The Economics of Land Use
COST OF
RESIDENTIAL
DEVELOPMENT STUDY
City of San José Housing Department
December 8, 2025
The Economics of Land Use
2 Agenda & Presenters
1. Staff Overview
2. Presentation on Affordable
and Market-Rate Housing
Reports
3. Perspectives from Industry
Experts
4. City Council Questions and
Discussion
■ Erik L. Soliván - Housing
Director
■ Jason Moody – Managing
Principal – Economic &
Planning Systems, Inc
■ Nicole Graham – Co-CEO –
CSG Advisors
Background
The City of San José Housing Department
contracted with CSG Advisors and Economic and
Planning Systems (EPS) to prepare a Residential
Development Cost Study. EPS focused on the cost
of developing market rate housing while CSG
focused on the cost of developing subsidized
affordable housing.
The Economics of Land Use
3 History and Community Outreach
■ In December 2017, City Council directed staff to convene a City Council Study Session to discuss the aggregate impact of the fees and policies the City imposes on housing development and construction.
■ There have been three previous iterations of the report on the Cost of Residential Development, in 2018, 2022 and 2023.
■ Developer Roundtable held on November 21
■ Community Meeting held on December 4
■ Additional meetings conducted with key stakeholders:
– Working Partnerships
– South Bay Labor Council
– Hanover Company
– Bayview Development
– SV@Home
– Urban Catalyst
4 The Economics of Land Use
MARKET-RATE
HOUSING
The Economics of Land Use
Important Context
1. The analysis draws from available
public and private data
2. Hypotheticals are created based on
Current market performance
Project costs in particular areas
of San José
A varied set of building types
3. Additional data and analysis is
needed to further an understanding
of the hard cost breakdown and
according contextual analysis
6 Cost of Development Study – Market Rate Housing
1. Important tool to understand barriers
to new housing construction
2. Factors within City Control
City policy and programs
Impact fees
Taxes
Permitting
3. Factors outside City control
Cost of land
Market financing
Material supply chains
The Economics of Land Use
EPS Study Scope and Purpose
Scope
■ Evaluate the costs and feasibility of developing various residential product types in San José
– EPS considers 5 “generic” higher density housing building types ■ Results provided across 4 “districts” that correspond to MLS zones used in the Parks fee, consistent with previous Cost of Development studies Purpose
■ Inform City Council and public on economic feasibility of housing development in current market
■ Results will inform justification of fee waivers as outlined in Section
14.10.310 in the San José Municipal Code (MC)
7 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Analytical Framework for Results
■ Data and analysis reflect 2024 - 2025 market
conditions
■ Revenue and cost assumptions informed by 3rd-
party sources (e.g., CoStar, Redfin, Marshall + Swift)
and local developer data
■ Individual projects will differ from results shown
due to a variety of factors (e.g., location, quality,
developer capability, site conditions, etc.)
8 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Summary of City Pro-Formas
9 Cost of Development Study – Market Rate Housing
Description
EPS Pro-
Forma
Podium
EPS Pro-
Forma
Wrap
Sample
Pro-
Forma
1 Sample
Pro-
Forma
2 Sample
Pro-
Forma
3 EPS Pro-
Forma
Tower
Sample
Pro-
Forma
4 Rentable Sq. Ft. to Total
Building Sq. Ft. Ratio 85% 85% 85% 85% 85% 80% 80%
Avg. Sq. Ft. per Unit 902 902 519 814 864 902 801
Residential Stories 5 5 7 5 6 20 11
Estimated Hard Costs
per Unit $449,994 $437,994 $327,338 $465,252 $319,666 $687,068 $621,762 per Sq. Ft. $424 $413 $536 $486 $315 $610 $621
TowerPodium and Wrap
The Economics of Land Use
For-Sale Building Types
Image source: CoStar
10 Cost of Development Study – Market Rate Housing
Townhome Stacked Flats
Typical Building Characteristics:
• 3 - 4 stories
• Wood frame construction
• Integrated parking garage
Typical Building Characteristics:
• 3 - 4 stories
• Wood frame construction
• Integrated parking garage
The Economics of Land Use
Rental Building Types
Image source: CoStar
11 Cost of Development Study – Market Rate Housing
Tower
Podium
Wrap
Typical Building Characteristics:
• 6 - 8 stories
• Wood frame construction
over concrete podium
Typical Building Characteristics:
• 4 – 6 stories
• Wood frame construction
built around concrete
parking structure
Typical Building Characteristics:
• 12+ stories
• Steel frame construction
