TO: HONORABLE MAYOR
AND CITY COUNCIL
FROM: Councilmember Tordillos
Councilmember Kamei
SUBJECT: General Plan Four-Year
Review Policy Framework.
DATE: August 14, 2026
Approved
Date:
8/14/2026
COUNCIL DISTRICT: Citywide
SUBJECT: General Plan Four-Year Review Policy Framework.
RECOMMENDATION
Approve the August 13, 2026 memo from Mayor Mahan, Vice Mayor Foley, and Councilmembers Campos, Cohen, and Casey, and add the following direction to the City Manager with respect to staff Recommendation 2(b)(2), the framework for the future implementation of the Small Multifamily / Missing Middle Housing program described at Strategy P-35 of the City’s adopted and certified Housing Element:
1. Explore the creation of a local density bonus program for missing middle housing that can be pursued in lieu of state density bonus law. To incentivize utilization of the local program instead of the state law, the local density bonus program should be ministerial and create a preferable development pathway to any ordinary application under the missing middle housing program and should allow for the same number of bonus units as state law, provided the development adheres to City objective development standards.
1. Eligibility for the density bonus program should leverage planned work to develop objective design standards for missing middle housing, as well as additional standards to ensure local neighborhood compatibility that may otherwise be preempted by COUNCIL AGENDA: 8/18/26
FILE: 26-852
ITEM: 10.3
HONORABLE MAYOR AND CITY COUNCIL
8/14/26
Subject: General Plan Four-Year Review Policy Framework
state law, including minimum requirements for common open space on the parcel and height limits.
2. Develop objective written health and safety standards for projects applications proposing to rely on state Density Bonus Law (Gov’t Code section 65915) under any proposed implementation policy for the Missing Middle Housing program envisioned by Housing Element Strategy P-35.
3. Work through the Office of Intergovernmental Relations with our legislative delegation in Sacramento to sponsor a bill that would authorize cities to enact a model Missing Middle Housing program implementation ordinance that fulfills the intent of Housing Element Strategy P-35 but specifically allows the city to retain authority to impose local objective planning standards notwithstanding the state Density Bonus Law (Gov’t Code section 65915).
4. Pilot, within 0.75 miles of Tier 1 and Tier 2 transit hubs pursuant to SB 79 in and around downtown only, allowing an expanded missing middle housing program that permits a maximum building height of 45 feet and four stories in Residential Neighborhood General Plan land use designations to foster a gradual transition from the 55-foot height limit of Tier 2 transit hubs to the 35-foot height limit of Residential Neighborhood zones.
5. Return to Council with options for allowing small-scale neighborhood retail uses such as corner stores and cafes in select Residential Neighborhood areas.
1. Options should include explicit prohibitions on the granting of Off- Sale Alcohol and Tobacco Retail licenses in Residential Neighborhood areas.
BACKGROUND
We appreciate the intensive policy and outreach work staff has done throughout the General Plan 4-Year Review process. This process represents the City’s best opportunity to tackle the root of the affordability crisis that is driving so many working and middle class families out of San José: a severe lack of housing. The impacts of this crisis are clear. Estimates show our population declining for the first time since 1870, with the decline disproportionately concentrated within our working-class and our black and brown communities. All evidence, with sources ranging from the Center for Continuing Study of the California Economy to UC Berkeley’s Urban Displacement Project, points to the City’s failure to build enough housing as the culprit.1 Missing Middle housing offers a practical response to this crisis, one that has already proven effective in a wide range of cities in North America, from Seattle and Austin to Portland and Edmonton. We must act swiftly to protect our residents and meet our obligations under state law.
It is also important to recognize what Item 10.2 is and what it isn’t. This item is not a rezoning, and it is not the approval of any project application, density standard, or the
1 https://www.urbandisplacement.org/wp-content/uploads/2021/08/bay_area_re- segregation_rising_housing_costs_report_2019.pdf
HONORABLE MAYOR AND CITY COUNCIL
8/14/26
Subject: General Plan Four-Year Review Policy Framework
like. Rather, Item 10.2 establishes the potential parameters for programs and policies that help us meet our legal obligations under the Housing Element and state law. Per consultation with planning staff, there will be multiple subsequent touch points as the details of legally adequate policies emerge. In that way, Item 10.2 is more akin to a study session than an ordinary policymaking action. The staff report contemplates a December 2027 date for actual adoption. There will be numerous opportunities for engagement with the public between now and then. Moreover, Item 10.2 defines much of the scope of environmental review for the ultimate policy choices Council will make later. If that scope is too narrow, Council will be unable to adopt policies and programs consistent with both the spirit and the letter of Housing Element Law, triggering expensive new analysis and likely consequences as elaborated below.
