San Jose apartment project to reduce affordable housing

Plans for a housing development near Japantown have changed, with the number of affordable apartments being significantly reduced.

The San Jose Planning Commission voted unanimously Wednesday, with Commissioners Melissa Bickford and Pierluigi Oliverio absent, to recommend the City Council approve a 7-story, 118-home multifamily apartment complex with six affordable homes instead of 18 as initially proposed. The reduction in homes at 380 North First St. will require developer Msasa Properties to pay in-lieu fees of $976,286 to the city, since it dropped the affordable housing below the city’s 15% requirement, according to planning department officials.

Documents from the city housing department show developers cut a majority of planned affordable homes just weeks after city officials informed the public the project would include 18 homes.

Erik Schoennauer, representative for the apartment developers, said they scaled back on the number of city-designated affordable homes to make the development financially feasible.

“It’s extremely costly, and in this environment, it’s very hard to make projects pencil,” he told San José Spotlight. “So we took the on-site affordable units down to six, but we still have to pay the fee on the difference. We will pay a cash contribution to the city’s affordable housing fund in addition to providing the six (homes) onsite.”

The six affordable homes will be available to residents making 50% of the area median income, which in Santa Clara County is $92,150 for a family of four or $64,500 for an individual.

San Jose councilmembers added the 15% affordable housing requirement to an inclusionary housing policy in 2021 to increase homes for low-income residents.

Schoennauer told planning commissioners the building has been vacant for nine months, and mostly vacant for more than five years. He’s excited to see it transform into an extensive brick facade that will play off the historic landmark building.

“There’s local neighborhood businesses that need more customers, and this is how we get more customers,” he told San José Spotlight.

Commissioners said they liked the project because of its convenient proximity to public transit such as the VTA light rail, as well as new restaurants and employment opportunities in the downtown and Civic Center area.

Housing and economic development advocacy group Catalyze SV gave the project an overall positive score, though Executive Director Alex Shoor said they reviewed the project prior to the updated plans. He said developers typically change plans as they proceed with projects, and they should be upfront about it with the community.
In November developer Sand Hill Property Company agreed to pay $13.9 million in city fees after cutting more than 100 affordable homes from a 772-apartment project. In-lieu fees collected by the city are invested into future affordable housing projects.

“It does happen, but it is what I would consider not a best practice,” Shoor told San José Spotlight. “If they don’t go back out to the community and say, ‘Hey, we made this change’ it can create confusion and a lack of transparency around development.”

Contact Vicente Vera at [email protected] or follow @VicenteJVera on X.