Meeting Intelligence Preview
Meeting Summary
This San Jose City Council study session examined the cost of residential development, finding that townhomes and stacked flats are currently market feasible while rental multifamily projects (podium, wrap, tower) are not penciling due to San Jose's lower rents compared to neighboring cities. The analysis showed San Jose's impact fees are competitive regionally at 6-10% of project costs, and that fee waivers could tip some podium/wrap projects to feasibility. Affordable housing costs in San Jose track with Bay Area averages, with the city producing a higher share of studios/one-bedrooms and larger projects than regional peers.
Key Decisions (1)
Cost of Residential Development Study Presentation
Staff and consultants presented comprehensive analysis of market rate and affordable housing development costs. Key findings: townhomes/stacked flats are feasible under current conditions; rental podium/wrap/tower projects show negative residual land values; San Jose rents are 20-30% lower than neighboring cities; city fees represent 6-10% of total project costs ($37,000-$72,000 per unit); fee waivers could make some podium/wrap projects feasible.
Development Activity (4)
Urban Catalyst Downtown Projects
300 units under construction, 900 units processing through entitlements in growth areas
AlphaX Infill Projects
60+ units under construction, approximately 200 units in pipeline; focus on small site infill development (6-15 units per site)
VTA Capital Station
Affordable housing project in pipeline, targeting AHSC (Affordable Housing Sustainable Communities) state funding
East Santa Clara Avenue Senior Housing
68 senior affordable units, initial phase of campus with three affordable projects; received 9% tax credits from state; city providing $7.8 million in fee waivers and loan (14% of capital stack)
Market Signals (6)
Housing Demand
San Jose entitled 21,993 multifamily units between 2020-2024 but only about 7,000 pulled building permits, indicating financing challenges rather than zoning barriers.
Commercial Demand
AI companies are leasing millions of square feet in neighboring cities, creating demand for housing to serve tech workers.
Sentiment
Recent rental project foreclosures in San Jose show projects built at $650,000/unit selling at $450,000/unit, with investors losing all equity and banks taking haircuts.
Housing Demand
San Jose produces 5-10 times less housing per capita than neighboring cities despite similar construction costs and impact fees, due to 20-30% lower achievable rents.
Infrastructure
Federal tax credit doubling through 'one big beautiful bill' expected to enable California to fund approximately 200,000 additional affordable homes through increased bond volume cap.
Housing Demand
Construction costs have stabilized post-COVID, but rental market rents in San Jose have grown only about 3% year-over-year, lagging neighboring municipalities.