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1/12/2026
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
RESOLUTION NO. ______________
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN
JOSE AMENDING THE MULTIFAMILY HOUSING
INCENTIVE PROGRAM: (1) EXTENDING THE DEADLINE
TO APPLY FOR MULTIFAMILY HOUSING INCENTIVE
PROGRAM BENEFITS TO FEBRUARY 28, 2027, AND
MAINTAINING CURRENT ELIGIBILITY CRITERIA AND
INCENTIVE LEVELS; (2) ADDING SEVEN PROPOSED
HOUSING PROJECTS TO THE LIST OF ELIGIBLE
PROJECTS IN THE MULTIFAMILY HOUSING INCENTIVE
PROGRAM; (3) INCREASING ELIGIBILITY FOR A 50%
REDUCTION IN THE BUILDING AND STRUCTURE TAX
CONSTRUCTION TAX AND COMMERCIAL,
RESIDENTIAL, MOBILE HOME PARK TAXES FROM 1,800
UNITS TO 3,600 UNITS THAT OBTAIN A BUILDING
PERMIT BEFORE FEBRUARY 28, 2027; AND (4)
CREATING A TIERED PRIORITIZATION SYSTEM FOR
ALLOCATING LIMITED CAPACITY BASED ON A
DEVELOPMENT PROJECT'S CONSTRUCTION
READINESS, FINANCING COMMITMENTS, AND FIRST-
COME, FIRST-SERVED BASIS FOR BUILDING PERMIT
APPLICATIONS
WHEREAS, the Multifamily Housing Incentive Program (“MHIP”) was established by City Council as a strategic response to stalled housing production on December 10, 2024, under RES2024-420; and
WHEREAS, MHIP’s capacity was expanded from 1,500 to 1,800 units in May of 2025 under RES2025-130 to accommodate the significant developer interest following a year of no new market-rate project construction in 2024; and
WHEREAS, currently there are five projects (totaling 1,444 units) under construction that have participated in MHIP and an additional seven projects (proposing up to 2,225 units) that have expressed interest in participating in MHIP; and
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
WHEREAS, the program targets high-density developments (50+ units per acre) in strategic growth areas that have been unable to secure financing and begin construction due to challenging economic conditions; and
WHEREAS, Chapter 14.10 of the San José Municipal Code sets “Minimum Labor Standards for a Private Construction Project Accepting a City Subsidy”, defining a subsidy to include any “reduction, permanent suspension or exemption of any fee or tax” that applies to single or multiple projects; and
WHEREAS, construction projects receiving a City subsidy are required to pay all workers employed on the construction prevailing wage rates, and are subject to other provisions such as requiring apprenticeships and local hire, among others; and
WHEREAS, there are exemptions to the definition of a subsidy that include the reduction of a fee or tax that is applied uniformly across all private construction projects within a specific subcategory of use, e.g., high-rise residential, when City Council determines, based on specified criteria, that construction of the projects is not financially feasible; and
WHEREAS, according to the City’s 2025 Cost of Residential Development Study dated November 13, 2025, by CSG Advisors and Economic & Planning Systems, Inc., the construction cost environment remains extremely challenging and, while the rate of escalation has stabilized, the elevated baseline pricing continues to create significant feasibility barriers for multifamily development, with direct construction costs now accounting for approximately 69% of total development costs; and
WHEREAS, without incentives, only lower-density townhomes and stacked flats show positive residual land values; and
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
WHEREAS, higher-density rental housing developments remain financially infeasible without incentives; and
WHEREAS, analysis shows fee/tax waivers can improve project economics by $4-16 million per development, often sufficient to achieve positive returns when combined with modest rent growth; and
WHEREAS, the study found that fee waivers may “tip the scales” toward feasibility when combined with modest market improvements; and
WHEREAS, targeted interventions like MHIP are essential to bridging the feasibility gap for housing production due to the combination of high construction costs, elevated interest rates and negative residual land values at a time when San Jose needs to accelerate production to meet its Reginal Housing Needs Allocation goals; and
WHEREAS, with a total pipeline of eligible projects exceeding 8,324 units and the remaining capacity of 357 units, staff recommends extending Phase I benefits through February 2027 and expanding the total capacity from 1,800 to 3,600 units; and
WHEREAS, Attachment A, attached hereto, contains the list of MHIP-eligible projects, categorized as under Construction (1,794 units), Market-Rate Pipeline Eligible (6,332 units), Market-Rate Pipeline Proposed Additions (2,225 units), and Affordable Housing Pipeline Eligible (1,992 units); and
WHEREAS, seven new projects were added to Attachment A as eligible MHIP projects that may apply for its benefits, including Skyline at Tamien Phase II, located at 1325 Lick Avenue, Gifford located at 313 Gifford Avenue, Echo located at 147 E. Santa Clara Street, Icon located at 147 E. Santa Clara Street, WSC Apartments located at 1470 W.
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
San Carlos St., 211 River Oaks located at 211 River Oaks Parkway, and 3896 Stevens Creek located at 3896 Stevens Creek Blvd; and
WHEREAS, Phase I Benefits for the first 3,600 units with building permits by February 28, 2027, include:
Reduced Inclusionary Requirement: 5% of the units made available at an Affordable Rent to households earning no more than 100% of Area Median Income (“AMI”) vs. standard 15% at varied income levels – balancing affordability with project feasibility.
Inclusionary Housing Ordinance In-Lieu Fee Waiver: $0 per square foot for mixed compliance projects.
