TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Erik L. Soliván
SUBJECT: See Below DATE: November 24, 2025
Approved Date:
12/3/25
CO
UNCIL DISTRICT: Citywide
S
UBJECT: Fiscal Year 2024-2025 Affordable Housing Impact Fee and Commercial Linkage Fee Annual Report
RECOMMENDATION
Accept the Fiscal Year 2024-2025 Affordable Housing Impact Fee and Commercial Linkage Fee Annual Report prepared in accordance with the California Mitigation Fee Act (Government Code section 66000 et seq.) on the status and expenditure plans for the City’s Affordable Housing Impact Fee and Commercial Linkage Fee.
SUMMARY AND OUTCOME
Accepting staff recommendation with the attached Annual Report of required information will allow the City of San José (City) to continue to use Affordable Housing Impact Fees (AHIF) and Commercial Linkage Fees (CLF) to fund affordable housing developments partially or fully.
COUNCIL AGENDA: 12/16/25
FILE: 25-1313
ITEM: 2.15
HONORABLE MAYOR AND CITY COUNCIL
November 24, 2025
Subject: Fiscal Year 2024-2025 Affordable Housing Impact Fee and Commercial Linkage Fee Annual Report
BACKGROUND
The California Mitigation Fee Act
The California Mitigation Fee Act (Government Code Section 66000 et seq) 1 requires
public agencies to account for and make specific findings regarding mitigation fees collected by an agency as a condition of development approval.
The Mitigation Fee Act regulates how public agencies may establish, collect, maintain, and spend impact fees imposed on developers. The Mitigation Fee Act also requires that the local or lead agency review and make available to the public an annual report that accounts for the mitigation fees held by the agency. The City is required to make an annual report available to the public within 180 days after the last day of each Fiscal Year. In accordance with this requirement, staff is presenting the Annual Impact Fee Report for the Fiscal Year ending June 30, 2025, for the AHIF and the CLF.
AHIF Program Background Information
On November 18, 2014, the City Council adopted by resolution the AHIF establishing the AHIF program. The AHIF program was assessed on market-rate rental residential developments to offset their impact on the demand for affordable homes for lower- and moderate-wage workers. The AHIF has been amended several times since its adoption.
On February 23, 2021, the Inclusionary Housing Ordinance was amended to lower the minimum threshold to apply to new residential developments of 10 or more units, which was previously 20 or more units (Ordinance No. 30538).
2 As part of City Council action,
the direction included sunsetting the AHIF program. On June 29, 2021, City Council passed Resolution No. 801493 suspending AHIF for new projects that submitted applications for first approval on or after June 29, 2021.
CLF Program Background Information
City Council established the CLF through adoption of Ordinance No. 30475 4 on
September 22, 2020, based on a July 2020 nexus and feasibility study by Keyser Marston Associates. The study identified how new non-residential developments create affordable housing needs and outlined the maximum and financially feasible fee levels for different commercial uses and locations. The CLF is an impact fee paid by non- residential developers that is intended to create a funding mechanism to increase the
1 California Government Code Section 66000:
https://leginfo.legislature.ca.gov/faces/codes_displayText.xhtml?lawCode=GOV&division=1.&title=7.&part &chapter=5.&article
2 https://records.sanjoseca.gov/Ordinances/ORD30538.pdf 3 https://records.sanjoseca.gov/Resolutions/RES80149.pdf 4 https://records.sanjoseca.gov/Ordinances/ORD30475.pdf
HONORABLE MAYOR AND CITY COUNCIL
November 24, 2025
Subject: Fiscal Year 2024-2025 Affordable Housing Impact Fee and Commercial Linkage Fee Annual Report
supply of affordable housing in San José. The fee is codified under Chapter 5.11 of the San José Municipal Code.5
ANALYSIS
The City’s AHIF and CLF programs are consistent with the state’s Mitigation Fee Act.
Detailed reports are attached to this memorandum as Attachment A - Fiscal Year 2024- 2025 Affordable Housing Impact Fee Annual Report and Attachment B - Fiscal Year 2024-2025 Commercial Linkage Fee Annual Report.
FY 2024-2025 AHIF Program
Since its inception, the AHIF program has generated $25,627,437.65 in fee revenue and interest. For Fiscal Year 2024-2025, all funds will be committed to the development of new affordable housing through the City’s Gap Financing Program.
FY 2024-2025 CLF Program
Since its inception, the CLF program has generated $6,112,740.16 in fee revenue and interest and will be allocated for future development projects as part of the City’s Gap Financing Program. The City has been working towards improving the program’s implementation and ensuring that the collected fees are used towards the intended purposes.
Fiscal and Policy Alignment
Acceptance of this annual report and required supporting information will allow the City to comply with state law and continue the use of AHIF funds to finance affordable housing projects. The AHIF program implements several City policy objectives outlined in the Envision San José 2040 General Plan.
