SAN JOSE LEADERS are signing off on additional tax breaks available to new builders this year in an effort to attract housing developers.
The San Jose City Council voted unanimously May 13 to increase the number of new homes qualifying for a 50% reduction in commercial, residential, mobile home park taxes and building and structure taxes from 1,500 to 1,800. Housing developers have an opportunity to apply for such tax breaks through the city’s multifamily housing incentive program until the end of the year.
Councilmembers also unanimously approved about $4.1 million in tax cuts under the program for Urban Catalyst’s 278-apartment project at 498 W. San Carlos St. This follows a $4.9 million tax cut granted to The Hanover Company in March on a 345-apartment project at 905 N. Capitol Ave. Hanover also avoided about $20 million in city park fees by incorporating an open space and plaza into the design of a multifamily 1, 472-apartment project at 0 Seely Ave. earlier this month.
Housing Director Erik Soliván said the city decided to add more eligible homes because the program saw a boost in popularity.
“The multifamily housing incentive program (is) having good uptick, we are seeing some work moving forward now with the downtown incentive program as well,” he said. “So we have good progress on both programs that are put together by council here last year to incentivize more housing production.”
Getting projects into the pipeline
Mayor Matt Mahan said additional housing projects in the pipeline are under review to see if more developers can qualify.
“One of the things that drives me crazy is that critics have sometimes accused San Jose of not being sufficiently pro-housing,” he told San José Spotlight. “I don’t think we should be overly constrained in thinking about fees or geographies — we need housing.”
Councilmembers approved the multifamily housing incentive program last December. It offers a 50% tax reduction through the rest of the year, and a 25% building and structure tax reduction on the first 1,500 homes built after Jan. 1, 2025. The program reduces fees for developers who don’t meet the city’s 15% affordable housing mandate and realigns North San Jose park fees.
San Jose’s downtown high-rise incentive program, extended last summer, is another developer-aimed initiative touted as a success by Mahan after providing tax breaks to multistory housing providers.
“… Critics have sometimes accused San Jose of not being sufficiently pro-housing. I don’t think we should be overly constrained in thinking about fees or geographies — we need housing.” Mayor Matt Mahan
Santana Row-based property management company Federal Realty has been retroactively added to the multifamily housing incentive program and could receive a $3.4 million refund from the city in previously paid affordable housing in-lieu fees.
Federal Realty proposed a 5-story residential building with 258 homes in 2016, with the existing permit expiring April 2026. Despite paying the affordable housing impact fees, construction on the housing complex hasn’t started.
“One of the projects that were on the initial list just sort of accidentally fell off,” Soliván said Tuesday. “This amendment would add the Federal Realty project, which is looking to come out of the ground here this year. They’re ready to pull building permits.”
June decision looms
City officials will decide whether or not to grant the multimillion-dollar refund during a June 10 public subsidy hearing.
Patrick McMahon, senior vice president of Federal Realty, told Soliván they want to start developing in about two months.
“This program is the difference between the drawings sitting on a shelf in our office for the foreseeable future, and plans moving forward this summer,” McMahon said at the meeting.
Contact Vicente Vera at vicente@sanjosespotlight.com or follow @VicenteJVera on X.
This story originally appeared in San Jose Spotlight.