A buyer I worked with last spring pulled up a five-year-old blog post about Morgan Hill before our first meeting. It described the city's growth cap in reverent terms: a strict annual limit on new homes, in place since 1977, that kept supply tight and resale values protected. She wanted to know if that was still true before she wrote an offer twenty percent over a comparable Gilroy listing.
The honest answer is more complicated than the blog post let on. The ordinance she read about is still sitting in the municipal code. It has also been switched off by the state since 2020. What she needed to know wasn't whether the cap existed on paper. It was what actually got built while it was turned off, and whether that construction competes with the kind of home she was trying to buy.
The Ordinance Everyone Assumes Is Still Running
Morgan Hill voters created the Residential Development Control System in 1977, a program that forced developers to compete each year for a limited pool of building allotments, scored on points for design and affordability features. Voters renewed it in 1990, 2004, 2006 and 2009, then again in November 2016 as Measure S, approved by 77 percent of the electorate. Measure S set a population ceiling of 58,200 through 2035 and capped new housing allotments at 215 units a year.
That is the version of Morgan Hill most secondhand market commentary still describes: a city that deliberately rations new construction, which in turn protects the value of everything already built.
What Actually Switched It Off
In 2019, the state legislature passed the Housing Crisis Act, known as SB 330, which strips cities of the ability to cap the number of housing permits they issue and moves qualifying projects onto a ministerial approval track based on objective standards rather than discretionary hearings. Morgan Hill's own planning department confirmed the effect on Measure S directly: the law suspended the city's voter-approved cap and set aside the population ceiling entirely. City staff originally described the suspension as a five-year measure when it took effect in 2020. Lawmakers have since renewed the preemption, and as of this writing it remains in force. The RDCS is not repealed. It is paused, and has been for six years running.
That distinction matters for anyone assuming scarcity is doing the same work it did a decade ago.
The Building Going Up While the Cap Was Off
The clearest evidence of what changed sits on a 7.5-acre parcel at Monterey Road and Madrone Parkway, the former site of a towing yard. In 2021, San Mateo-based developer Jemcor won approval for a 249-unit affordable housing complex called Village at Madrone, using the state's density bonus law to add 80 percent more units than local zoning would normally allow. The planning commission split 4-3 over how to handle spillover parking on neighboring Taylor Avenue, but the deeper story is that a project of that density, on that timeline, would have had to compete for a scored allotment slot under the old RDCS. Under SB 330, it didn't. It's built now and leasing.
That project sits alongside two others in the same construction pipeline, a 389-unit apartment complex and another multifamily project known as Magnolias, all clustered on the same Monterey Road corridor. None of them are detached single-family homes. All three moved forward specifically because the old competition system was no longer standing in the way.
Reading Comps by What Actually Got Unlocked
Here's the part that gets lost in the "cap is suspended" headline: suspending the RDCS didn't open the floodgates evenly across every kind of housing. It opened them for the projects that qualify for density bonus treatment, which in practice means income-restricted multifamily buildings. The city's own housing progress data shows why. For the 2015 to 2023 planning cycle, Morgan Hill produced 2,203 new homes against a state-assigned goal of 928, a total of 237 percent of target. That looks like an oversupply story.
It isn't one for the buyer comparing detached houses. The same housing element that reports blowing past its overall goal also carries an unresolved shortfall in the above-moderate income category, the tier that covers most market-rate resale homes rather than income-qualified apartments. In plain terms, Morgan Hill built far more housing than the state required, and most of that surplus wasn't the kind of home competing with the one you're bidding on.
That is the mechanism a five-year-old blog post can't tell you about, because it hadn't happened yet. The cap coming off didn't flood the detached-home market. It flooded one narrow lane, on one corridor, with one kind of unit.
| Pre-2020, RDCS in force | 2020 to present, RDCS suspended | |
|---|---|---|
| Approval path | Annual competition for a capped, points-scored allotment | Ministerial review against objective standards, density bonus available |
| What got built | Mostly detached single-family subdivisions spread across multiple builders each cycle | Concentrated multifamily along the Monterey Road corridor |
| What it means for your comps | Scarcity was structural and applied to the whole housing stock | New supply is real but doesn't compete directly with resale single-family inventory |
Why Your Portal Search Might Disagree With Itself
If you've been watching Morgan Hill listings this year, you've probably noticed two numbers that don't sit together comfortably. Asking prices tracked through August 2026 show a median list price of about $1.25 million, down roughly 4 percent from a year earlier, with list price per square foot also down about 4 percent. Closed sale data covering the three months ending in May 2026 tells a different story: a median sale price near $1.3 million, up modestly year over year, with price per square foot actually up 2.6 percent, and homes moving from list to pending in roughly 11 days, down from about 18 days the year before.
Those aren't contradictory so much as they're measuring different moments in the same transaction. One tracks what sellers are asking. The other tracks what buyers are actually paying at closing, in a market where the homes selling fastest may not be the same ones sitting longest on the list-price side of the ledger. Days-on-market figures for the city have ranged as widely as 11 days to over 90 depending on which count and which window you're reading. None of that is a reason to distrust the data. It's a reason to ask your agent to pull the actual closed-sale comps for the specific streets you're comparing, rather than leaning on a single portal's homepage number.
What This Means If You're Weighing Morgan Hill Against Somewhere Else
A quiet second-order effect worth knowing about is SB 9, the 2022 state law that lets homeowners split a single-family lot or add a second unit through an administrative process rather than a public hearing. It doesn't build apartment towers, but it does mean the parcel next to the one you're evaluating could legally become two units without the kind of neighborhood review that used to apply. That's a small, quiet shift, not a headline one, but it belongs in the same conversation as the RDCS suspension: the rules that used to make Morgan Hill's growth predictable have moved, piece by piece, over the past six years.
None of this means the growth cap story was wrong. It means it was a description of a system that isn't currently running the way it once did, and won't necessarily start again on the old timeline. If you're comparing a Morgan Hill listing to one in Gilroy or elsewhere in South County, the useful question isn't whether Morgan Hill still limits growth. It's which corridor the new supply is landing on, and whether that supply is the kind of home you're actually trying to buy.
A Few Questions Worth Asking Directly
Could the old growth cap come back? The ordinance is still on the books. It would take either a change in state law or a change to how SB 330 applies to reactivate Measure S as written, and neither has happened as of this writing.
Does the suspension affect single-family zoning too? Directly, mostly not. The density bonus law that unlocked projects like Village at Madrone applies to multifamily and affordable housing projects. SB 9's lot-split and duplex provisions are the piece that touches single-family parcels, and even those move through an administrative process rather than a public vote.
What about Holiday Lake Estates or other unincorporated pockets near Morgan Hill? Those areas sit outside city limits and aren't subject to city ordinances at all, RDCS or otherwise, which is its own separate conversation worth having before you compare a listing there to one inside city boundaries.
If you're trying to figure out what a specific Morgan Hill listing's history actually means for its resale trajectory, that's the kind of comp work that doesn't come from a portal's homepage. Lindsay Hogan has been reading Santa Clara County's zoning changes against its sale prices for fifteen years, and she's happy to pull the actual numbers for the block you're considering.
