January 23, 2026
City of San Jose City Council
200 E. Santa Clara St.
San José, CA 95113
Subject: Support for Housing Incentive Programs (Items 8.2 and 8.3) and Inclusionary Housing Ordinance Updates (8.4)
Dear Mayor Mahan and Honorable Councilmembers,
SPUR writes in support of the proposed housing incentive programs, including the expansion of Downtown Residential Incentive Program and the Multifamily Housing Incentive Program extension. We believe that these actions will unlock stalled housing developments, support housing production in Downtown San José, and deliver naturally occurring affordability for middle-income households without deep subsidies, relieving displacement pressures elsewhere in the city.
We are particularly supportive of the expansion of the Downtown Residential Incentive Program because its focus on office-to-residential conversions aligns with SPUR’s Revitalizing San José’s Downtown: Five Strategies. By targeting conversion projects for mid- and high-rise buildings in the Downtown and phasing reductions to key development taxes, the program prioritizes housing that can realistically be delivered in the near term. Simultaneously, we encourage the City to identify complementary and reliable funding strategies for parks, notably Guadalupe River Park and St. James Park, so that housing production and investments in park amenities, maintenance, and public space can advance together.
In supporting the extension of the Multifamily Housing Incentive Program (MHIP), we recognize its demonstrated success over the past year. After a period in which no multifamily projects advanced to construction, MHIP has helped unlock multiple projects now under construction or actively pursuing permits, representing approximately 1,400 units.1 Together, the program’s combination of tax reductions, expanded eligibility, and a readiness-based prioritization could deliver even more housing projects. Although the potential loss of transportation revenue is not assumed in the 2026-2030 Adopted Traffic Capital Program, we want to emphasize the importance of identifying additional, sustainable transportation funding sources to continue supporting the critical link between housing and transportation in the Bay Area’s largest city. 1 City of San José, Staff Memorandum: Multifamily Housing Incentive Program Extension, Agenda Item 8.3. Staff analysis summarizes project status and unit counts.
January 23, 2026
San José City Council
San José City Hall
200 E. Santa Clara St.
San José, CA 95113
Sent via electronic mail
Re: Item 8.4, Amendments to Chapter 5.08 of Title 5 of the San José Municipal Code and Regulations for the Inclusionary Housing Ordinance (IHO).
Dear Mayor Mahan, Vice Mayor Foley, and Members of the San José City Council:
The 34 undersigned organizations and individuals, members, and partners of the Race Equity Action Leadership (REAL) Coalition, write to express concern regarding the proposed changes to San José’s Inclusionary Housing Ordinance (IHO) and to urge the Council to defer action at this time.
As a coalition, we support the production of housing at all income levels and recognize the importance of increasing overall housing supply. At the same time, the City must preserve and strengthen its most effective tools for producing affordable housing for low- and very low-income residents – particularly given persistent affordability gaps, limited public funding, and unmet Housing Element obligations.
The proposed changes would shift inclusionary requirements toward higher income levels, reducing access for renters most in need and weakening one of the City’s most reliable mechanisms for producing deeply affordable housing. We are also concerned about the lack of robust stakeholder engagement, comparative policy alternatives, and in-depth analysis to support such a consequential change.
Attached to this letter is a detailed policy analysis prepared by Silicon Valley Council of Nonprofits, REAL members, and allied organizations and individuals from the REAL Coalition Housing Justice Workgroup. The analysis outlines concerns related to affordability impacts, equity considerations, engagement, transparency, analysis, and process, and provides context for why deferral is warranted.
REAL Coalition Letter to CSJ Council re Item 8.4, January 23, 2026
We respectfully urge the Council to defer action on the proposed IHO changes and direct staff to conduct meaningful cross-sector engagement, provide robust analysis across AMI levels, and present policy alternatives for community and Council consideration. We also note our support of the Housing Department’s proposal to create a streamlined IHO process for 100% affordable housing developments.
San José has long been a housing-friendly community and leader in inclusionary housing policy. We ask the Council to protect this legacy by ensuring any changes to the IHO strengthen – rather than dilute – the City’s affordability, equity, and anti-displacement goals.
