TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Erik L. Soliván
Chris Burton
John Ristow
SUBJECT: See Below DATE: May 15, 2025
Approved
Date:
5/15/2025
COUNCIL DISTRICT: 4
SUBJECT: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
RECOMMENDATION
(a) Conduct a public hearing to approve an economic development tax and fee waiver in connection with a reduction in construction taxes and a reduction of the Inclusionary Housing Ordinance in-lieu fee for 0 Seely Building A, which meets the requirements of the Multifamily Housing Incentive Program enacted by the City Council on December 10, 2024 and amended by the City Council on May 13, 2025, in an amount of up to $6,057,536.80 pursuant to California Government Code Section 53083 and Open Government Resolution No. RES2024-99 Section
2.3.2.6.C.
(b) Adopt a resolution approving the tax and fee waiver and authorizing the Housing Director, or his designee, to negotiate and execute documents and document amendments related to implementing the Multifamily Housing Incentive Program, such as construction progress agreements.
SUMMARY AND OUTCOME
In compliance with the Multifamily Housing Incentive Program (MHIP), City Council approval of the recommendations in this memorandum would provide a total fee and tax reduction and Inclusionary Housing Ordinance (IHO) fee waivers in the amount of $6,057,536.80 for the 0 Seely Building A development located at 0 Seely Avenue. City Council approval will also allow the Housing Director, or his designee, to negotiate and COUNCIL AGENDA: 6/17/25
FILE: 25-727
ITEM: 8.10
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
execute documents and document amendments related to implementing the MHIP, including construction progress agreements, with the developer, Hanover, of the 0 Seely Building A development.
BACKGROUND
On December 10, 2024, City Council adopted the MHIP,1 which allows a reduction of the IHO in-lieu fee and certain construction taxes. Specifically, the MHIP allows a 50% reduction to the Building and Structure (B&S) tax and the Commercial, Residential, Mobile Home Park (CRMP) tax for the first 1,500 units that obtain a building permit by December 31, 2025, and a 25% reduction in the B&S tax to subsequent projects that obtain City building permit after the 1,500 units, or on or after January 1, 2026. MHIP also extends the duration of the $0 IHO in-lieu fee reduction and expands eligibility to include mixed compliance projects outside of downtown high-rise developments.
Previously, this IHO in-lieu fee applied only for high-rise developments located downtown.
On May 13, 2025,2 the MHIP ordinance was amended to increase the number of units that obtain a building permit by December 31, 2025, that are eligible for the 50% reduction to B&S and CRMP taxes from 1,500 to 1,800 units. The amended MHIP ordinance will become effective on June 20, 2025.
ANALYSIS
The 0 Seely Building A development located at 0 Seely Avenue must comply with its amended IHO Affordable Housing Compliance Plan and record an Inclusionary Housing Agreement against the site, memorializing the requirements under the MHIP’s IHO in- lieu fee reduction prior to building permit issuance. Staff will also execute an agreement with the developer to ensure the additional requirements of the tax reduction are met.
1 File: 24-2305, Item #: 8.2, Meeting Date: December 10, 2024, Item Title: Multifamily Housing Incentive Program and North San José Park Fee Realignment, Web
Link: https://sanjose.legistar.com/View.ashx?M=F&ID=13583575&GUID=F101D3D4- D65C-407D-9B6C- 234BDE8EB26A
2 File: 25-503, Item #: 8.3, Meeting Date: May 13, 2025, Item Title: Public Hearing for Amendments to the Multifamily Housing Incentive Program, Web Link:
https://sanjose.legistar.com/View.ashx?M=F&ID=14145280&GUID=AA00F98A-07E5-4ACA-BC41- C3B11D307CB4
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
0 Seely Development Overview
The proposed master plan, phased development is located on a 22.88-acre site at the northeast corner of Montague Expressway and Seely Avenue. The development will deliver 1,472 residential units and approximately 18,965 square feet of commercial space.
The development consists of two main phases:
• Phase 1: 154 market-rate townhomes, which are not eligible for the MHIP. • Phase 2: Includes two components:
o Three market-rate multifamily apartment buildings (Buildings A, B, and C) with a total of 1,140 apartments.
o One 178-unit restricted affordable apartment building.
Phase 2: Restricted Affordable Units Under IHO Mixed Compliance
In Phase 2, the developer will comply with the IHO’s mixed compliance option, summarized in Table 1, requiring 57 units (5%) of the 1,140 apartments among three multifamily buildings to be restricted affordable apartment units with rents at or below 100% of the area median income, distributed as follows.
Table 1 – IHO Compliance
Building Market
Rate Units
5% of Income-Restricted
Units (≤100% AMI) Total Units
A 377 20 397
B 353 19 372
C 353 18 371
Total 1,083 57 1,140
All components of Phase 2 are eligible for the MHIP; however, only Building A is currently being considered in this memorandum for a tax and fee waiver under the program. Buildings B and C may be submitted for future consideration as construction progresses.