• Podium and / or
subterranean parking
The Economics of Land Use
Description of Building Types
12 Cost of Development Study – Market Rate Housing
Description Townhome Stacked Flats Podium Wrap Tower
Site Acreage 2.0 2.0 2.0 2.0 2.0
Total Housing Units 40 106 172 172 470
Stories 3 4 7 5 22
Program
Density (Units per Acre) 20 53 86 86 235
Avg. Net Sq. Ft. per Unit 1,458 1,118 902 902 902
Net Sq. Ft. 58,313 118,533 155,098 155,098 423,815
Gross Sq. Ft. 72,892 139,450 182,469 182,469 529,769
Floor Area Ratio 0.84 1.60 2.09 2.09 6.08
Parking Format Integ. Garage Integ. Garage Podium Structured Underground & Podium
Parking Ratio 2.0 2.0 1.0 1.0 0.8
Total Parking Spaces 80 212 172 172 376
For Sale Rental
The Economics of Land Use
Multiple Listing Service (MLS)
Zones
Zones Used:
09: Downtown /
Central
15: West
07B: North
03: South and East
13 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Factors That Can Affect Feasibility
■ Key Market Value Considerations:
– Achievable valuation, sale prices and rent schedules
– Mortgage Interest rates
– Land acquisition costs
– Market capitalization rates
■ Key Cost Considerations:
– Labor and material inputs
– Construction financing terms (e.g., interest rates)
– Taxes and fees
– Entitlement streamlining / fast-tracking (not modeled) ■ Consultant sensitivity analysis shows how results might change with improved market conditions
14 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Study Results
■ Rationale for tax and fee waivers under Municipal Code Section 14.10.310 varies by product type
– For sale townhomes and stacked flats are positive (less eligible for waivers) – For rent podium, wrap, and towers are negative (may be eligible for waivers) ■ Tax and Fee waivers have and may continue to tip the scales for some projects ■ Development economics varies by location due to differences in asset & liability prices & rents
■ Modest improvement in market conditions can make higher density feasible – Combination of modest increase in rents and/or decline in development costs can make wrap and podium feasible (e.g., 5% - 15% change) – Tower will require more substantial change in rents and/or development costs to achieve feasibility (e.g., 10% - 35% change)
15 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Development Feasibility
Framework
16 ■ Results based on a financial model that incorporates market data (rents, sale prices, construction costs, etc.) to solve for “Residual Land Value” (RLV)
■ RLV represents amount a developer could pay for a site and still have a profitable project.
■ Helps us answer the question:
Is net value of a proposed project (excluding cost of land) equal or greater than existing site value?
Project
Value
Project
Costs
(excluding land)
Residual
Land
Value
The Economics of Land Use
Results By Building Type &
Location
Hypothetical 2-acre site
Project
Value
Project
Costs
(excluding land)
Residual
Land
Value
17 Cost of Development Study – Market Rate Housing
Townhome Stacked Flats Podium Wrap Tower
Location 40 Units 106 Units 172 Units 172 Units 470 Units West $20,952,000 $8,168,000 ($6,677,000) ($3,988,000) N/A Downtown Tower N/A N/A N/A N/A ($134,754,000)
Central $2,261,000 $2,697,000 ($11,879,000) ($9,191,000) ($134,754,000) North $10,081,000 $17,450,000 ($15,309,000) ($12,620,000) N/A South and East $5,295,000 $2,698,000 ($21,160,000) ($18,471,000) N/A Note: Values rounded to nearest 1,000
For Sale Rental
Residual Land Value (2-acre site)
The Economics of Land Use
Hard Costs by Building Type
*Hard Cost Breakdown
Materials and Supplies 65% - 70% of all Hard Costs
Labor 30% - 35% of all Hard Costs
18 Description Townhome Stacked Flats Podium Wrap Tower Stories 3 4 7 5 22
Total Housing Units 40 106 172 172 470
Site Improvement - $10/Site sq. ft.1
$871,200 $871,200 $871,200 $871,200 $871,200
Hard Costs*
Per GSF (Excludes parking) $266 $285 $380 $380 $560
Total $19,389,183 $39,743,357 $69,338,103 $69,338,103 $296,670,752 Parking Hard Costs
Integrated - $13,793/space $1,103,440 $2,924,116 $0 $0 $0 Surface - $9,000/space $0 $0 $309,600 $309,600 $0
Structured - $35,000/space $0 $0 $0 $4,816,000 $0
Subterranean - $85,000/space $0 $0 $0 $0 $15,980,000
Above Ground Podium - $50,000/space $0 $0 $6,880,000 $0 $9,400,000 Total Parking Costs $1,103,440 $2,924,116 $7,189,600 $5,125,600 $25,380,000 Total Hard Costs per Unit
(Excludes Land and Soft Costs) $534,096 $410,742 $449,994 $437,994 $687,068 [1] Standard grading and demolition. Excludes unique circumstances such as environmental mitigation.
