City leaders have agreed to give a San Jose housing developer multimillion-dollar tax breaks as part of a recently-passed program meant to win over builders.
The San Jose City Council unanimously voted Tuesday to approve a seven-story, 345-apartment complex at 905 North Capitol Ave., signing off on $4.9 million in construction tax cuts and fee waivers and bypassing the 15% affordable housing requirement. Hanover Company will instead designate 17 apartments or about 5% for affordable housing.
Housing developers are able to avoid such mandates under the Multifamily Housing Incentive Program approved by councilmembers in December 2024. The initiative is among a slew of programs rolled out last year aimed at incentivizing housing developers to invest in San Jose.
Housing developers have praised the city’s changing approach, leaving affordable housing advocates disappointed with city officials for allowing developers to skirt minimum requirements.
“Last year we had zero new multifamily housing starts, zero, not one building permit,” Mayor Matt Mahan said at the meeting. “We have to be able to rightsize our fees, processes and regulations to figure out how we’re going to be flexible, meet the market and allow that investment to flow if we really want housing.”
City housing department officials reported 336 multifamily homes were built in 2023 and 782 were constructed in 2022.
San Jose Housing Director Erik Soliván said the Multifamily Housing Incentive Program was designed to catalyze projects forward.
“The current program does a 50% reduction in the building and structure construction tax, as well as the commercial, residential, mobile park building tax, and then the (affordable housing) in lieu fee reductions, with at least 5% affordable homes being built,” he said Tuesday.
The 50% tax cut brings the amount owed by Hanover Company from $1.7 million down to about $861,000, coupled with an in-lieu affordable housing fee waiver of more than $4 million.
Scott Youdall, Hanover Company’s regional development partner on the West Coast, said they have plans to bring at least 742 new apartments to San Jose. He spoke in favor of the multifamily housing incentive program when it was approved last year.
“This project was originally entitled and approved in the face of rising interest rates, and we have not been able to get this project capitalized and started,” Youdall said Tuesday. “But with the help of this incentive, we have been able to put the capitalization in place.”
He said they expect to break ground on the project March 24. The project plans to add about 3,000 square feet of office space and one level of underground parking with 364 spaces.
“We’re looking forward to getting this housing started,” Youdall said.
The apartment complex sits in District 4 Councilmember David Cohen’s domain. He called Youdall a friend and said it should come as no surprise to Hanover Company that he has “mixed emotions” about the project.
“It will be, as far as I can tell, the tallest building east of Interstate 680 in all of San Jose,” Cohen said Tuesday. “This will be a good test of how transit-oriented development along our light rail corridor in East San Jose works, because obviously this is one of the first housing projects like it.”
Contact Vicente Vera at [email protected] or follow @VicenteJVera on X, formerly known as Twitter.
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