Building A is a six-story structure that will include up to 397 multifamily residential units and approximately 6,427 square feet of commercial space. These restricted affordable apartment units will include a mix of studios, one-bedroom, two-bedroom, and three- bedroom apartment units.
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
Construction Taxes
The City’s construction taxes include the B&S and the CRMP, both of which are based on the construction valuation derived from the most current building valuation data table published by the International Code Council for the residential portion of developments.
The B&S tax rate on residential building construction valuation is 1.54%, and the CRMP tax rate on residential building construction valuation is 2.42%, for a combined tax of
3.96%. Proceeds from these taxes are used to fund transportation capital improvement projects, which may include repairs and redevelopment of existing transportation-related projects and improvements, such as pavement maintenance, complete streets, pedestrian safety, and traffic calming projects. Table 2 provides an overview of the construction taxes for the 0 Seely Building A development.
Table 2 – Construction Tax Overview
Development
Standard B&S and
CRMP Construction
Taxes
50% Tax
Reduction3
B&S and CRMP
Taxes to be
Received
0 Seely Building A
Development $2,557,133 $1,257,124 $1,300,009
Inclusionary Housing Ordinance
In 2010, City Council adopted the IHO, which requires all residential developers constructing new or modified rental or for-sale residential units to comply with a base requirement of 15% on-site affordable housing units within the development. Other compliance options are also allowed under the IHO, at the developer’s election. The existing IHO mixed compliance option allows developers to pay a reduced in-lieu fee and provide 5% of their total units as new restricted affordable housing.
The IHO in-lieu fee methodology is based on a development’s net residential square footage calculation. The current fiscal year fee for mixed compliance properties providing 5% of units with restricted rents affordable to households at or below 100% of the area median income is $13.80 per net residential square foot for developments located in moderate market areas.
4 Table 3 provides a summary of the projected total
IHO in-lieu fee waived for the 0 Seely Building A development.
3 Under the MHIP, the 50% reduction in the B&S construction tax and the 50% reduction in the CRMP construction tax are only applicable to the residential portion of the B&S and CRMP construction taxes. 4 “Moderate market area” means a market area or other geographical area designated by or pursuant to a City Council resolution or policy based on findings, including findings regarding residential building activity levels for market-rate housing.
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
Table 3 – Waived IHO In-Lieu Fees
Development Market Area
Fiscal Year 2024-
2025 IHO
In-Lieu Fee Rate for
Mixed Compliance
Net Residential
Square
Footage
Waived IHO
In-Lieu Fee
0 Seely Building A Moderate
Market $13.80 347,856 $4,800,412.80
Table 4 provides a summary of the total proposed tax and fee waiver for the 0 Seely Building A development.
Table 4 – Proposed Tax and Fee Waiver
50% Reduction of B&S and CRMP Construction
Taxes on Developments Residential Portion $1,257,124.00 IHO In-Lieu Fee Waiver $4,800,412.80
Total Tax Reduction and Fee Waiver $6,057,536.80
Multifamily Housing Incentive Program Implementation Progress
In December 2024, City Council approved the MHIP and directed staff to provide an update on the progress of implementing this program. On May 13, 2025, City Council approved an amendment to MHIP to change, the first 1,500 units of a development that obtain building permits before December 31, 2025, can receive a 50% reduction of the B&S tax and a 50% reduction of the CRMP tax, to the first 1,800 units. Table 5 provides a summary of units that City Council has authorized under the MHIP to-date, including the developments that are proposed for the MHIP residential tax and fee waiver in this memorandum.
Table 5 – MHIP Implementation Progress
Development Market-Rate
Units
Affordable
Units
Total
Units
905 North Capitol Avenue 328 17 345
The Aquino at 498 West San Carlos Street 264 14 278
Santana Row Lot 12 at 358 Hatton Street* 245 13 258
0 Seely Avenue Building A** 377 20 397
Total 1,214 64 1,278
*Scheduled as a separate City Council item on June 17, 2025. **Development discussed in this memorandum.
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
EVALUATION AND FOLLOW-UP
Staff will execute agreements with the developer of the 0 Seely Avenue development as required under the San José Municipal Code Sections 4.46.039.11 and 4.47.089 and monitor development construction to ensure the MHIP requirements are fulfilled. The development must still comply with IHO requirements, including their Affordable Housing Compliance Plans and recordation of an Inclusionary Housing Agreement against the site prior to building permit issuance. Staff will not execute any agreements with the developer until the ordinance amendment takes effect on June 20, 2025.
COST SUMMARY/IMPLICATIONS
The development aligns with the City’s Economic Development Strategy to spur the development of multifamily residential in identified growth areas within the City of San José.
Table 6 addresses the requirements set forth in the City’s Resolution No. RES2024-99 for the publication of information related to an economic development waiver of more than $1,000,000.
