MULTIFAMILY HOUSING INCENTIVE PROGRAM RESIDENTIAL
TAX AND FEE WAIVER FOR 0 SEELYMIXED-USE
DEVELOPMENT BUILDING B AT 681 EAST TRIMBLE ROAD
JUNE 23, 2026 ITEM 8.3
CITY COUNCIL
ERIK L. SOLIVÁN
HOUSING DIRECTOR
BANU SAN
DEPUTY DIRECTOR
Surge in AI investment is leading a Market-Rate rent recovery across the Bay Area that began in San Francisco San Francisco
$3,000
$3,500
$4,000
$4,500
May '24 Oct '24 Mar '25 Aug '25 Jan '26
Average rent prices in San Francisco
have increased by 1% over the last
month and by 18% since last year.
Palo Alto
$3,500
$4,000
$4,500
$5,000
May '24 Oct '24 Mar '25 Aug '25 Jan '26
Average rent prices in Palo Alto have
increased by 8% over the last month
and by 7% since last year.
Santa Clara
$3,100
$3,300
$3,500
$3,700
May '24 Oct '24 Mar '25 Aug '25 Jan '26
Average rent prices in Santa Clara have
increased by 1% over the last month and
by 6% since last year.
Investment Cycle Ahead
Data: Rental Market Trends Reports by Zumper.com Slide 2 Investment Cycle Ahead
San José is well positioned to capture the benefits of the Bay Area’s broader multifamily recovery, attracting large institutional investment for its growing tech workforce while maintaining market-rate rents well below San Francisco, Palo Alto, and neighboring submarkets.
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
1Q2020 1Q2021 1Q2022 1Q2023 1Q2024 1Q2025 1Q2026
Class A Class B Class C Class F All Class Avg.
Higher valuation trades are trades are
typically 4- and 5-star, transit-oriented,
institutional-scale assets, where investors are
underwriting strong rent growth, extremely low
vacancy, and long-term scarcity value.
Examples include, but are not limited to, a 650-
unit South San Jose community that sold for
~$323M (one of the region's priciest apartment
deals in years)
1, and 1250 Lakeside traded at
roughly $143.5M (~$574,000 per unit)2.
1 CoStar Silicon Valley apartment complex sells for $323 million as AI boom drives up rents 2 City Development Limited Sells 250 Units Multifamily At 1250 Lakeside Drive For $143.5M Slide 3 Multifamily Housing Incentive Program (MHIP)
• In December 2025, the City released a Cost of Residential Development Study finding that higher- density rental housing is not financially viable, due to elevated construction costs, high interest rates, and insufficient rents to cover development costs, and that the MHIP construction tax reduction and IHO fee waiver offer an efficient mechanism for closing this 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 Slide 4
0 Seely Avenue Rental Apartments
Building C Building B Building A
Developed by The Hanover Company
• 1,130-unit residential development
across three buildings:
• Building A with 397 units:
• 20 restricted affordable
up to 110% area media income
• Under construction
• Building B with 372 units:
• 19 restricted affordable units
up to 110% area median income
• Building C with 361 units
• Construction start: est. 2027
Slide 5
0 Seely Mixed Use Development Building B
Building B
Inclusionary Housing Fee Waiver Value $4,480,002
50% Reduction of CRMP & B&S Construction Taxes
on the residential portion of the building $1,773,456
Total Fee Waiver and Reduction $6,253,458
($16,810 per unit)
Slide 6
MHIP Production Progress to Date
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
0 Seely Avenue (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
0 Seely Avenue (Bldg B)* Hanover Co. 353 19 372
0 Seely Avenue Affordable** Hanover Co. 1 135 136
Total 1,975
(83%)
404
(17%)
2,379
(100%)
* Development discussed in this presentation. ** Fee waivers and reductions under $1 million do not require Council action.
Slide 7