Inclusionary Housing
Ordinance
Item 8.4
Slide 11/27/2026
March/June Budget Message Directed
1. Adjust AMI target levels to align prioritization to workforce housing developments between 60% and 120% AMI
2. Exempt 100% Affordable developments from the IHO Process
3. Streamline regulatory processes
4. Align to the Moderate-Income Housing Strategy adopted by the City Council Community and Economic Development Committee in May 2025
CITY COUNCIL DIRECTION
Slide 21/27/2026
• Housing Department Staff presented at three (3) public informational and interactive meetings on the proposed changes to the Inclusionary Housing Ordinance
• 2 virtual meetings on October 9th and December 10th
• 1 in-person meeting on January 14th
• Recommendation memorandum was posted on the City’s Council Agenda website for the January 27, 2026, City Council meeting • Recordings of the virtual community meetings were published on the City’s website
Slide 31/27/2026
COMMUNITY ENGAGEMENT
Slide 4
HOUSING CONTINUUM
Funded Through:
1. Gap Financing Program
2. Rent Stabilization Program
3. Community Development Block Grant
4. Low to Moderate Income
Housing Fund
Supported Through:
Inclusionary Housing
Ordinance
1/27/2026
IHO Program Snapshot*
404 Total Applications Submitted
Only 58 Projects (14% of applications)
began construction
• 43 Projects Completed On-Site Units (10%)
totaling 1,442 units
43% of units at 50% AMI
56% of units at 60% – 110% AMI
• 15 Projects Paid In-Lieu
($44M, overwhelming majority from 5
Projects)
Over 1,444 units under construction today
under the housing production incentive
program
Slide 5
PROGRAM OUTCOMES
73%
7%
20%
Project Pipeline by Compliance Method
Build On-Site Mixed-Compliance Pay In-Lieu Fee* Since 2018 1/27/2026
IHO Program Current Applications*
On-Site Affordable Housing | 53 Projects | 1,850 units
• 30%-50% AMI: 24%
• 60%-100% AMI: 74%
• 110%-120%: 2%
Mixed-Compliance | 5 Projects | 50 Units
• 50 on-site affordable units
• $12.4 million in-lieu fees
In-Lieu Fee Only | 15 Projects
• $38.2 million total fees
Slide 6
PROGRAM PERFORMANCE DATA
0% 10% 20% 30% 40%
30% AMI
50% AMI
60% AMI
70% AMI
80% AMI
100% AMI
110% AMI
120% AMI
Applications by AMI
*Does not include 100% affordable housing projects
74%
1/27/2026
5.08.500 Inclusionary Housing Requirement for On-Site Compliance NOTE: Santa Clara County Area Median Income, Family of 4, 2025: $195,200 Slide 71/27/2026
PROPOSED ORDINANCE CHANGES - 1
Option Existing Proposed
Rental
5% at 50% AMI
5% at 60% AMI
5% at 100% AMI
15% total
OR
10% at 30% AMI
5% at 60% AMI
5% at 80% AMI
5% at 110% AMI
15% total
For-Sale 15% at 120% AMI 15% at 120% AMI
5.08.510 Inclusionary Housing Requirement for Off-Site Compliance Slide 8
PROPOSED ORDINANCE CHANGES - 1
Option Existing Proposed
Rental
10% at 50% AMI
5% at 60% AMI
5% at 100% AMI
20% total
10% at 60% AMI
10% at 80% AMI
10% at 100% AMI
30% total
For-Sale 20% at 120% AMI 25% at 110% AMI
1/27/2026
1. 5.08.400 Streamlined Process for 100% Affordable Developments
1. Reduce additional work by utilizing regulatory agreements to show IHO compliance rather than an IHO Process & Agreement
2. 5.08.600 Affordability Period for Rental Inclusionary Units
1. Reduce the affordability restriction term to 55 years to align with state and federal regulations
3. Other Administrative Efficiencies
Slide 9
PROPOSED ORDINANCE CHANGES - 2
1/27/2026
Concept, Intent, and Pilot
1. When a developer provides more affordable housing units than required for a given project, the surplus units can be converted into credits.
2. These credits can then be:
• Banked for use in future projects by the same developer, OR • Transferred/sold to other developers who need to meet IHO obligations
Slide 10
REGULATORY UPDATE
SURPLUS CREDIT PROGRAM
1/27/2026
Restrictions
1. Equivalency: Credits must
synchronize with unit room
counts to be eligible for transfer
2. Transferability: Align AMI
ranges and construction timing
for utilization
Benefits
1. Flexibility → Adjustments to
financial market conditions, build
now, bank benefits for later
2. Efficiency → Easier
consideration for where and how
affordable housing units get
produced
Slide 11
(1) 3 BR / 1,500 sqft / 110% AMI – 4 RMS
(1) 2 BR / 1,000 sqft / 80% AMI – 3 RMS
(1) 1 BR / 800 sqft / 60% AMI – 1 RM
(2) 2 BR / 2,000 sqft / 70% AMI – 6 RMS
(2) 1 BR / 1,600 sqft / 90% AMI – 2 RMS
3,600 sqft – 8 Rooms
Building A Building B
3,300 sqft – 8 Rooms
REGULATORY UPDATE
SURPLUS CREDIT PROGRAM
1/27/2026
To make the updated requirements easier to follow, we’ll offer:
1. Clear pathways for selecting compliance options
2. Detailed guides for each compliance option
3. Visual exhibits to illustrate requirements
4. Interactive calculators for obligation estimates
5. Ready-to-use templates for applications, agreements, and other compliance forms
Slide 12
REGULATORY UPDATES
STREAMLINE PROCESSES
1/27/2026