For Sale Rental
The Economics of Land Use
City Impact Fees and
Construction Taxes
19 City Impact Fees and Taxes (Rental) Range Per Unit
Construction taxes $6,400 – $6,800
Parkland in lieu fees $11,000 – $20,000
Inclusionary Housing In Lieu Fees $21,000 – $49,600
% Of Total Unit Costs 5.5% – 10.2%
Total City Impact Fees and Taxes $37,000 – $72,000
The Economics of Land Use
Development Taxes & Impact Fees per Unit
– City Comparison (Townhomes)
20 $25,600
$31,100
$64,787
$63,798
$65,775$7,185
$5,175
$4,650 $4,800
$7,755
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
San José Mountain View Cupertino Sunnyvale Santa Clara
School Mitigation Fees
Development Impact Fees
$32,785 $36,275
$69,437 $68,598
$73,530
The Economics of Land Use
Development Taxes & Impact Fees per Unit
– City Comparison (Podium, Wrap, Tower)
21 Avg. Rent
/ Sq. Ft. $3.59 $5.12 $3.89 $4.39 $4.42
$18,080
$22,916
$58,613
$63,798
$47,076$4,311
$3,105
$2,790
$2,880
$4,653
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
San José Mountain View Cupertino Sunnyvale Santa Clara
School Mitigation Fees
Development Impact Fees
$22,391 $26,021
$61,403
$66,678
$51,729
The Economics of Land Use
Results By Building Type & Location –
All Taxes and Impact Fees Waived
22 Cost of Development Study – Market Rate Housing
Assumes 100% waiver of: Construction Taxes and Inclusionary and Parkland Impact Fees Project
Value
Project
Costs
(excluding land)
Residual
Land
Value
Townhome Stacked Flats Podium Wrap Tower
Location 40 Units 106 Units 172 Units 172 Units 470 Units West $25,231,000 $16,672,000 $4,858,000 $7,547,000 N/A
Downtown Tower N/A N/A N/A N/A ($105,156,000)
Central $6,690,000 $11,481,000 $110,000 $2,798,000 ($105,156,000) North $13,723,000 $22,892,000 ($7,694,000) ($5,005,000) N/A South and East $7,651,000 $7,334,000 ($14,852,000) ($12,164,000) N/A Note: Values rounded to nearest 1,000
For Sale Rental
Residual Land Value (2-acre site)
The Economics of Land Use
Townhomes & Stacked Flats Appear
Financially Feasible in Current Market
Note: Sale price at time of land acquisition
23 Cost of Development Study – Market Rate Housing
Townhome Results:
■ $1,100 / Sq. Ft. Sale
Price
■ $525k RLV / Unit
Stacked Flat Results:
■ $760 / Sq. Ft. Sale
Price
■ $80k RLV / Unit
The Economics of Land Use
Higher Density Building Types unlikely to be
Financially Feasible in Current Market
Note: Rent at time of land acquisition
24 Cost of Development Study – Market Rate Housing
Podium Results:
■ $3.89 / Sq. Ft. rent
■ -$70k RLV / Unit
Wrap Results:
■ $3.89 / Sq. Ft. rent
■ -$50k RLV / Unit
Tower Results:
■ $4.30 / Sq. Ft. rent
■ -$285k RLV / Unit
The Economics of Land Use
Reductions in Costs Could Make Podium &
Wrap Buildings Feasible
Note: Excludes land acquisition.
