HOUSING DEPARTMENT
MULTIFAMILY HOUSING INCENTIVE
PROGRAM RESIDENTIAL TAX AND FEE
WAIVER FOR EL PASEO DE SARATOGA
AT 1777 SARATOGA A VENUE
March 24, 2026 Item 8.3
City Council
Erik L. Soliván
Housing Director
Banu San
Deputy Director, Housing Department
• In December 2025, the City released a Cost of Residential Development Study evaluating housing development feasibility under current market conditions
• Higher-density rental housing is generally not financially viable today due to elevated construction costs, high interest rates, and insufficient rents to cover development costs • The MHIP construction tax reduction and IHO fee waiver offer an efficient mechanism for closing the financial feasibility gap
• City Council approved MHIP on December 10, 2024, and amended the program on May 13, 2025 and January 27, 2026. Key program benefits include:
• IHO in-lieu fee reduced to $0 for developments that include at least 5% of units on-site at up to 110% area median income
• 50% reduction in the Building and Structure (B&S) and Commercial-Residential-Mobile Home-Park (CRMP) Construction Taxes for the first 3,600 eligible units through February 28, 2027 (Phase I) • 25% reduction in the B&S Tax for projects beyond the first 3,600 units or after February 28, 2027 (Phase II) • To qualify, developments must be listed on the Eligible Projects list last updated January 27, 2026 Multifamily Housing Incentive Program (MHIP)
Slide 2
• Developed by Sand Hill Property
Company
• 772-unit residential development
across two buildings:
• 12-story structure with 398
residential units
• 10-story structure with 374
residential units
• 39 restricted affordable units at
110% area median income
Slide 3
El Paseo De Saratoga at 1777 Saratoga Avenue
Slide 4
Proposed Tax and Fee Waiver
Inclusionary Housing In-Lieu Fee N/A*
50% Reduction of CRMP & B&S
Construction Taxes on the residential
portion of the building
$3,693,404
Total Fee Waiver and Reduction $3,693,404
($4,784 per unit)
* The developer will pay the applicable Mixed Compliance IHO in-lieu fee, estimated at $13,965,730 (no IHO waiver requested). The fee will be directed as a minimum contribution paid under San José Municipal Code 5.08.590(C) to the El Cathedral 100% affordable housing project located at 2315 Canoas Garden Avenue.
Slide 5
MHIP Production Progress
Development Developer Market-Rate
Units
Affordable
Units Total Units
905 North Capitol Avenue Hanover Co. 328 17 345
498 West San Carlos Street Urban Catalyst 264 14 278
358 Hatton Street Federal Realty 245 13 258
681 East Trimble Road (Bldg A) Hanover Co. 377 20 397
802 South First Street Maracor/Pacific West 2 164 166
1777 Saratoga Avenue* SandHill Prop. 733 39 772
Total 1,949
(88%)
267
(12%)
2,216
(100%)
* Development discussed in this presentation.
HOUSING DEPARTMENT
MULTIFAMILY HOUSING INCENTIVE
PROGRAM RESIDENTIAL TAX AND FEE
WAIVER FOR EL PASEO DE SARATOGA
AT 1777 SARATOGA A VENUE
March 24, 2026 Item 8.3
City Council
Erik L. Soliván
Housing Director
Banu San
Deputy Director, Housing Department