HOUSING DEPARTMENT
February 24, 2026 Item 8.5
City Council
Erik L. Soliván
Housing Director
LOWER INCOME VOUCHER AND
EQUITY PROGRAM
Building More Housing Focus Area
Performance Dashboard
Entitlements, Building Permits Issued, and Certificates of Occupancy Priority Areas
Near-Term
Goals
(FY 2025-
2026)
Indicators
Long-Term Goal. Meet residents' housing needs across income levels by making San José a great place to build housing.
1. Land Use, Policy, and Regulation 2. Development Services Process 3. Linking Land and Capital
1.1 Complete task force process for General Plan
4-Year Review by June 2026.
1.2 Develop Downtown Ministerial permit process
and include analysis in October CED Citywide
Planning Activities Status Report.
2.1 Analyze options to report on development
services timeliness across the pipeline and report
findings to the CED Committee in December
2025.
2.2 Bring standard conditions of approval and
CEQA process guidelines to City Council by Q3
FY 2025-2026.
2.3 Conduct initial analysis of projects affected by
state CEQA streamlining statutes by June 2026.
2.4 Complete development fee estimator work
by adding multifamily new construction by
December 2025.
3.1 Cost of Development City Council
Study Session on affordable and
market rate development data analysis in
December 2025.
3.2 Review a portfolio of entitled housing projects
with various requirements that present financial
feasibility challenges in today’s market. Present
analysis to CED Committee in February 2026.
3.3 Provide data analysis on the effectiveness of
the market-rate incentive and affordable financing
housing programs and bring resulting program
adjustments to City Council in Q3 FY 2025-2026.
3.4 Provide alternative financing programs
to preserve housing at all income levels. 2
Change
Initiatives
• General Plan Four-Year review
• Downtown Ministerial
• Housing Catalyst Work Plan
• CEQA permit standards
• Development fee estimator
• AI Streamlining tool
• Multifamily Housing Incentive and Downtown
Incentive market rate housing programs
• Affordable unit financing
• Cost of Development Study Session
• Public-Private Partnerships
A Distressed Downtown Asset
1. Opened in late 2024, leasing stuck at 40% with all Studio units are fully leased, 198 1BR and 2BR units remain vacant due to lack of parking options and other considerations
2. The Developer and Equity investor have exited the project forcing a complex bankruptcy proceeding and the debt holder, a Private Equity firm is attempting to sell the note
3. A steep write-down of the debt will have a ripple effect on valuations of residential downtown projects, particularly residential towers, further depressing residual land values and market-rate rents
Slide 3
Targeted Opportunity
02/24/26
1. A steep mark down of the debt below market value will trigger valuation mark-downs of downtown residential towers
2. The downward trend of debt write-offs in residential projects freezes the investment climate, creates more barriers to high-density residential development in downtown as risks of loss erode investor confidence in asset performance in the downtown market
3. The cost of residential development in downtown will increase, as investors will need to higher risks of loss, lower rent schedules, rising costs of materials and lower residual land valuations
Slide 4
Roll-On Effect of Fiscal Insolvency
02/24/26
1. A new tool, Master-Leasing, is an innovative financing bridge that temporarily strengthens short to mid-term asset performance.
2. Positions the City to create affordable units 80% AMI to 110% AMI with a possible preference for public employees, at a low per unit cost, and to recoup the investment by taking an equity position in the asset, allowing for enhanced project oversight while securing a public benefit.
3. Restore market and investor confidence in downtown by demonstrating a proactive, solutions-oriented approach to residential stability.
Slide 5
Lower Income Voucher Equity Program
02/24/26
1. Investment by the City of $11.2M over two five-year terms totaling $48K per unit per year, to Master-Lease 198 units by providing a Voucher to buy-down existing 110% AMI down to 80% AMI for two year the float the rents up to market-rate over the term of the agreement
2. Take an Equity position that will also allow for oversight during the term of the agreement, and to exit the partnership with 100% return on principal + interest
3. L.I.V .E San Jose (Lower Income V oucher Equity) will target a “preference” (not a set aside) for public employees, including police officers, firefighters, and city hall workers
Slide 6
L.I.V .E. Program – Initial Asset
02/24/26
702/24/26
Lower Income Voucher
Inflator: 3% Discount:3%
82/23/2026
Lower Income Voucher
Inflator: 3% Discount:3%
San Jose Housing Authority Max Years Subsidy 10 (Select 5-, 10-, or 15-year subsidy stream) The Fay Step Down Year 3 (Year in which 80% AMI units flip to 100% AMI) Step Down Percent 50% (% of units that flip to 100% AMI)
UNIT MIX AND RENTS
Units Project SF City SF Leased Units Leased % Project City 0-Bedroom 411 411 39 100% 39 0
1-Bedroom 500 521 68 31% 218 150
2-Bedroom 864 864 32 41% 79 47
Total 336 197
Project and City Rents
Project Rent
Per SF
City Rent
Per SF Project Rent City Rent
Minimum Market
Advantage Max Afford. Tenant Rent
0-Bedroom $6.84 $6.84 $2,810 $2,810 10% $2,529
1-Bedroom $6.72 $6.30 $3,362 $3,287 10% $3,026
2-Bedroom $5.01 $5.01 $4,330 $4,330 10% $3,897
Total $6.33 $5.99 $3,525 $3,536
80% AMI Rents Gross Utility Net Rent
Rent Adv. @
Net Rent Tenant Rent Subsidy
0-Bedroom $2,814 $93 $2,721 $89 $2,529 $281
1-Bedroom $3,015 $106 $2,909 $453 $2,909 $378
2-Bedroom $3,618 $134 $3,484 $846 $3,484 $846
100% AMI Rents Gross Utility Net Rent
Rent Adv. at
Net Rent Tenant Rent Subsidy
0-Bedroom $3,518 $93 $3,425 -$615 $2,529 $281
1-Bedroom $3,769 $106 $3,663 -$301 $3,026 $262
2-Bedroom $4,523 $134 $4,389 -$59 $3,897 $433
02/24/26
Slide 9
Equity Return
02/24/26
Fiscal Analysis (subject to performance)
Financially Distressed Portfolio of Local Non-Profit
1. City is exposed to the portfolio totaling over $100,000,000 of investments
2. Intervene to stabilize assets in partnership with the County and the Housing Authority and to mitigate impacts on residents and the surrounding community
3. Preserve deeply affordable housing units for ELI and formerly homeless persons and households
4. Will return this spring with the tools for intervention Slide 10
Alternative Financing for Other Distressed Assets
02/24/26