25 Cost of Development Study – Market Rate Housing
Cost Reduction
for Feasibility
■ Podium: -10%
■ Wrap: -8%
■ Tower: -30%
The Economics of Land Use
City Development Taxes and Impact
Fees by MLS Zone
26 Cost of Development Study – Market Rate Housing
Description West
Downtown
Tower Central North
South and
East
Inclusionary in-Lieu
Amount (per Net Sq. Ft.) $49.91 $49.91 $49.91 $21.71 $21.71 District West Valley Central Central North Evergreen
Parkland in-Lieu1
Townhome Amount (per Unit) $21,840 N/A $25,600 $47,040 $14,880 Multifamily Amount (per Unit) $15,440 N/A $18,080 $18,080 $10,480 Tower Amount (per Unit) N/A $10,950 $10,950 N/A N/A
District (MLS Zone) 15-Campbell 9-Downtown 9-Downtown North San José 3-Evergreen School
Amount (per Gross Sq. Ft.) $4.20 $4.79 $4.79 $5.17 $4.47 School District Campbell
Union School
+ High School
Districts
San José
Unified School
District
San José
Unified School
District
Santa Clara
Unified School
District
Evergreen +
East Side
Union High
School
Districts
Construction Taxes (per Unit)
Townhome
Stacked Flats
Podium
Wrap
Tower
[1] Assumes qualification for 20% Parkland in-Lieu Fee reduction for townhome and multifamily projects, and 25% reduction for Tower projects for providing on-site open space amenities (e.g. balconies, rooftop amenities). $12,367
$8,974
$6,617
$6,617
$7,020
The Economics of Land Use
Total Development Taxes and Impact
Fees / Unit By Building Type & Location
Note: Includes Construction Taxes and Inclusionary, Parkland, and School Impact Fees 27 Cost of Development Study – Market Rate Housing
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
West Downtown Tower Central North South and East
Townhome Stacked Flat Podium / Wrap Tower
The Economics of Land Use
Other Soft Costs
28 Cost of Development Study – Market Rate Housing
Note: Assumptions are industry standard amounts based on EPS observations of developer pro-formas.
Soft Cost Category Townhome
Stacked
Flats Podium Wrap Tower
Architecture and Engineering 4% of Hard Cost $21,364 $16,430 $18,000 $17,520 $27,483 Other Soft Costs 2% of Hard Cost $10,682 $8,215 $9,000 $8,760 $13,741 Permits and Fees 1% of Hard Cost $5,341 $4,107 $4,500 $4,380 $6,871 Taxes 1% of Hard Cost $5,341 $4,107 $4,500 $4,380 $6,871 Financing 8% of Hard Cost $40,057 $30,806 $33,750 $32,850 $51,530 Insurance
For-Sale 4% of Hard Cost $21,364 $16,430 N/A N/A N/A
For-Rent 2% of Hard Cost N/A N/A $9,000 $8,760 $13,741
Marketing/Leasing
For-Sale 5% of Hard Cost $26,705 $20,537 N/A N/A N/A
For-Rent 2% of Hard Cost N/A N/A $9,000 $8,760 $13,741
Developer Fee 4% of Total Development Cost $30,352 $23,298 $23,778 $23,204 $35,577 Developer Contingency 5% of Total Development Cost $37,940 $29,123 $29,722 $29,005 $44,471 Assumption
Average Soft Costs per Unit
For Sale Rental
The Economics of Land Use
Avg. Rents & Sale Prices by MLS
Zone
29 Cost of Development Study – Market Rate Housing
Central West
Downtown
Tower North South and East
Citywide Q2
2025 Average
Sale Price per Net Sq. Ft.1
Townhome $730 $1,100 - $870 $745
Stacked Flat $710 $760 - $820 $665
Typical Sale Price
Townhome (1,500 Net Sq. Ft.) $1,095,000 $1,650,000 - $1,305,000 $1,117,500 Stacked Flat (1,100 Net Sq. Ft.) $781,000 $836,000 - $902,000 $731,500 Monthly Rent per Net Sq. Ft.2
Tower $4.30 - $4.30 - -
Podium / Wrap $3.89 $4.02 - $3.66 $3.45
Typical Monthly Rents
Tower (800 sq. ft.) $3,440 - $3,440 - -
Podium / Wrap (800 sq. ft.) $3,112 $3,216 - $2,928 $2,760 [2] Rents reflect units built in last 10 years.
[1] For-sale prices relfects past year average sale price plus 10% new construction premium. $3.82
$2,890
$810,000
The Economics of Land Use
Avg. Rents & Sale Prices –
Neighboring City Comparison
30 Cost of Development Study – Market Rate Housing
$810,000
$1,309,000
$1,477,000
$1,665,000
$1,639,000
$810,000
$747,000
$822,000
$1,164,000
$1,008,000
$2,890
$3,536
$3,512
$3,112
$4,096
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$1,600,000
$1,800,000
San José Santa Clara Sunnyvale Cupertino Mountain
View
Monthly Rent (Podium / Wrap)
Sale Price (Townhome & Stacked Flat)
Townhome (1,500 Sq. Ft.) Stacked Flat (1,100 Sq. Ft.) Podium / Wrap (800 Sq. Ft.) The Economics of Land Use
Key Takeaways – Market Rate Housing
Townhome and stacked flats are feasible under
current market conditions.
Multifamily (podium, wrap, tower) are infeasible
under current market conditions.
– But fee waivers may make some projects feasible.
Overall, San José remains cost competitive relative
to neighboring jurisdictions.
