Audit shows San Jose struggles to manage affordable housing

San Jose’s lack of oversight on its affordable housing portfolio has led to repeated property violations and some families making above the income limit, a city audit has found.

The City Auditor’s Office found that the Housing Department didn’t complete one-third of its annual compliance reviews in 2024 and 2025, and property inspections have a three-month backlog. This is due to vacancies in the department, high employee turnover and a lack of proper processes. In addition, outdated software makes it difficult for staff to keep track of loans and properly oversee properties in an audit released in June. The City Council accepted the auditor’s report and its recommendations on Aug. 18.

“The department had not been able to complete all its annual property reviews or inspections in recent years. This was primarily a question of resources and not having standard processes in place to complete the level of work intended,” City Auditor Joseph Rios told San José Spotlight. “Depending on how a property was financed, there may be overlapping oversight responsibilities with the federal and state governments. This can add a layer of complexity to overseeing and resolving issues.”

The audit recommended the department update its software, implement a policy to address tenants making above or below the income limits and develop a strategic plan for overseeing affordable housing that defines staff roles and goals.

“I think the recommendation related to strategic planning to help define overall program goals and resource needs, and the one related to developing a risk rating model to help prioritize staff’s work are two that come to mind as priorities,” Rios said.

Rios said that his office decided to examine the city’s affordable housing developments because residents expressed that housing affordability was a key concern in an annual community survey. The last time San Jose audited its affordable housing portfolio was in 2014 and findings were also similar, he said.

Sarah Fields, spokesperson for the housing department, said they are working to implement the audit’s recommendations. Staff is developing a new portal to show where affordable or subsidized housing is available within the city.

“The housing department agrees with the audit recommendations and is following each of the recommendations within the asset management audit — meeting or exceeding the timeline expectations,” Fields told San José Spotlight.

Households making above limits

San Jose oversees affordable housing developments that it either has provided loans to or are in the pipeline — about 25,000 apartments across 220 properties. As of January, it manages an affordable housing loan balance portfolio of $745 million.

Affordable housing properties built with public dollars have income requirements to ensure they are serving low- to moderate-income families. Housing staff manages the loans and does property reviews to ensure tenants are still within the income limits.

The audit found that some households exceeded the income limits of the apartments they were living in. Out of the nearly 880 apartments across 10 properties the auditor sampled, 110 households made above the specified income level for their apartment. The report stated that the department does not have a way to address this.

This has caused some properties to lose out on income, as the tenants were charged below the allowable amount. One property potentially could have collected $114,000 more a year, according to the report. This also impacts the property’s ability to pay back its loans to the city, and there are times when developers have not paid back city loans, according to the audit. In one instance, a property owner only paid San Jose about $1,700 in 2025; they owed $7.6 million.

At the Aug. 18 council meeting, District 2 Councilmember Pamela Campos asked housing staff to return to council after developing a policy on how to address tenants making under or over the income level. Staff don’t have the ability to take action on households making above or under the income level, as that responsibility falls on the property manager, Housing Director Erik Soliván said.

“Some folks may be concerned with displacement impacts and want to understand how the housing department might prevent or mitigate displacement of these tenants,” Campos said at the meeting.

Campos did not respond to a request for comment.

Lack of process

As part of the loan stipulations, property managers must also keep buildings in safe and habitable conditions, which housing staff inspect.

The audit found that some buildings had repeated violations, and that staff are spending excessive time on reinspections. A quarter of the properties inspected in 2024 and 2025 had to be reinspected three or more times, and one property was reexamined eight times before it received a violation notice.

There was no clear process on when issues should be escalated to the city’s code enforcement team, as the housing department cannot issue fines or citations. Furthermore, the department only had one inspector for the tens of thousands of homes during the time of the audit.

“I think that’s a more serious problem that they should go after (than the households making above income limits),” Sandy Perry, board vice president of the South Bay Community Land Trust, told San José Spotlight. “There’s a lack of oversight around the building codes, and that’s much more impactful for the residents of apartments where there’s building code violations.”

Contact Joyce Chu at [email protected] or @joyce_speaks on X.