San Jose leaders are delaying a vote on a plan to revamp a development program responsible for generating a significant portion of the city’s affordable housing. The decision follows vocal pushback from opponents who warn the policy change would mean less housing support going to those most in need.
The change proposed by city staff would increase target income brackets for beneficiaries of San Jose’s inclusionary housing policy, which requires market-rate housing developers to direct a portion of their investments toward affordable housing. It aims to shift the program’s focus from low- and moderate-income residents toward middle-income working professionals. The City Council was expected to vote on the policy change Tuesday, but the city’s Rules and Open Government Committee voted last week to delay the decision until January.
“I think it will give us a better picture of balancing both our housing goals and our development realities,” District 1 Councilmember Rosemary Kamei said at the committee meeting.
The proposed change — which stems from a directive given earlier this year by Mayor Matt Mahan — caught local affordability advocates off guard.
“We feel like any changes to a tool that is working well to produce affordability really needs to be thoroughly analyzed,” Alison Cingolani, a director for the San Jose-based affordable housing advocacy nonprofit SV@Home, told San José Spotlight. “They’re consequential decisions. They affect the lives of thousands of people.”
Typically, San Jose housing developers can fulfill the city’s inclusionary requirement by designating 15% of the homes in a residential project as below-market-rate affordable properties. Alternatively, they can also choose to pay an “in-lieu” fee that will help fund affordable housing projects elsewhere.
Mahan set this policy change in motion with a directive included in his March budget message. It instructed city staff to draw up proposals to reconfigure the inclusionary housing program to provide more housing targeted toward middle-income residents.
“Affordable workforce housing fills a vital role in our housing continuum, yet we haven’t built it at the scale we need,” Mahan wrote in his budget message.
Mahan was unavailable for comment.
San Jose’s inclusionary housing requirement has helped produce about 288 affordable homes each year on average since 2019, according to city data. These new homes have all been financed by private developers — making the program all the more appealing for city leaders. In contrast, 100% affordable housing developments typically require public subsidies in order to pencil out.
Housing development of all kinds has slowed to a trickle in San Jose over the last several years, amid increasing construction and financing costs.
A staff memo outlining the proposal argues that by allowing developers to charge higher rents for their affordable homes, the change to the inclusionary program will help balance the financial math for many proposed projects and allow them to move forward.
Affordable homes have largely been set aside for people making 80% of area median income or less under the existing inclusionary housing policy. For a household of four in San Jose, that income cap comes out to an annual wage of roughly $159,500.
If adopted, the proposed policy change would push those income targets up to between 80% and 110% of area median income. At the highest end, a family of four could make as much as $214,000 a year and still qualify.
Critics have balked at such figures, arguing that focusing housing support on such affluent families would undermine San Jose’s efforts to keep more economically precarious residents housed.
They note that in December 2024, San Jose already passed a temporary measure that reduced the affordability requirements for many housing projects. That change was also intended to help financially struggling projects reach profitability so they can move forward.
Cingolani said with rent limits increased to the proposed levels, in many cases, the affordable apartments created under the inclusionary program would often have higher rents than those on the open rental market.
That’s because rental prices for San Jose’s affordable housing scale up for families with higher incomes. The maximum monthly rent for a one-bedroom apartment for people making 80% of the area median income is set at $3,191. That’s more expensive than the average market price for a one-bedroom apartment: $2,604 a month, according to recent city figures.
Affordable homes targeted at middle-income residents have proven to be an increasingly tough sell in recent years. Many local developers have reported such homes have sat vacant for extended periods, with few tenants willing to jump through the application hoops required by most affordable housing programs to access an apartment that offers only limited affordability gains.
Cingolani said such dynamics underscore the need for further study before proceeding with any major changes to San Jose’s inclusionary housing policy.
“We need to understand why we’re opening it up,” she said. “Is there a need to open it up?”
Contact Keith Menconi at [email protected] or @KeithMenconi on X.
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