Sincerely,
SIGNATORIES:
Vaughn Villaverde
AACI
Lavere Foster
African American Community Service
Agency
Chuck Cantrell
Afro UPRIS
David Mineta
Alum Rock Counseling Center
Richard Konda
Asian Law Alliance
Elisa Koff-Ginsborg
Behavioral Health Community
Association (BHCA)
Josh Selo
Bill Wilson Center
Don Taylor
Catholic Charities of Santa Clara
County
Chad Johnston
CreaTV San José
Rachel Montoya
Community Solutions
Beth Leary
Family Supportive Housing, Inc.
Kristopher Scott
Fresh Lifelines for Youth
2 REAL Coalition Letter to CSJ Council re Item 8.4, January 23, 2026
René Ramirez
HomeFirst
Gia Pham
Housing Choices
Richard Hobbs
Human Agenda
Susan Frazer
Jewish Family Services of Silicon
Valley
Nathalie Carvajal
Latina Coalition of Silicon Valley
Darcie Green
Latinas Contra Cancer
Tristia Bauman
Law Foundation of Silicon Valley
Quency Phillips
Lighthouse Innovation Center
Colsaria Henderson
Next Door Solutions to Domestic
Violence
Eva Terrazas
Pacific Clinics
Maria Daane
Parents Helping Parents
Melissa A. Morris
Public Interest Law Project
Poncho Guevara
Sacred Heart Community Service
Kimberly Woo
Services, Immigrant Rights and
Education Network (SIREN)
Kyra Kazantzis
Silicon Valley Council of Nonprofits
Sheri Burns
Silicon Valley Independent Living
Center
Michael Dao
SJSU Human Rights Institute
Sandy Perry
South Bay Community Land Trust
Lori Katcher
SURJ Santa Clara County
Yvonne Maxwell
Ujima
3 REAL Coalition Letter to CSJ Council re Item 8.4, January 23, 2026
Cassandra Magana
West Valley Community Services
Maria Noel Fernandez
Working Partnerships USA
About the REAL Coalition
The REAL community of Silicon Valley-based nonprofit leaders and allies has been meeting since June 2020 to use our positional power to advocate for a more racially-just and equitable society; to establish a peer network of leaders committed to fighting white supremacy and systemic racism in ourselves and our institutions; and to hold each other accountable to the promises we made in the Nonprofit Racial Equity Pledge. The REAL coalition is broadly representative of the nonprofit community including human and community services, behavioral health and health, arts and culture, domestic violence, older adults, food security, education, environmental, farming, legal, disability rights, LGTBQ rights, ethnic, immigrant rights, housing and homelessness, criminal justice reform, urban planning, and intermediary organizations, and others. Over 125 organizations have participated in the REAL Coalition.
4 Proposed Changes to San José’s Inclusionary Housing Ordinance Would Weaken Affordability, Undermine Equity, and Reduce the City’s Ability to Meet its Housing Obligations
Prepared by the Silicon Valley Council of Nonprofits for the Race Equity Action Leadership (REAL) Coalition Housing Justice Workgroup and allied organizations and individuals
San José is considering changes to the Inclusionary Housing Ordinance (IHO) that would make inclusionary homes less affordable, undermining the intent of the ordinance.
The Housing Department is proposing changes to the IHO that would allow developers to meet affordability requirements by building homes for higher-income households.
Instead of requiring 15% of units to be affordable to people earning between 50% and 100% of the Area Median Income (AMI), the proposal would shift that range upward to 60% – 110% AMI. This change would make inclusionary homes less affordable for many San José renters and weaken the City’s ability to meet its affordability and anti-displacement goals.
IHO: An Effective Tool to Produce Affordable Housing
Since 2019, when the ordinance was last updated, the ordinance has produced an average of 288 affordable homes per year without City subsidy, about 43% of which are affordable to people earning at or below 50% of the area median income. This means the IHO alone produces nearly as many affordable homes each year as the City does through direct subsidy, which has averaged at about 300 homes annually.
The Need for Affordable Housing in San Jose Continues to be High San José’s state-mandated housing obligations – known as the Regional Housing Needs Allocation (RHNA) – require the City to plan for more than 15,000 homes affordable to very low-income households and an additional 8,600 homes affordable to low-income households. While the City has made progress, the production of housing affordable at these income levels over the past several years has fallen well short of the scale of need.
As of the March 2025 Housing Element Annual Progress Report, only 9% of the RHNA requirement for very low income and 17% of the requirement for low income housing have been met for the 2023-2031 period (6th Housing Element Cycle). The City previously exceeded its targets for market rate units in the 5th Cycle – producing 115% of its RHNA goal while only achieving 26% of its goal for affordable units. Significantly 1 more housing needs to be built to achieve overall production goals, but the City must refocus its efforts to preserve levers for affordable units – especially considering that it previously failed to meet its goals for affordable units by a wide margin.