31 Cost of Development Study – Market Rate Housing
The Economics of Land Use
OFFICE TO
RESIDENTIAL
CONVERSIONS
The Economics of Land Use
Key Drivers of Feasibility for
Office to Residential Conversion
1. Building’s Physical Attributes
2. Market and Financial Factors
3. Local Regulatory Framework
33 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Key Physical Determinants
■ Floorplate depth
■ Window access
■ Floor-to-floor height
ratio
■ Column spacing /
structure rhythm
■ Façade / envelope with
operable openings
■ Parking ratio
■ Year built
34 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Good vs Challenging Candidates
■ Narrow floorplates
support high % of units
on the window line
(fewer interior “dead
zones”)
■ Punched, operable
windows on multiple
façades allow natural
ventilation and
bedroom planning
■ Taller ceiling heights
provide flexibility for
residential MEP
distribution and soffits
■ Regular structural grid
makes plumbing stacks
and unit stacking
efficient
■ Strong street presence
supports active ground-
floor retail and
placemaking
■ Deep floorplates create large
interior areas too far from
windows for viable unit
layouts
■ Curtain wall façade is costly
to modify and limits operable
windows for ventilation
■ Center-core layout results in
inefficient unit shapes and
long double-loaded corridors
■ Lower ceiling heights
(relative to pre-war buildings)
constrain residential system
routing
■ Weak street activation from a
glass-box façade that doesn’t
support engaging retail
edges.
Bank of Italy Building
30 S 1st St (1926)
Sobrato Tower
488 Almaden Blvd
(2002)
35 Cost of Development Study – Market Rate Housing
Image source: CoStar
The Economics of Land Use
Market and Financial Factors
■ Office building acquisition costs too high to
be feasible
■ Financial condition of existing owner(s)
■ High risk, limited precedent
■ Submarket context matters
36 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Policy Framework and Levers
Office and residential spaces are governed by different city and state building codes / standards (especially life safety), many of which cannot be relaxed.
But local policy levers can move the needle on feasibility, including:
1. Impact and linkage fee reductions or deferrals
2. Parking reductions
3. Open space / amenity requirement flexibility
4. Streamlined approvals
37 Cost of Development Study – Market Rate Housing
The Economics of Land Use
Key Takeaways – Office Conversions
Difficult to make broad conclusion about feasibility
of office-to-residential conversions due to wide
variation in circumstances.
Targeted policy interventions can make
some building conversions feasible.
Identifying and quantifying specific opportunities
in San José will require additional analysis.
38 Cost of Development Study – Market Rate Housing
The Economics of Land Use
BROADER CONTEXT
FOR MARKET RATE
HOUSING
The Economics of Land Use
Challenges and Opportunities In the
Region
40 Cost of Development Study – Market Rate Housing
Source: JLL
1 Silicon Valley workers
are the most
productive of any U.S.
market, producing
$410,000 in GDP per
person this year. The
market is also
expected to grow the
fastest through the
next 5 years.
2 Overall market
recovery hinges
heavily on the return
to in-office work for
major tech
companies. Silicon
Valley’s top tech firms
lead the regions
return to office, driven
heavily by artificial
intelligence
development.
3 Development in the
Bay Area continues to
be cost prohibitive.
Limited new product
coupled with a history
of an undersupplied
housing market keep
Silicon Valley one of
the most expensive
markets in the
country.
4 The Bay Area has
operated at a
considerable housing
supply shortage, and
is expected to do so
going forward, even if
state mandated
development goals
are met.
5 Silicon Valley
maintains a renter
pool of high-income
individuals, many of
whom would be
homeowners in other
markets, but given the
high barriers to
ownership in the
Valley, stay in the pool
6 The Valley is expected
to see incomes
continue to grow
quicker relative to rent
growth through the
rest of the year. Rent
growth is expected to
see major growth
following Tech’s
significant return to
office.
The Economics of Land Use
41 The Economics of Land Use
42 The Economics of Land Use
43 The Economics of Land Use
Policy Context
4-year review of the Envision San José 2040 General
Plan
Updates to the Inclusionary Housing Ordinance
and Residential Incentive Programs
Continue Work on Focus Areas
– Land Use, Policy, and Regulation
– Development Services Process
– Linking Land and Capital
44 Cost of Development Study – Market Rate Housing
AFFORDABLE
HOUSING
Interpreting Findings For
Affordable Housing in San José
San José’s affordable housing costs are consistent
with Bay Area norms
Smaller average units drive higher costs/net square
foot, not higher underlying construction costs
Per-unit costs reflect scale efficiencies and City fee
policies
San José represents significant share of affordable
housing proposed throughout the Bay Area
46 Cost of Development Study - Affordable Housing
Important Context
■ Data sourcing was at time of tax credit application
– Does not reflect cost at financial closing (up to 12 months later) – Does not reflect cost at project completion (up to 24 months later) ■ Tax credit application budgets can vary up to 10% from the actual development costs
– There can be significant variations between estimates made at application submittal and final costs
■ San José, because of Santa Clara County Measure A Policy, built smaller units at a higher per square foot costs
47 Cost of Development Study - Affordable Housing
Affordable Housing Dataset
Scope of Data
o 194 new construction developments included in the
dataset from available funding applications:
o New construction application data included for:
o Santa Clara County from 2023-2025 YTD,
comprised of 28 projects and 4,298 units –
providing a robust sample of proposed
development activity.
