The parade of residents who spoke at Planning Commission on April 30—cheering the developer for setting aside 16 units for people with mental disabilities—partially masked the reality that 14 affordable units had been erased from their North 40 designs since Grosvenor Americas submitted its plans for Phase 2.
But Commissioner Rob Stump highlighted the loopholes both the Town and the developer are using to avoid having to build the number of affordable homes Los Gatos told Sacramento it would build.
“I think it’s really important to look at this,” Stump said. “That number was actually 364 for Phase 2 of the North 40 project. And what is actually happening is that 77 are being developed. What we’ve seen over the past several years is that numbers have been provided to us—like in September of 2022—the thought was that up to or maybe even more than 130 units could be provided. Then, in September of 2023, that was reduced to 91 affordable units. And now, as of March 2025, it’s been reduced even further to 77 affordable units.”
Now, he was off by one home and a few chapters—it was 365 units set out in the Affirmatively Furthering Fair Housing (AFFH) section—but at the outset of the public hearing, he exposed an interesting dynamic at play.
He might’ve been thinking of the original North 40 Specific Plan, which included a 364-total-unit “maximum,” with 20% affordable (at the “moderate income” level or below)—so 72.8 affordable units.
But that (as seen in a May 2014 draft) was for the entire original specific plan, which included Phase 1 and other properties not controlled by Grosvenor.
The current Phase 2 plan is for 450 units, including 127 townhomes, 67 rental apartments (plus a manager unit) in a 100% affordable building, a seven-story building with 255 apartments (including 10 for lower-income residents) and a commercial area on the ground floor, and 3.5 acres of public open space.
On the one hand, Grosvenor is still planning to develop more affordable units in the second phase (after building dozens of affordable senior units in Phase 1) than was imagined, at first, for the overall North 40 area.
However, what’s before the Town represents a 25 percentage point reduction in its affordable housing commitment to the State, compared to the numbers included in the Housing Element.
But to hear the Town tell it, it’s no big deal, because HCD lets it get away with this kind of unrealistic accounting.
“As we look at that trajectory of fewer and fewer affordable housing units being built, what kind of predicament does this put the Town in, potentially?” Stump asked.
“The reality of any of these sites in the Sites Inventory being developed to the level of affordability in the Sites Inventory is, if not zero, as close as you could possibly be,” said Director of Community Development Joel Paulson. “So, obviously, as you’re aware, if the Town gets into a situation where we no longer have capacity to meet our Regional Housing Needs Allocation, we will fall under No Net Loss law, which will require the Town to rezone an additional site to make up that capacity—site or sites, depending on the extent of that—to refill that bucket, so we’re still compliant with Housing Element law.”
Was the three-digit prediction unrealistic? asked Stump.
‘The reality of any of these sites being developed to the level of affordability in the sites inventory is, if not zero, as close as you could possibly be’
—Joel Paulson, community development director
This is where Paulson explained the intricacies of the affordability loophole—that is, he blamed the State for not giving Los Gatos the power to force Grosvenor to build as many units for poorer folks as it told HCD the site could generate.
“Technically, once you hit the minimum density for the specific jurisdiction—in our case it’s a minimum of 30 dwelling units per acre—the State actually allows you to presume that all of those units will be affordable in the Housing Element process. But, the State doesn’t provide any opportunities for jurisdictions to compel projects to come forward in those exact—or even remotely similar—fashion,” he said.
The Affirmatively Furthering Fair Housing (AFFH) section of the Housing Element contains a breakdown of how many homes—and of what type—the Town told the State’s Department of Housing and Community Development (HCD) it’s hoping to build.
As a lawyer for Grosvenor reminded Planning Commissioners at the hearing, it was failures in this area—a chapter meant to demonstrate how the historically segregated community of Los Gatos was taking serious steps to open itself up to a wider group of people—that caused Los Gatos to fall out of compliance with State law.
A key table put the total number of homes to be constructed at the North 40 Phase 2 segment of town at 452, and the affordable unit number there (of very low all the way through moderate homes) at 365 units (including 184 very low, 89 low and 92 moderate).
Essentially, Los Gatos was able to get its Housing Element passed by the State (finally, after more than a year of wrangling), largely by saying it would knock off 365 of the 1,167 “affordable” units it needs to produce to stay on track with its contributions to combatting California’s housing crisis with Phase 2 of the North 40—or 31.28%.
Now, if all 77 affordable units make it past the finish line, Los Gatos’ most promising site for affordable housing by far would only end up accounting for 6.6% of the affordable units Sacramento has ordered Los Gatos to produce.
To be fair to the developer, it’s been pouring cold water on the idea it could shoulder the burden of nearly a third of Los Gatos’ affordable housing requirement for quite some time.
And it’s been upfront about its plan to build a chunk of townhomes mixed with hundreds of units of high-density housing since 2021 (although at first it said it was thinking of building less than 40 townhomes and perhaps 100 to 200 multifamily units—after plans for a hotel fell through once Covid-19 killed that market off).
Grosvenor said it calculated density by subtracting nondevelopable space. Stump said the developer is supposed to use the gross project area.
The item was continued so Grosvenor could complete its environmental review.
Los Gatos is required to plan for 537 “very low income” homes, 310 “low income” homes and 320 “moderate income” homes (on top of 826 “above moderate income” homes) between 2023-2031.
The City of Scotts Valley is in a similar situation, where it pledged to HCD it would take care of a massive number of the low-income housing it’s supposed to build within a single “Town Center” property downtown.
However, it did not drag its feet like Los Gatos did and got its Housing Element approved on the first try.
On Tuesday night, Council failed to implement a program related to 100% affordable housing developments it added to its Housing Element to convince HCD to approve the homes plan.
Council voted unanimously to study the issue some more in conjunction with HCD officials.
Mayor Matthew Hudes said there’s no reason to go beyond what State law requires, especially when the property rights of current homeowners are concerned.