6 EVALUATION AND FOLLOW-UP
This item is reported annually to City Council. The next report for Fiscal Year 2025-2026 will be presented to City Council in late 2026.
5 https://library.municode.com/ca/san_jose/codes/code_of_ordinances?nodeId=TIT5HO_CH5.11COLIFE 6 https://www.sanjoseca.gov/home/showpublisheddocument/22359/637928744399330000
HONORABLE MAYOR AND CITY COUNCIL
November 24, 2025
Subject: Fiscal Year 2024-2025 Affordable Housing Impact Fee and Commercial Linkage Fee Annual Report
COORDINATION
This report has been coordinated with the City Attorney’s Office and the City Manager’s Budget Office.
PUBLIC OUTREACH
Government Code Section 66006 includes a minimum 15-day requirement to make the information in the report available to the public before a public meeting is held. This report will be made available to the public at the following location: Housing Department lobby, 200 E. Santa Clara Street, 12
th floor, San José, California, during business hours
from December 1, 2025, until December 16, 2025. The report will also be posted on the City of San José’s website prior to the City Council meeting scheduled for December 16, 2025.
COMMISSION RECOMMENDATION AND INPUT
No commission recommendation or input is associated with this action.
CEQA
Not a Project, File No. PP17-009, Staff Reports, Assessments, Annual Reports, and Informational Memos that involve no approvals of any City action.
PUBLIC SUBSIDY REPORTING
This item does not include a public subsidy as defined in section 53083 or 53083.1 of the California Government Code or the City’s Open Government Resolution.
/s/
Erik L. Soliván
Director, Housing Department
For questions, please contact Banu San, Deputy Director, Housing Department, at [email protected]
, or (408) 975-4489.
ATTACHMENTS:
Attachment A: Fiscal Year 2024-2025 Affordable Housing Impact Fee Annual Report Attachment B: Fiscal Year 2024-2025 Commercial Linkage Fee Annual Report 1 ATTACHMENT A
Fiscal Year 2024-2025 Affordable Housing Impact Fee Annual Report
Annual Report
In accordance with Government Code Section 66006(b)(1), the requirements for the Fiscal Year (FY) 2024-2025 annual report are as follows:
A. A Brief Description of the Type of Fee in the Account or Fund
The City adopted the Affordable Housing Impact Fee (AHIF) to address the increased need for affordable housing connected with the development of new market-rate residential rental units. A nexus study prepared by Keyser Marston Associates established a reasonable relationship between the need for affordable housing and new, market-rate rental residential development.
New market-rate residential rental development leads to a net increase in new residents, and the increase in goods and services required by these new residents leads to an increase in job creation in the City. These jobs include service and retail sector jobs (e.g., teachers, restaurant workers, pet care, maintenance workers, etc.).
Workers employed in these lower-wage jobs find it challenging to obtain market-rate housing. This results in an increase in the need for new housing affordable to extremely low-, very low-, low-, and moderate-income households, which AHIF revenues will be used to provide. Additionally, the City's General Plan includes goals supporting the provision of affordable moderate-income housing. This may include either moderate- income rental housing or purchase assistance programs for first-time homebuyers.
B. The Amount of the Fee
The initial AHIF fee at adoption was $17.00 per each livable square foot of rentable space built within the residential development. Each year on July 1, the per square foot AHIF program fee increased by 2.4%. When the program sunset for new developments that submitted AHIF applications for first approval on or after June 29, 2021, the final fee was $20.08 per square foot. Table 1 summarizes the AHIF rate schedule since the fee was adopted.
Table 1 - AHIF Rate Schedule
AHIF Fiscal Year AHIF
per Sq. Ft
Initial fee July 1, 2016 - June 30, 2017 $17.00
Fee During Reporting period July 1, 2017 - June 30, 2018 $18.70 Fee During Reporting period July 1, 2018 – June 30, 2019 $19.15 Fee During Reporting period July 1, 2019 – June 30, 2020 $19.61 Final Fee Level Due To Sunset July 1, 2021 - Current $20.08
2 C. The Beginning and Ending Balance of the Account or Fund
On July 1, 2024, the AHIF fund balance totaled $12,859,354.86. On June 30, 2025, the AHIF fund balance totaled $11,401,462.
D. The Amount of The Fees Collected, and Interest Earned
Table 2 summarizes the AHIF revenues for FY 2024-2025. During FY 2024-2025 one residential development paid an AHIF fee and one residential development repaid the City interest on an AHIF-funded loan, and no impact fees were collected. Additionally, the interest earned since adoption also has a carrying balance.
Table 2 - FY 2024-2025 AHIF Collected and Interest Earned
Source of Revenue Year of
Payment
Received
Total
Impact Fees Collected FY 2024-2025 $0
AHIF-Funded Loan Repayment Interest Earned FY 2024-2025 $272,367.41 Interest Earned Since Adoption of Balances Ongoing $451,914.11
E. P ublic Improvements Expenditures – An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the cost of the public improvement that was funded with fees.