Any policy change that reduces the production of deeply affordable housing undermines the City’s ability to meet its RHNA obligations, fulfill its adopted Housing Element and equity goals, and – most importantly – respond to the real housing needs of San José residents.
Historically Marginalized Communities Will Be Most Impacted Historically marginalized communities, such as San José’s African American, indigenous, Vietnamese/AAPI, Latino, immigrants and other communities of color, people with disabilities, older adults, transition-aged youth, survivors of intimate partner violence, Veterans, and the LGBTQ+ community are disproportionately represented among people experiencing homelessness and housing insecurity. Policy and funding changes that reduce affordable housing will fall most heavily on these communities, which on average have less household wealth than white residents and therefore fewer resources to weather economic shocks.
It is unclear whether the proposed IHO changes were evaluated through an equity lens.
Absent a robust racial and economic equity analysis, the proposal risks conflicting with the City’s Housing Element, its Racial and Society Equity Ordinance, the Equity Values and Standards Policy, and the City’s charter.
The City Has Limited Tools and Funds to Support Affordable Housing Development
The recent Cost of Residential Development Study highlighted the City’s effectiveness in leveraging local funds to support affordable housing, with an ROI of $3 - $6 for every $1 of local funding invested. However, Measure A has now been fully and successfully deployed, the bulk of the City’s Measure E funding has been redirected to interim shelter and homelessness response, and the City’s commercial linkage fee has produced little funding as commercial development has been stagnant.
In this constrained funding environment, land-use and regulatory tools such as the IHO are more critical to producing housing affordable to low- and very low-income residents.
Proposed IHO Changes Are Not Responsive to Housing Needs 2 IHO units are primarily rental. More than two-thirds of San José renter households earn below the area median income, and the City’s average rents align at approximately 70% of AMI. In this context, there is no demonstrated need for a middle-income rental strategy within the IHO. Only about 30% of renters earn above the median, and these households are generally able to compete in the rental market without subsidy.
The proposed changes would shift a significant share of inclusionary units above San José’s average rents, requiring income-restricted leasing and ongoing verification for households that do not need assistance to access market-rate housing. Experience elsewhere in the Bay Area shows that deed-restricted rental units at higher AMI levels are more likely to sit vacant, undermining both affordability and production goals.
Need for Stakeholder Engagement to Inform Policy Development As a coalition, we support the production of housing at all income levels and recognize the importance of increasing overall housing supply. However, the effectiveness and equity of housing policy depend on inclusive, transparent policymaking.
The initial IHO and the 2019 revision were created after deep engagement with housing advocates, the tenant community, and the market-rate and affordable development community. Engagement was not treated as procedural, but as substantive input shaping both policy design and feasibility options.
In contrast, the proposed IHO changes were developed with little to no substantive stakeholder engagement prior to their release. Key stakeholders – even developers – were not meaningfully involved in identifying challenges, testing assumptions, or shaping potential solutions before policy changes were advanced for Council consideration. Engagement, where it occurred, was largely limited to reacting to a fully formed proposal rather than informing its development. In the Housing Department memorandum, community feedback was not summarized for Council.
Need for Robust Analysis to Support Recommendations and Inform Council Deliberation
2019 IHO changes were informed by a comprehensive 145-page memo that clearly explained the policy’s goals, presented four alternative approaches, documented best practices, and modeled outcomes. This level of analysis enabled thoughtful Council deliberation and informed decisionmaking.
3 The current proposal lacks comparable analytical rigor, leaving Council without the information necessary to assess tradeoffs, impacts, or unintended consequences.
Cost of Residential Development Study Was a Missed Opportunity While the Cost of Residential Development Study provided an excellent opportunity to inform this discussion, its scope was narrow and did not assess the impact of proposed IHO changes to affordability of built units or alternative IHO policy options. It evaluated only in-lieu fees, an alternative form of compliance the Housing Department has indicated is chosen by a minority of developers.
As a result, the study does not provide the Council with the information necessary to evaluate the feasibility or affordability impacts of changes to on-site inclusionary housing requirements. Staff should analyze feasibility impacts of constructing on-site units across a mix of AMI levels.