Table 6 – City of San José Cost/Benefit Evaluation
a) Accountability
The MHIP suspends 50% of construction taxes for eligible developments and allows for payment of taxes to be
delayed until the issuance of the first Certificate of
Occupancy, and an IHO in-lieu fee reduction to $0 for
projects meeting certain conditions.
b) Net fiscal impact
The project is estimated to generate one-time revenue of $1,300,009 in construction taxes. The construction tax
forgone revenue is $1,257,124. The IHO in-lieu fee
forgone revenue is $4,800,412.80.
c) Net job impact
Based on estimates from the developer, the 0 Seely
Building A development will create approximately 288 full- time jobs. 77% of these construction jobs will generate an annual salary above $80,000, 13% will generate an
annual salary between $60,000 and $80,000, and the
remaining 10% of jobs earning between $40,000 and
$60,000. The recipient will provide health insurance to all employees.
d) Housing impact
0 Seely Building A will deliver 377 new market-rate
(above 120% of the area median income) housing units,
and 5% or 20 moderate-income units with a maximum
price at or below 100% of the area median income.
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
Based on the reported net job impact above, up to 29
extremely low-income housing units may be required for
employees hired to implement the project.
e) Source of funds
The program does not provide funds directly to the
projects. It is a suspension of 50% of construction taxes and a reduction to $0 of the IHO in-lieu fee. The project is estimated to generate one-time revenue of $1,300,009
across multiple funds.
f) Neighborhood
impacts
No significant impacts are anticipated on traffic or public infrastructure, given that funding is being transferred to the traffic capital fund to mitigate the one-time revenue reduction.
Table 7 addresses the requirements set forth in the State of California Assembly Bill 562 (Government Code 53083) for publication of information related to an economic development subsidy and a public hearing.
Table 7 – State of California Cost/Benefit Evaluation
a) Name/address of benefiting
business entity
Seely Development Partners LLC,
1780 S. Post Oak Lane
Houston, TX 77056
b) Start and end dates for the
subsidy
Projects are eligible for the MHIP subsidy after
the issuance of building permits prior to
December 31, 2025. The subsidy will become
finalized upon payment of taxes prior to the
issuance of the first Certificate of Occupancy,
subject to conditions therein.
c) Description of the subsidy,
estimated total amount of
expenditure of public funds or
revenue lost
The City shall suspend 50% of construction taxes
on the development constructed and shall allow
payment of the taxes to be delayed until the
issuance of the Certificate of Occupancy. The
City shall also provide a reduction to $0 for the
IHO in-lieu fee. The estimated economic
development subsidy is $6,057,536.80.
d) Statement of public purpose
To encourage the development multifamily
residential development, spurring increased retail
amenities, attracting more employers, increasing
transit use, and improving public life in San José.
The aggregation of these factors will increase the
economic vitality of the City and will translate to
increased property tax and sales tax revenue for
the City.
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
e) Projected tax revenue The project is estimated to generate one-time revenue of $1,300,009.00 in construction taxes.
f) Estimated number of jobs
created, broken down by full
time, part-time and temporary
positions
Based on estimates from the developer, 0 Seely
Building A development will create approximately
288 full-time jobs. 77% of these construction jobs
will generate an annual salary above $80,000,
13% will generate an annual salary between
$60,000 and $80,000, and the remaining 10% of
jobs earning between $40,000 and $60,000. The
recipient will provide health insurance to all
employees.
COORDINATION
This memorandum has been coordinated with the City Attorney's Office, the City Manager’s Budget Office, and the City Manager’s Office of Economic Development and Cultural Affairs.
PUBLIC OUTREACH
The memorandum will be posted on the City’s Council Agenda website for the June 17, 2025 City Council meeting.
COMMISSION RECOMMENDATION AND INPUT
No commission recommendation is associated with this action.
CEQA
0 Seely Avenue: Environmental Impact Report for 0 Seely Avenue Mixed-Use Project (Resolution No. RES2024-297), File Nos. PDC21-035, PD22-002, PT22-003, and ER21-284).
HONORABLE MAYOR AND CITY COUNCIL
May 15, 2025
Subject: Approval of a Multifamily Housing Incentive Program Residential Tax and Fee Waiver for the 0 Seely Building A Development Located at 0 Seely Avenue
PUBLIC SUBSIDY REPORTING
This item includes a public subsidy as defined in the City’s Open Government Resolution section 2.2.10 and is in the amount of $1,000,000 or more. An informational memorandum, as described in Open Government Resolution section 2.3.2.6.C, will be released at least 28 calendar days prior to the City Council meeting at which the subsidy will be considered. The Acting Director of the City Manager’s Office of Economic Development and Cultural Affairs has been informed of this subsidy to ensure it is tracked appropriately.
/s/ /s/
Erik L. Soliván Chris Burton
Housing Director Planning, Building and
Code Enforcement Director
/s/
John Ristow
Transportation Director
The principal author of this memorandum is Shelsy Bass, Interim Housing Policy and Planning Administrator, Housing Department. For questions, please contact Banu San, Deputy Director, Housing Department, at [email protected].