January 26, 2026
San José City Council
200 E Santa Clara St
San Jose, CA 95113
RE: Item 8.4: Amendments to the Inclusionary Housing Ordinance Dear Mayor Mahan and Honorable Councilmembers,
On behalf of MidPen Housing, I am writing to share our perspective as a developer, long-term owner, manager, and resident services provider of affordable housing. We appreciate the opportunity to engage on this important area of housing policy in the City of San José.
MidPen Housing is one of the nation’s leading developers, owners and managers of high-quality affordable housing and onsite resident services. Since MidPen was founded in 1970, we have developed 139 communities with more than 10,000 homes for low-income families, seniors and those with supportive housing needs throughout the Bay Area and Monterey Bay Area. In the City of San José, our portfolio includes 14 properties serving over 2,600 residents with an additional 203 homes at VTA Capitol Station in our development pipeline.
We believe in the importance of building housing across a spectrum of types and affordability levels to solve our housing crisis. While it is meaningful from a policy perspective to have an Extremely Low Income (ELI) option as part of the inclusionary thresholds, we recognize that there has been an underutilization of the option to produce 10% of units at 30% AMI. With the changes to the City’s inclusionary housing ordinance effectively serving as a move up the income spectrum, we see a gap in existing policy framework to meet the need in the 30% to 80% AMI range. We would like to collaborate meaningfully and find solutions.
The affordable housing sector is structured around production in the 30-80% AMI range. In July of last year, the passage of the federal bill H.R. 1 expanded the Low-Income Housing Tax Credit (LIHTC) and tax-exempt bond programs. Specifically, it increased the allocation of 9% LIHTCs by 12%, while also reducing the bond threshold test for 4% LIHTC projects – effectively doubling the flow of this resource that was previously constrained by the bond cap. Novogradac estimates that this influx of federal resources will allow California to build more than 200,000 additional units. We encourage the City of San José to take advantage of this opportunity – it is the time to put local City funds to work as leverage and bring in State and Federal funding that is otherwise left on the table. The opportunity to leverage local sources is significant; for every $1 of local investment, developers often raise $6 of capital.
In December of last year, I was privileged to present to your Council about opportunities to reduce cost. Building on the themes of that testimony, I will bring to the fore than an additional concept: the City can maximize existing planned investments in housing that is designed to obtain LIHTCs by creating more certainty in its housing finance delivery system. Building a
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.