COUNCIL AGENDA: 10/06/2026
FILE: 26-1035
ITEM: 8.2
TO: CITY COUNCIL
FROM: Mayor Mahan
Councilmember Mulcahy
SUBJECT: SEE BELOW DATE: October 2, 2026
Approved:
SUBJECT: Actions Related to the Arena Hotel Redevelopment and Homekey Program Transition.
RECOMMENDATION:
Approve the staff recommendation and Direct the City Manager to:
1. Report back to the City Council in six months on:
a. the status of efforts to explore the transfer of Homekey-supported units at or below 30% area median income (AMI) to alternative locations;
b. the progress of negotiations with the California Department of Housing and Community Development (HCD) regarding the revised Standard Agreement; and c. any material changes to the project scope, unit mix, or timeline arising from negotiations with the new development partner or HCD.
2. Return to the City Council with the final terms of the amended Homekey Standard Agreement prior to execution.
BACKGROUND:
The Arena Hotel has presented significant challenges since the City acquired the property, and we recognize the considerable work that has gone into reaching this point. The site was purchased to provide emergency interim shelter while advancing a long-term redevelopment opportunity. Since then, the City, Housing Department, service providers, development partners, residents, and surrounding community have worked through the complexities of the site and toward a sustainable path forward.
This item was originally placed on a prior City Council calendar. At that time, the District 6 Council Office requested that it be deferred to allow additional community engagement and ensure that residents, neighbors, and surrounding businesses better understood the proposal, the challenges facing the site, and the City's next steps. Given the property's history and the expectations previously established regarding its future, we believe that additional engagement was important.
We recognize the concerns raised by residents and neighbors. When the hotel was opened, many residents were not fully aware of the plans and activities taking place at the site, and the surrounding
HONORABLE MAYOR AND CITY COUNCIL
October 2, 2026
Actions Related to the Arena Hotel Redevelopment and Homekey Program Transition.
community was given the expectation that the property would ultimately be redeveloped as 100% Permanent Supportive Housing. As we know today, the proposals previously considered were not financially feasible, requiring the City to reconsider the path forward.
Since then, the City has made rebuilding trust with the surrounding neighborhood and business associations a priority. The City Council has also taken significant steps to deliver improvements along The Alameda, including establishing the Community Benefit Improvement District (CBID) and Business Improvement District (BID), funding beautification of the underpass connecting the corridor to Downtown San José and the SAP Center, and advancing other neighborhood improvements. We also appreciate the Housing Department and San José Police Department for participating in a recent community meeting to discuss this progress and reinforce that the action before the Council is a step in an ongoing process, rather than a final decision on the Arena Hotel's future.
An important component of the current action is the removal of the prior development team, which was unable to deliver a financially feasible proposal that met the City's expectations. Moving forward with a new development partner and amending the Homekey Standard Agreement are necessary steps to reset the project and establish a more viable path forward.
While the proposal differs from what the community was originally led to expect, this action does not establish a final development plan for the Arena Hotel. Approval will allow the Housing Department to work with a new development partner, continue negotiations with California HCD, and further develop a long-term vision for the property through additional analysis and community engagement. We remain focused on delivering a high-quality housing development that realizes the full potential of the site while addressing the needs of surrounding residents, businesses, and the broader community.
The proposed six-month report-back will provide the City Council and community with an update on negotiations with California HCD regarding the revised Homekey Standard Agreement, the City's continued exploration of opportunities to transfer Permanent Supportive Housing units to alternative locations, and any material changes to the project scope, unit mix, or timeline resulting from negotiations with the new development partner or HCD. We also encourage the Housing Department to remain engaged with the Mayor's Office and District 6 Council Office regarding these discussions and any material changes as the project moves forward.
The final terms of the amended Homekey Standard Agreement will return to the City Council for approval prior to execution, providing the Council with an opportunity to review the agreement before it is finalized. This provides an additional point of accountability as the City transitions to a new development partner and works toward a sustainable long-term plan.
Ultimately, this action provides an opportunity to reset the Arena Hotel project and move it toward a more viable future. The next phase should remain focused on transparency, meaningful community engagement, and developing a long-term plan that delivers high-quality housing while addressing the needs and concerns of the surrounding community.