At the same time, macroeconomic shifts in the development environment have created real uncertainty for housing production. In this context, advancing multiple policy changes without comprehensive analysis—or modeling how these policies interact—deprives the Council of a clear understanding of impacts on feasibility, production, and affordability.
Policy decisions should be guided by long-term housing needs and obligations, not temporary market conditions. Weakening the IHO based on a brief period of depressed market-rate development risks locking in affordability losses that will persist long after market conditions rebound.
A meaningful feasibility analysis must evaluate on-site construction at multiple AMI levels and consider interactions with other housing production and incentive policies.
Need for Alternatives for Council Consideration
Staff memos, especially those for deeply consequential decisions such as this, historically have presented both a staff recommendation and alternatives for Council consideration, each supported by data and analysis. The purpose of alternatives for consideration is to provide balanced, objective options (including pros, cons, costs, impacts) for major decisions, ensuring the council can select the best feasible solution, empower community input, and explore different structures, ultimately leading to better, more informed policy-making that serves the whole community, not just a single path. 4 The current IHO memorandum does not present alternatives or comparative analysis, limiting the Council’s (and stakeholder’s) ability to evaluate whether the proposed approach is the most effective way to achieve the City’s housing goals.
San José’s History of IHO Leadership
San José has been a statewide leader in inclusionary housing, advancing the legal authority for such policies through landmark cases. The ordinance was supported by a broad coalition spanning housing advocates, business leaders, and elected officials across sectors.
This history underscores the importance of maintaining San José’s leadership by ensuring that changes to the IHO strengthen – rather than dilute – its affordability and equity outcomes, which are the reasons behind having such an ordinance in the first place.
Recommendation
Proposed amendments to the Inclusionary Housing Ordinance suffer from significant process and policy deficiencies. Changes to the ordinance should be deferred, and staff given direction to address these issues before returning to Council.
We encourage the Council to defer action on the proposed IHO changes and direct staff to provide:
● A summary of engagement with a wide range of stakeholders – including an opportunity for cross-sector engagement – and how feedback shaped proposed policy changes.
● An analysis of feasibility of building on site at each AMI level, and policy options to support feasibility based on that analysis.
In addition, the City must refocus on affordability. We encourage the Council to hold a study session to assess progress towards Housing Element commitments and reaffirm the City’s priorities for producing affordable housing at all income levels. 5 1098 Lincoln Avenue ∙ SUITE 200 ∙ SAN JOSE, CALIFORNIA 95125 ∙ PHONE (408) 292-1601
January 26, 2026
Honorable Mayor and Members of the San José City Council City of San José
200 East Santa Clara Street
San José, CA 95113
Re: Support for Amendments (1 -23-26 memo from Mahan, Kamei, Campos, Cohen, Tordillos) to the Inclusionary Housing Ordinance – Item 8.4
Dear Mayor and Councilmembers:
On behalf of Republic Urban Properties, I write to express our strong support for the Mayor and Council Memorandum dated January 23, 2026, recommending targeted amendments to the Inclusionary Housing Ordinance (IHO). We believe the memorandum represents the most practical and data-driven approach to addressing San José’s current housing feasibility challenges while maintaining the City’s commitment to affordability.
In today’s market, the existing IHO—particularly its income-level requirements for on-site units—has become overly restrictive. Escalating construction costs, higher interest rates, and lower achievable rents relative to neighboring jurisdictions have materially reduced project feasibility. As a result, many entitled residential projects are unable to proceed to construction, yielding the unintended consequence of less market-rate and less affordable housing overall.
The Mayor and Council memorandum appropriately acknowledges this reality. The proposed adjustments—most notably removing the 110% AMI on-site rental requirement for higher- density projects and introducing a 7% alternative compliance option at 50% AMI—strike a necessary balance between affordability goals and financial feasibility. These changes align with independent research showing that excessive inclusionary requirements can suppress housing production altogether.
We also support the memorandum’s focus on encouraging small-scale and infill development by exempting the first 20 units of smaller projects and retaining the existing 99-year affordability restriction. Together, these provisions help ensure long-term public benefit while increasing the likelihood that projects actually get built.
San José is falling behind on its RHNA goals, particularly for moderate-income households.
The recommended amendments improve feasibility in the 60%–80% AMI range—where the City is most constrained—while preserving a pathway to deeper affordability through alternative compliance. This recalibration is essential if San José is to unlock stalled projects and accelerate housing delivery during the current RHNA cycle.