o Bay Area (9-county), Sacramento, Los
Angeles, and San Diego from 2024-2025
YTD*
Data Collected
o Project details: city/county and
housing type (Large Family, Special
Needs, Single-room Occupancy
(SRO), etc.)
o Unit mix: number of units per
bedroom size, square footage by
bedroom type
o Development budget categories:
hard costs, soft costs, financing
fees, reserves, developer fee, etc.
o 22 additional projects (2016–2022)
were excluded to maintain focus
on current cost environment
194 new construction developments based upon 2023–2025 tax credit applications *No new construction applications were submitted for Marin County in 2024-2025 48 Cost of Development Study - Affordable Housing
Methodology & Key Context
Application-stage data provides a consistent baseline for comparing San José to peer metros This analysis uses data from tax credit applications for new construction affordable housing projects across major California metros.
The dataset captures projected development costs, funding sources, and key details at the time of application such as bedroom and unit mix, building square feet and other key attributes.
Projects budgets represent amounts at the application stage — costs often increase between application and closing, so actual costs are likely higher for all areas.
Application data (vs. closed project data) was used to generate a larger sample size for more robust regional comparisons.
49 Cost of Development Study - Affordable Housing
Methodology & Key Context Cont.
Application-stage data provides a consistent baseline for comparing San José to peer metros Reported costs do not include additional fees that may be triggered by City funding contributions
Acquisition costs were excluded from the analysis because:
1) these costs are treated inconsistently in CDLAC applications and
2) excluding acquisition provides more consistent comparison to the market rate methodology presented by EPS
Development costs from prior to 2025 were adjusted upward by 3% per year to allow comparisons in terms of 2025 dollars 50 Cost of Development Study - Affordable Housing
AFFORDABLE HOUSING
COST FINDINGS
San José in Bay Area Context
• Projected
development
costs across
counties indicate
that both unit
size and
development
type drive total
costs more than
geography alone.
• *Per Unit Cost at
application,
acquisition costs
excluded
(no applications were submitted for Marin County in 2024 or 2025YTD) 52 $1,050
$839
$976 $1,006 $1,062 $1,087 $1,141
$1,215
$1,436
San Jose Solano Contra Costa Sonoma San Mateo Santa Clara Santa Cruz Alameda San Francisco $675,744 $685,620
$808,958
$754,346 $759,663 $723,837
$829,394
$643,022
$822,645
San Jose Solano Contra Costa Sonoma San Mateo Santa Clara Santa Cruz Alameda San Francisco Cost of Development Study - Affordable Housing
Per Unit Cost*
Cost Per Net Sq. Ft.
Smaller Units Drive Higher Costs Per
Net Square Foot (NSF)
Cost Per Net Square Foot and Average Unit Size
• Higher costs per NSF align
with smaller units —
counties with the smallest
average unit sizes tend to
show the highest cost per net
square foot.
• San José’s costs are
consistent with peers —
development costs generally
track other Bay Area counties
with comparable unit sizes.
• Regional differences are
wide — cost per net square
foot ranges from about $840
in Solano to $1,366 in San
Francisco, underscoring the
Bay Area’s construction cost
gradient.
53 $1,050
$839
$976 $1,006
$1,062 $1,087
$1,141
$1,215
$1,436
644
817 829
750
716
666
727
529
573
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
San Jose Solano Contra Costa Sonoma San Mateo Santa Clara Santa Cruz Alameda San Francisco Cost of Development Study - Affordable Housing
(No applications were submitted for Marin County in 2024 or 2025 YTD) San José’s Cost per NSF Cost per NSF Average Unit Size
San José Developments Have More
Units and Fewer Bedrooms
Findings from funding
applications:
■ More units per
development:
– 173 units vs. 154
in Santa Clara
and 112 Bay Area
average.
■ Fewer Bedrooms:
– 66% of units are
Studios/1-BRs in
San José vs. 55%
Bay Area.