Meeting our Housing Element obligations
The City of San José made two primary commitments related to Missing Middle housing in its 6th Cycle Housing Element. First, the program committed the City to “allow missing middle housing of at least four units and up to 10 units in locations throughout the city.” And second, the City committed to implementing an upzoning that would result in “at least 20,000 units of net new capacity added citywide.”
With the typical Residential Neighborhood lot in San José being roughly 1/8th of an acre, 32 DU/AC is the minimum density the City must consider to plainly satisfy its commitment to allow at least four units on these parcels. Going below 32 DU/AC will set the stage for HCD to revoke the City’s Housing Element and unleash a wide range of penalties and challenges: the resurgence of the Builder’s Remedy and loss of local land use control across the City; reduced access to state funding and grants– a reduction that would disproportionately impact historically disinvested communities– at a time when we are grappling with a $50 million deficit; and fines that per the Attorney General could reach hundreds of thousands of dollars a month.2 These are not consequences our City or our residents can afford, and 32 DU/AC is the minimum density we can adopt to avoid them. Thus it is imperative that the Council continue to work towards enabling 32 DU/AC throughout the City.
Likewise, significant limitations on the locations where the new Missing Middle housing program would apply would narrow the scope of environmental review and jeopardize the Council’s ability to legally adopt a compliant policy. Adopting such limitations now– without obtaining sufficient supporting feasibility analysis demonstrating that the program can still deliver 20,000 net new homes within the planning period– would endanger the city’s ability to substantiate to the California Department of Housing and Community Development that the policy meets the requirements of the City’s adopted Housing Element. That is, we would be left without the ability to deliver on the commitments San Jose made when HCD certified the City’s Housing Element, and we would risk incurring the aforementioned penalties as a result.
2 https://oag.ca.gov/system/files/attachments/press-docs/Legal%20Alert%20-%20SB%201037.pdf
HONORABLE MAYOR AND CITY COUNCIL
8/14/26
Subject: General Plan Four-Year Review Policy Framework
Maintaining local control over development standards
While the staff recommendation would increase the base density of Residential Neighborhood zones to 32 DU/AC, the base zoning is only one factor in determining the actual number of units allowed on a given site. State Density Bonus Law provides for up to a potential 100% increase in the total allowed units, while also allowing project applicants to waive local development standards, including height, lot coverage, and setback requirements. State ADU Law similarly allows applicants to build additional units above base density with state guidelines that supersede local setback and lot coverage rules.
These laws have, by some estimates, facilitated the approval of over 140,000 homes, including nearly 70,000 deed-restricted affordable homes3, but they have also preempted local regulations that could support the same density while creating more complete and livable neighborhoods. These two goals– density that delivers the critical affordable housing our residents deserve, and local standards that meet neighborhood needs– are not incompatible. By designing a local alternative density bonus program for missing middle housing that is mutually exclusive with State Density Bonus, the City can provide applicants with a local alternative path to achieve the same densities allowed under State Density Bonus Law but in a way that preserves and respects local development standards including height and open space requirements.
The City has already committed, under the P-19 Expanded City Density Bonus Program strategy of the Housing Element, to exploring this type of program, and the direction to develop a local density bonus program aligns with that existing workstream. Similarly, the P-35 Small Multifamily Housing strategy of the Housing Element commits the City to developing design standards for Missing Middle housing, and these standards can serve as the foundation for the standards required by the local density bonus program.
By providing a local program that is financially more attractive to would-be applicants under a Missing Middle housing program, the City will be able to continue to favor development that more closely matches the neighborhood character and avoids impacts like significant differences in building height.
Supporting project feasibility and unit affordability
In addition to providing an incentive for applicants to work within the confines of the City’s objective development standards, the proposed local density bonus program can also make the housing we build more affordable and support the financial feasibility of missing middle development projects. By allowing more units to be built on a given parcel, builders are able to spread fixed costs like land acquisition and architectural soft costs across more units, increasing project feasibility.
