San Jose leaders are green lighting a developer’s initiative that includes converting a market-rate apartment complex on The Alameda into affordable apartments.
The San Jose City Council unanimously approved a financing package Tuesday allowing Larkspur-based Catalyst Housing Group’s nonprofit arm to buy the complex. Councilmember Dev Davis was absent.
The council signed off on Catalyst obtaining $100 million in bond funding from a joint powers group in California to buy the building and transition it to affordable or below market-rate apartments.
The California Municipal Finance Authority, made up of a series of public agencies in the state, works to promote economic development, jobs and housing development, among other missions and will issue the bonds. The city is not directly involved in the transaction nor is it contributing funds to support the change.
The building, called Modera The Alameda in San Jose, is located at 787 The Alameda and has 168 apartments, a “resort-inspired” pool, rooftop deck and other amenities.
City officials said the plans are a win because San Jose will not need to contribute any funds directly to the project. It will result in 167 affordable apartments with one manager’s unit coming online soon, to help address a severe housing crisis plaguing the city.
From 2014 to 2021, San Jose only met about a quarter of its overall housing need for below-market rate homes based on regional housing goals, city data shows. Like other Bay Area cities, San Jose has continued to miss targets for affordable housing production.
Once the property is converted to an affordable housing complex, the roughly $1 million its owners currently pay in annual property taxes will no longer be required. The city receives 14% of property taxes, and would miss out on about $140,000 annually from this property, a city finance official said.
However, some residents questioned the actual levels of affordability that will be offered to future residents.
“It looked to be very similar to what the current rents are at the property,” resident Ryan Christoper said to councilmembers. “So if you could just shed a little light on why this is a public benefit, and why we would be foregoing significant tax revenue to support a project that isn’t actually supporting affordable housing.”
On the apartment complex website, the current rate for one-bedroom homes are shown as starting at monthly rents of $2,818, and ranging up to $3,583. Two-bedroom apartments start at $4,181.
Plans for the transition call for 34 apartments to be priced as affordable to people earning up to 50% of the area median income each year. In Santa Clara County that is $62,450 for a single person and $89,200 for a household of four.
The other 134 apartments will be priced higher, aimed at being affordable for people earning up to 80% of the median income—about $96,000 for a single person and $137,000 for a household of four.
The lower-priced apartments would have rents limited at roughly $1,561 for a studio, up to $2,230 for a three-bedroom. The higher-priced homes would rent for $2,400 for a studio, and rise steadily to $3,428 for a three-bedroom under current market conditions, city reports said.
“Those higher AMI levels are not what I would call the true definition of affordable housing,” Alex Shoor, a candidate for council in District 6 where the apartment complex is located, told San José Spotlight.
He said people earning $96,000 might be struggling to pay rent in a hot market like the South Bay, but by many American standards would be considered part of the middle class.
“The legal definition of affordable housing does not match the actual definition of affordable housing in Santa Clara County because the area median income is so high,” Shoor said.
Overall, Shoor said he supports the transition of the apartments because it will provide a nice living environment and amenities for future renters in an upscale area, coupled with good resources and transit nearby.
He told the city council he’d like to see more outreach to residents about these unique transactions to boost affordable housing supplies, and whether there will be more of them in the future.
Kemit Mawakana, a division manager in the city’s housing department, told San José Spotlight there is no perfect model to address the housing crisis, or it would be solved by now—but the city sees value in supporting these affordable apartments.
He added the city’s involvement ensures there will be a 75-year affordability restriction on the apartment complex, so it will protect future renters from steep rent hikes.
“We need to provide affordable housing at different income levels, and provide it over the long term, as well,” Mawakana said.