– 34% 2–3 BRs in
San José vs. 44%
Bay Area.
City of County of Major Metro Areas
San José Santa Clara Bay Area Sacramento Los Angeles San Diego Total/Avg Total Properties 19 28 70 10 72 28 180
Total Units 3,287 4,298 7,835 1,071 8,203 3,249 20,358
Units Per Project 173 154 112 107 114 116 113
38% 5% 36% 14% 100%
Unit Distribution
by Bedroom
Total Units /
Distribution
of Units
Studios 27% 26% 25% 17% 19% 16% 21%
1-Bedroom 39% 35% 30% 47% 49% 36% 40%
2-Bedroom 22% 24% 26% 21% 21% 26% 23%
3-Bedroom 12% 15% 18% 14% 10% 22% 15%
4-Bedroom 0% 0% 1% 0% 2% 0% 1%
San José & Santa Clara figures include applications from 2023 to 2025. Data for the Bay Area and Major Metro Areas section includes applications from 2024 to 2025.
54 Cost of Development Study - Affordable Housing
San José in California Context:
Development Costs Per Unit
■ San José’s total cost per unit of $675K driven by developments comprised of more units and smaller unit sizes.
■ Hard Costs in San José’s $484K align with dominant product types (larger projects comprised of studios and 1-bedrooms).
■ Developer fees and financing costs reflect San José’s scale efficiencies as well as City policy related to development fees
$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 Bay Area
Los Angeles
Sacramento
San Diego
San Jose
Santa Clara
$536,559
$357,811
$357,007
$370,854
$483,964
$512,625
$77,786
$50,863
$55,606
$57,058
$59,337
$66,243
$75,737
$60,196
$46,206
$54,932
$65,734
$71,318
$71,706
$57,511
$54,689
$67,796
$59,601
$66,130
| Hard Costs
| Soft Costs
| Reserves
| Financing Costs
| Developer Fee
$723,837
$675,744
$556,752
$520,035
$536,087
$770,214
55 Cost of Development Study - Affordable Housing
Development Cost/Net Square Foot by Housing Type
■ San José’s cost per
square foot is lower
than Bay Area average,
with the largest gap in
Senior housing ($1,499
vs. $1,747 Bay Area).
■ Non-Targeted housing
($1,100/nsf) and Large
Family housing
($938/nsf) drive San
José’s cost profile,
comprising 94% of total
SF in applications.
■ San José comprises
100% of applications for
Senior and Non-
Targeted projects in
Santa Clara County.
■ San José projects
exhibit higher costs per
square foot than
Sacramento and
Southern California.
*Findings for this segment may be skewed due to limited sample size of two projects. 56 Cost of Development Study - Affordable Housing
57 Cost of Development Study - Affordable Housing
Key Takeaways
Affordable Housing Development
Cost of affordable housing development in San José
tracks comparable Bay Area counties
High cost per net square foot are driven by smaller
average unit size in San José
San José represents a large share (42%) of affordable
housing developments planned in the Bay Area
Unhoused
Outreach
[TOEP]
Encampment
Resolution
[ESCPR]
Lived in
Cars & RV
[OLIVE] PSH Units
Rent Subsidized
& Restricted
Rent Stabilized
Market Rate
Units
Subsidized
Homeownership
Home
Ownership
Board & Care Beds
[County]
Safe Sleeping & Parking
[City]
Congregate
Shelter Beds [County]
Interim Housing
Tiny Homes
Unit
Preservation
Preservation
Prevention
Hoteling & Congregate
[City]
Interim Housing
Hotels
Support Programs:
1. Gap Financing Program
2. Rent Stabilization Program
3. Community Development Block Grant
4. Low to Moderate Income Housing Fund
5. HOME Program
Support Programs:
1. Inclusionary Housing Ordinance
2. Homebuyer Assistance Program
3. Residential Incentive Program
Policy Context
Building More Housing Focus Area
59 Building More Housing Focus Area
60 Building More Housing Focus Area
61 Timeline of Council Items
62 ■ January 2026: Inclusionary Housing Ordinance
Updates, Residential Incentive Programs, Multifamily
Housing Bond Policy
■ Spring 2026 Focus Area update
■ June 2026: General Plan Four-Year Review Task Force
Process Concludes
■ August 2026: Planning Commission Transmits
Recommendation on General Plan Four-Year Review
to City Council
The Economics of Land Use
APPENDIX A
Market Rate Pro-Formas
The Economics of Land Use
Example Cash Flow 1
Description Assumption / Factor Total
Site Acreage 87,120
Stories 7
Program
Density (DU/AC) 86
Total Dwelling Units 172
Avg. NSF / DU 902
NSF 155,098
GSF 182,469
FAR 2.09
Parking Format Podium
Parking Ratio 1.0
Total Parking Spaces 172
Project Value
Monthly Rent $3.89 per NSF $7,239,993
Gross Potential Monthly Parking Income $200 per Month $34,400 Losses to Vacancy (Market Only) 7.00% -$506,799
Gross Residential Revenue $6,767,593
Operating Expenses $10,000 per DU -$1,720,000
Net Operating Income (NOI) $5,047,593
Estimated Development Value 5% Cap Rate $100,951,864
Central podium
64 The Economics of Land Use
Example Cash Flow 1 – cont.
