Presentation - est. 5 minutes — San Jose City Council, December 10, 2024

Multifamily Housing Incentive Program
and North San José Parks Fee Realignment
City Council
Item 8.2
December 10, 2024
Erik Soliván, Director
Housing Department
John Ristow, Director
Department of Transportation
Nanci Klein, Director
Office of Economic Development + Cultural Affairs
Chris Burton, Director
Planning, Building and Code Enforcement
Jon Cicirelli, Director
Parks, Recreation and Neighborhood Services
Blage Zelalich, Deputy Director
Office of Economic Development + Cultural Affairs
2 Background
 City Council direction in June 2024:
• Return with recommendations to unblock
multifamily housing projects within
Growth Areas throughout the City.
• Scope the potential incentive program to
project applications that were deemed
complete by the Planning, Building, and
Code Enforcement Department by the end
of June 2022.
• Explore changes to the North San José Park
Impact Fees for multi-family housing.
14200 Union Ave.
681 E. Trimble

3 Why Facilitate Housing Production?
 Current economic conditions remain a barrier to the construction of new housing, especially market rate units.
 Multifamily Housing Incentive Program should signify to the market at large that San José is fostering a pro-housing development environment. 1,217
207
366
782
336
0 -
200
400
600
800
1,000
1,200
1,400
2019 2020 2021 2022 2023 2024
MARKET-RATE MULTIFAMILY UNITS*

STARTING CONSTRUCTION
* Projects with 20 or more units
4 Proposed Program Considerations and Objective
 Careful consideration needed given City’s multiple objectives.  Significant concerns weighed against the need to spur multifamily housing production:
• Loss of funds for park development/improvements and deferred infrastructure and maintenance
• Reduction in construction taxes for transportation projects and staffing • Reduction of funds needed to match other public and private sector grants • Continued waiver of funding and support to produce affordable housing  Administration's objective is to balance reduction of City costs while still maintaining support for transportation, affordable housing, and parks-related commitments.
5 Proposed Program Components and Universe of Projects
 Construction Taxes
• Taxes associated with some projects are projected in the current 5-year Capital Budget.
• Reduced revenue could impact Vision Zero program, pedestrian safety improvements, accessibility projects, new development and planning data collection.
 Inclusionary Housing
• Community and Economic Development CSA priority is housing production.  City Revenue
• City will generate annual property tax and utility user tax, as well as business license tax and sales tax in mixed-use projects.
 Universe of Projects
• 35 projects: 7,357 market-rate and 2,276 affordable units. Total = 9,633 units. 6 Housing Data Analysis
 Housing Department collected data and developed a Fiscal Impact Model to size the incentive program and determine the appropriate term.
 Compared six housing projects three market-rate projects with restricted affordable units and three 100% affordable projects which benefit from the construction tax reductions.
 Maximum monthly affordable rent at 100% AMI is lower than market rate for an average San José household of three.

 More affordable units will be developed from the fee waiver than the total number of units supported by the collection and reallocation of the fee on a per unit basis.  Anticipate at least two projects will be catalyzed into construction in 2025. 7 Proposed Program vs Current Status
DENSITY Portions of multifamily projects with 50+DU/acre N/A GEOGRAPHY Designated Growth Areas N/A
CONSTRUCTION TAXES Phase 1
50% reduction in B&S and
CRMP tax for up to 1,500 units
that must also obtain a building
permit no later than December
31, 2025.

Phase 2
Starting January 1,
2026, 25% reduction
in B&S tax for
remaining units on
the eligible projects
list.

B&S tax charged at 1.54% of project
valuation. CRMP tax charged at

2.42% of project valuation.

INCLUSIONARY

HOUSING
$0 in-lieu fee and 5% of units at up to 100% Area
Median Income, unless a higher level of obligation has
already been negotiated.

Strong Market
: $49.99 sq. ft. OR 5%
of units at 100% AMI and $21.74
under mixed compliance.

Moderate Market
: $21.74 sq. ft. OR
5% of units at 100% AMI and $13.80
under mixed compliance.

TIMING OF PAYMENT At first Certificate of Occupancy Paid at Building Permit PROGRAM HORIZON Expiration of valid entitlement – Max of 4 years from initial entitlement for projects with project
applications deemed completed by December 31, 2022.

N/A
8 North San José Parks Fee Realignment
 Current North San José MLS 7B park fee is $41,600/unit with private recreation credits up to 50% allowed.
 Affordable units receive a 50% per unit reduction, with the ability to further reduce the fee through the development of on-site recreational amenities for an additional 50% fee reduction.
 Realignment of parks fees in MLS 7B for market-rate units to $22,600/unit with private recreation credits up to 50% against the reduced fee allowed.  Realignment brings MLS 7B fee equal to next highest
fee in the City (MLS 9 Downtown).
 No change in how affordable units are handled.

MLS 7B
9 Stakeholder Outreach and Engagement
 Labor Leadership
• Working Partnerships (9/4, 10/17, 10/25)
• NorCal Carpenter’s Union (10/17, 10/25, 12/6)
 Development Community
• Developers (9/16, 11/22)
• Developers & Construction Roundtable (9/26)
• SJ Chamber Land Use Committee (11/21)
 Stakeholder Advocates
• Transportation, Housing and Parks (9/17)
• MLS 7B community meeting (10/28)
• Housing (11/26)
1312 El Paseo de Saratoga
71 Vista Montana

San Jose City CouncilDecember 10, 2024

San Jose City Council
December 10, 2024