San Jose homeless housing expansion highlights cost concerns

San Jose is allocating millions of dollars to double the capacity of its oldest temporary housing site for homeless residents, pushing long-term operating costs into overdrive.

The Rue Ferrari site, located in South San Jose, is adding 134 beds at a cost of more than $30 million. The San Jose City Council unanimously approved the plans in December, but councilmembers voiced concerns over rising operating costs at this facility and other temporary housing sites in the city’s growing portfolio.

Once the expansion is completed, Rue Ferrari’s operating cost will increase from $3.7 million to $5.2 million annually. This, along with the city’s other three sites, are projected to bring annual operating costs to $30 million by 2028-29. But with the addition of the recently approved Berryessa supportive parking site, and the future launch of Cerone, Via Del Oro and Cherry sites, annual operating costs are expected to skyrocket to $70 million by 2028-29.

As the city forecasts budget deficits in the next five years, Budget Director Jim Shannon said costs are sustainable—but the city will potentially have to make cuts elsewhere.

“It’s $70 million in the general fund of $1.6 billion, so it’s certainly something that’s doable, but it will require some trade offs,” Shannon said.

San Jose is working with a $35-million surplus this fiscal year, but is bracing for a budget shortfall of $18.8 million forecasted for fiscal year 2024-25.

Several councilmembers questioned the sustainability of funding all the temporary housing sites, especially as the city plans to aggressively expand its portfolio of properties.

“These projections for operation (are) just so, so high,” Councilmember Peter Ortiz said at the December meeting.

Construction at Rue Ferrari is expected to start this spring and is slated for completion before year’s end. Plans include construction of roughly 29 new single-story buildings with up to four homes. Each home would include a room with a bed, bathroom and space for personal items.

The expansion will build out three common spaces that will include a kitchen, dining area and laundry facilities. Other design features will add an office area, private case management rooms, storage units and recreational spaces. New fencing, more parking, additional outdoor picnic and gathering areas, landscaping and places for dogs to play will be added as well.

The city will need to shell out millions of dollars annually to homeless service providers for case management and job assistance to support individuals moving into permanent housing, along with other supportive services.

Deputy Housing Director Ragan Henninger said the housing department is looking at ways to cut costs. This month, the city will request bids for new interim housing operators for all sites that may save costs.

“But to your question about you know, why are these so expensive?” Henninger said, referring to Ortiz’s concerns. “It is because the housing department has designed our interim housing sites and our supportive parking sites with a focus on very rich supportive services that are all focused on helping and moving individuals to housing destinations when they leave the program.”

And it’s worked, she said. San Jose officials credit the interim housing sites for the city’s 4.7% reduction in homelessness last year. At least half of those who enter a temporary housing site also move into permanent housing, city data shows.

Contact Jana at [email protected] or follow @Jana_Kadah on X, formerly known as Twitter.