3 https://www.circulatesd.org/win_win_bonus_report
HONORABLE MAYOR AND CITY COUNCIL
8/14/26
Subject: General Plan Four-Year Review Policy Framework
In their 2024 report Making Missing Middle Pencil4, the Terner Center for Housing Innovation explored the financial feasibility of various missing middle prototypes in the South Bay. The paper developed pro-formas for different housing prototypes using local data on rental and sale prices as well as land acquisition and construction hard costs.
The paper found that in the South Bay, 10-unit rental projects had the highest estimated internal rate of return and were significantly closer to financial feasibility than either duplexes or fourplexes. That finding was supported by qualitative interviews with missing middle developers across California, Oregon, and Texas, all emphasizing that developments of six to ten units are the most likely to be built and thus the most effective ingredients in our efforts to build housing that is affordable and meets both City and neighborhood needs.
This finding is further supported by the City’s own 2021 study by Strategic Economics, Feasibility of Missing Middle Housing in Residential Areas5. This study found that sixplex and eightplex missing middle projects were economically feasible in areas where duplex and fourplex rentals were not. The study also found that sixplex and eightplex projects produced the most affordable units, with home ownership opportunities available to households earning 105% AMI and affordable rental opportunities for households earning 95% AMI. By contrast, purchasing a median-priced home in San José today requires an income of 200-240% AMI6. The study confirms that sixplex and eightplex projects would reach households at lower income levels than all other typologies studied, finding that fourplex units would require an income of 125% AMI to rent, and townhomes would require 155% AMI. Put simply, sixplex and eightplex projects are the only housing typology studied that is remotely within reach for the majority of working and middle-class families in San José.
These findings have also been observed in other cities that have implemented Missing Middle housing programs. A 2025 paper studied the prices of 4,200 projects constructed under Seattle’s Low-Rise Multifamily program7. The study concluded that projects that built 1-4 replacement units resulted in sale prices higher than the home being replaced, while projects of 6-8 units saw prices fall 24% - 31%. The evidence is clear that a well-designed missing middle housing program can incentivize new construction, grow housing supply, and lower costs for our residents.
Transitional height for missing middle housing
To ensure a harmonious scale between high-capacity, high-density transit areas and traditional neighborhoods in downtown, we recommend establishing a transitional height
4 https://ternercenter.berkeley.edu/research-and-policy/making-missing-middle-pencil-the-math-behind- small-scale-housing-development-2024/
5 6 https://www.consumeraffairs.com/homeowners/income-needed-to-buy-a-home.html#cities-requiring-the- highest-income
7 https://www.aei.org/research-products/working-paper/low-rise-multifamily-and-housing-supply-a-case- study-of-seattle/
HONORABLE MAYOR AND CITY COUNCIL
8/14/26
Subject: General Plan Four-Year Review Policy Framework
limit of 45 feet and 4 stories for missing middle housing within 0.75 miles of an SB 79 transit hub in the downtown area and its immediate vicinity. This targeted standard ensures a seamless transition, in the parts of the city where 4 stories is a more natural height, between the 55-foot limit permitted in Tier 2 transit zones and the 35-foot ceiling for standard Residential Neighborhood zones. In doing so, it will provide developers with the flexibility to reach higher densities in areas the City has a vested interest in pursuing them while respecting the needs of local neighborhoods.
Building complete neighborhoods
As the City moves to promote gentle density by implementing the Missing Middle program, we have the opportunity to explore emerging best practices to incorporate small-scale, community-serving commercial uses into residential neighborhoods. We also have the ability to partner with our legislative delegation in Sacramento to enable this work so that we can enforce standards that make sense as the City transitions toward gentle density. This work would support existing General Plan goals and policies including VN-1.3 to encourage development of “compatible neighborhood retail and services within walking distance of residences”, VN-1.15 to “facilitate the development of compatible small scale neighborhood-serving retail” in existing neighborhoods, and VN-3 to improve residents’ access to healthful food. Peer cities including Sacramento and San Francisco are using their General Plan updates to explore similar “corner store” reforms, and San José should leverage this opportunity to pursue our goals of advancing “complete” neighborhoods that support our local economy and make our city more walkable and livable for our residents.