No developments received an allocation or commitment of AHIF funds in FY 2024- 2025.
F. An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in paragraph (2) of subdivision (a) of Section 66001, and the public improvement remains incomplete.
Table 3 summarizes construction timelines of developments with committed AHIF funds.
Table 3 - AHIF Construction Timelines
Development AHIF Amount
Disbursed
Construction
Start
Construction
Completion
Parkmoor Community
Apartments $71,732.35 November 2023 September 2025
3 G. A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and, in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan.
In FY 2024-2025, no fees were transferred, and no loans were made from the AHIF fund.
H. The amount of refunds made pursuant to subdivision (e) of Section 66001 of the California Government Code and any allocations pursuant to subdivision (f) of Section 66001 of the California Government Code.
In FY 2024-2025, no refunds were made from the AHIF fund.
1 ATTACHMENT B
Fiscal Year 2024-2025 Commercial Linkage Fee Annual Report
Annual Report
In accordance with California Government Code Section 66006(b)(1), the requirements for FY 2024-2025 Annual Report are as follows:
A. A Brief Description of the Type of Fee in the Account or Fund
The Commercial Linkage Fee (CLF) is an impact fee levied on commercial development for the provision of affordable housing. The City adopted the CLF to address the increased need for affordable housing connected with the development of new non- residential spaces. CLF funds are used to facilitate development of affordable housing for extremely low-, very low-, low-, and moderate-income households within the City of San José by supplementing other public funding sources.
B. The Amount of the Fee
The initial fee for the CLF program at adoption was set at different rates based on the type and location of non-residential space. The initial CLF fee at its adoption was $15.79 per each square foot of office space, $5.26 per each square foot of hotel space, $3.16 per each square foot of industrial/research and development space, $5.26 per each square foot of warehouse space, and $6.32 per each square foot of residential care space. Table 1 summarizes the CLF rate schedule since its adoption.
Table 1 – CLF Rate Schedule
Geographic
Area
Commercial Use FY 24-25 CLF FY 25-26 CLF
Downtown &
Nearby
Office ≥ 100,000 sq. ft. $14.31
< 100,000 sq. ft. $17.89
≥ 100,000 sq.ft $17.86
>50,000 and ≤ 100,000 sq.
ft $3.57
Hotel $5.96 $5.95
Industrial >100,000 sq. ft. $3.58 >100,000 sq.ft.$3.57
Warehouse $5.96 $5.95
Residential Care $7.16 $7.15
North San
Jose &
Nearby;
West SJ
Urban
Village
Office ≥ 100,000 sq. ft. $5.96
<100,000 $0
≥ 100,000 sq.ft $5.95
>50,000 and ≤ 100,000 sq.
ft $3.57
Hotel $5.96 $5.95
Industrial >100,000 sq. ft $3.58 >100,000 sq. ft $3.57
Warehouse $5.96 $5.95
Residential Care $7.16 $7.15
Edenvale &
Monterey
Office ≥ 100,000 sq. ft. $5.96
<100,000 sq. ft. $0
≥ 100,000 sq.ft. $5.95
>50,000 and ≤ 100,000 sq.
2 Geographic
Area
Commercial Use FY 24-25 CLF FY 25-26 CLF
Corridor ft $3.57
Hotel $5.96 $5.95
Industrial $5.96 $0
Warehouse $5.96 $5.95
Residential Care $7.16 $7.15
South & East
SJ Growth
Areas
Office $5.96 $0
Hotel $5.96 $5.95
Industrial $5.96 >100,000 sq.ft. $3.57
Warehouse $5.96 $5.95
Residential Care $7.16 $7.15
C. The Beginning and Ending Balance of the Account or fund
On July 1, 2024, the CLF account balance totaled $5,885,613.96. On June 30, 2025, the CLF account balance totaled $6,112,740.16.
D. The Amount of Fees Collected, and Interest Earned
In FY24-25 the department received $25,944 in application fees from 20 applicants. The interest earned in FY24-25 is $201,182.00. As of June 30, 2025, the CLF revenue fund balance totaled $227,126.20.
E. Public Improvements Expenditures - An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the cost of the public improvement that was funded with fees.
In FY 2024-2025, the City did not approve any disbursements of CLF funds. There were no new affordable housing developments that received an allocation of CLF funds for the acquisition, financing, construction, or development of new affordable housing.
F. An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in paragraph (2) of subdivision (a) of Section 66001, and the public improvement remains incomplete.
In FY 2024-2025, no developments were funded with CLF funds. There are currently no construction timelines to report.
3 G. A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and, in the case of an interfund loan, the date on which the loan will be repaid, and the rate of interest that the account or fund will receive on the loan.
In FY 2024-2025, no fees were transferred, and no loans were made from CLF fund.
H. The amount of refunds made pursuant to subdivision (e) of Section 66001 of the California Government Code and any allocations pursuant to subdivision (f) of Section 66001 of the California Government Code.
In FY 2024-2025, no refunds were made from the CLF fund.