50% Commercial, Residential, Mobile Home Park Construction Tax Reduction: Cuts Commercial, Residential, Mobile Home Park taxes from
2.42% to 1.21% of building valuation.
50% Building and Structure Construction Tax Reduction: Reduces Building & Structures taxes from 1.54% to 0.77% of building valuation. Extended Eligibility: Benefits maintained through permit expiration plus approved extensions; and
WHEREAS, Phase II Benefits (After 3,600 units or March 1, 2027) will include:
Continued IHO Benefits: Reduced inclusionary requirement and fee waiver remain for projects providing at least 5% of units at an affordable housing cost or affordable rent available to households earning no more than 100% AMI.
25% Building and Structure Construction Tax Reduction: Building & Structures tax reduced to 1.16% (from 1.54%).
No Commercial, Residential, Mobile Home Park Construction Tax Reduction: Returns to full 2.42% rate; and
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
WHEREAS, starting March 1, 2027, Phase II will offer the reduced Inclusionary Housing Ordinance In-Lieu fee and a 25% reduction of the Building and Structure Construction Tax for additional units in eligible projects under the temporary MHIP listed under Attachment A; and
WHEREAS, the Multifamily Housing Incentive Program Phase I Extension is based on the finding of the Memorandum, the Report, and the documents linked to the Memorandum;
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF SAN JOSE THAT:
1. The above recitals are true and correct.
2. The deadline to apply for Multifamily Housing Incentive Program (MHIP) Phase 1 benefits at current eligibility criteria and incentive levels is hereby extended to February 28, 2027.
3. The seven (7) new eligible projects under MHIP are added to the eligible project list memorialized in Attachment A hereto.
4. Eligibility for a 50% reduction in the Building and Structure Tax Construction Tax and Commercial, Residential, Mobile Home Park taxes is hereby increased from 1,800 units to 3,600 units that obtain a building permit before February 28, 2027.
5. MHIP will include a tiered prioritization system for allocating limited capacity based on a developments construction readiness, financing commitments, and first-come, first served basis for building applications for projects included in Attachment A attached hereto.
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Council Agenda: 01-27-2026
Item No.: 8.3 (a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
6. MHIP’s benefits and conditions are further defined and described in both the prior approved Resolutions and the Ordinance approved concurrently herewith, as may be amended or superseded.
ADOPTED this _____ day of ___________, 2026, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
MATT MAHAN
Mayor
ATTEST:
TONI J. TABER, MMC
City Clerk
SAW:CPA:CEG
1/12/2026
T-48566.003 / 2275498 A-1
Council Agenda: 01-27-2026
Item No.: 8.3(a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
ATTACHMENT A
Multifamily Housing Incentive Program Pipeline
Project Address Developer Units
Under-Construction
498 West San Carlos Urban Catalyst 278
358 Hatton Street Federal Realty 258
905 North Capitol Hanover 345
681 E. Trimble Building A Hannover Company 397
802 S. First Maracor/Pacific West 166
1371 Kooser Affirmed Housing Group 191
525 N. Capitol Community Development Partners 160
Total 1,794
Market-Rate Pipeline (Eligible)
4300-4360 Stevens Creek Fortbay/Perry Hariri 407
14200 Union Weingarten Investors 305
205 Dupont Miramar Capital/ Perry Hariri 689
700 Saratoga Avalon Bay Communities 247
1298 Tripp; 1325/1347 E. Julian ROYGBIV 913
70 N 27th HC Investment LLC 198
1530 W. San Carlos Urban Villa LLC 237
1520 W. San Carlos Vivji Mani 256
1050 Saint Elizabeth Evershine XVII LP 206
West San Carlos and Sunol Republic Urban 263
1065 S. Winchester A&Z Development 70
1073 S. Winchester A&Z Development 61
605 Blossom Hill Republic Urban 239
1197 Lick/Tamian Station Republic Urban 434
210 Baypointe Summerhill Homes 292
681 E. Trimble Building B Hannover Company 372
681 E. Trimble Building C Hannover Company 371
1312 El Paseo de Saratoga/1177
Saratoga Sand Hill Property 772
Total 6,332
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T-48566.003 / 2275498 A-2
Council Agenda: 01-27-2026
Item No.: 8.3(a)
DRAFT--Contact the Office of the City Clerk at (408)535-1260 or [email protected] for final document.
Market-Rate Pipeline (Proposed Additions)
1325 Lick Ave Swenson/Republic Urban 65
313 Gifford Ave Urban Catalyst 276
147 E Santa Clara (Echo) Urban Catalyst 316
147 E Santa Clara(Icon) Urban Catalyst 310
1470 W. San Carlos St WSC Apartments LLC 213
211 River Oaks Pkwy Valley Oaks Partners 505
3896 Stevens Creek Blvd Holland Partners 540
Total 2,225
Affordable Housing Pipeline (Eligible)
124 N. 15th Santa Clara Housing Authority 103
771-797 Almaden
Resources for Community
Development 99
2315 Canoas Garden Santa Clara Housing Authority 559
1135 E. Santa Clara Green Republic Blossom Hill LLC 89
501 Almaden Satellite Housing 53
1135 E. Santa Clara Allied Housing 91
2315 Canoas Garden Sand Hill Property Co. 237
2920/2928 Alum Rock Charities Housing 83
934-948 E. Santa Clara Milestone Housing Group 103
71 Vista Montana Charities Housing 446
Total 1,992