Central podium
Project Costs
Construction Costs
Site Work $10 per Land Sq. Ft. $871,200
Building Direct Cost $380 per GSF $69,338,103
Parking Costs
Surface $9,000 per Parking Spot $309,600
A.G. Podium $50,000 per Parking Spot $6,880,000
Parking Direct Costs $7,189,600
Total Construction Costs $77,398,903
Soft Costs
Park Impact Fees $18,080 per DU $3,109,760
Inclusionary in-Lieu Fees $49.91 per NSF $7,740,961
School Impact Fees $4.79 per GSF $874,025
City Construction Taxes
Building & Structure 1.54% of Building Valuation $431,563 Commercial Residential, Mobile Home Park 2.42% of Building Valuation $678,170 Construction $75 per Unit $12,900
Residential Construction $90 per Unit $15,480
Architecture and Engineering 4% of Construction Cost $3,095,956 Other Soft Costs 2% of Construction Cost $1,547,978
Permits and Fees 1% of Construction Cost $773,989
Taxes 1% of Construction Cost $773,989
Insurance 2% of Construction Cost $1,547,978
Financing 8% of Construction Cost $5,804,918
Marketing/Leasing 2% of Construction Cost $1,547,978
Total Soft Costs $27,955,644
Other Project Costs
Builder Fee 4% of All Costs $4,214,182
Development Contingency 5% of All Costs $5,267,727
Total Project Costs $114,836,455
Residual Land Value -$13,884,591
RLV per Land Sq. Ft. -$6,942,29565
The Economics of Land Use
Example Cash Flow 2
Description Assumption / Factor Total
Site Acreage 87,120
Stories 3
Program
Density (DU/AC) 20
Total Dwelling Units 40
Avg. NSF / DU 1,458
NSF 58,313
GSF 72,892
FAR 1
Parking Format Integ. Garage
Parking Ratio 2
Total Parking Spaces 80
Project Value
Market Rate Sale Value $1,100 per NSF $64,144,667
Sale Cost 1.5% per DU -$962,170
Net Building Value $63,182,497
Supportable Development Value 15% Return on Cost (Unlevered, exlcudes land) $72,659,871 West San José Townhome
66 The Economics of Land Use
Example Cash Flow 2 – cont.
West San José Townhome
Project Cost
Construction Costs
Site Work $10 per Land Sq. Ft. $871,200
Building Direct Cost $266 per GSF $19,389,183
Parking Costs
Integrated Garage $13,793 per Parking Spot $1,103,440
Parking Direct Costs $1,103,440
Total Construction Costs $21,363,823
Soft Costs
Park Impact Fees $21,840 per DU $873,600
Inclusionary in-Lieu Fees $49.91 per NSF $2,910,418
School Impact Fees $2.65 per GSF $193,163
City Construction Taxes
Building & Structure 1.54% of Building Valuation $189,809 Commercial Residential, Mobile Home Park 2.42% of Building Valuation $298,271 Construction $75 per Unit $3,000
Residential Construction $90 per Unit $3,600
Architecture and Engineering 4% of Construction Cost $854,553 Other Soft Costs 2% of Construction Cost $427,276
Permits and Fees 1% of Construction Cost $213,638
Taxes 1% of Construction Cost $213,638
Insurance 4% of Construction Cost $854,553
Financing 8% of Construction Cost $1,602,287
Marketing/Leasing 5% of Construction Cost $1,068,191
Total Soft Costs $9,705,998
Other Project Costs
Builder Fee 4% of All Costs $1,242,793
Development Contingency 5% of All Costs $1,553,491
Total Project Costs $33,866,105
Residual Land Value $38,793,766
RLV per Land Sq. Ft. $19,396,88367
APPENDIX B
Comparison of 2023 and 2025
Affordable Housing Cost Studies
69 Cost of Development Study - Affordable Housing
70 Cost of Development Study - Affordable Housing
71 Cost of Development Study - Affordable Housing
72 Cost of Development Study - Affordable Housing