San Jose's ambitious program to offer developers savings to tackle the housing crisis already appears to be paying dividends.
A multifamily housing incentive program, approved by the city in December 2024, initially aimed to waive 50 percent of construction taxes and fully exempt in-lieu fees for 1,500 units in eligible growth areas. This applies to projects that completed applications by June 2022 and get building permits by the end of December.
But because developers' interest has surged, San Jose is now expanding the eligible total to 1,800 units, according to a report from SiliconValley.com. A first-quarter market report from CRE firm NAI NorCal found that the city had 7,600 multifamily units under construction, which is close to a record high amount for the market and represents 4.9 percent of the total inventory.
Recently, Urban Catalyst's 278-unit, eight-story apartment project at 498 W. San Carlos St. received the green light and is set to receive roughly $4.07 million in waived fees and taxes, according to SiliconValley.com. Groundbreaking for the development is scheduled to begin in approximately 75-90 days.
Another recipient reaping benefits from the program is the Hanover Co., which received $4.9 million in exemptions for its 345-unit project at 905 N. Capitol Ave.
Additionally, developers can take advantage of savings in 2026 if their permits are approved next year. However, it will be a smaller tax reduction of 25 percent rather than the friendlier 50 percent if approved this year. According to the program, an estimated 8,539 units are eligible for the tax benefits in 2026. Additionally, the city has estimated that a total of 35 projects could qualify for the benefits under the program.
“We have provided incentives before and nothing happened, but this incentive seems to have triggered some movement in the development world," San Jose's Vice Mayor Pam Foley said, according to SiliconValley.com.
The flurry of development interest could be partly due to avoiding the full impact of tariffs before they start universally driving up prices. It's unclear if the big demand for projects in San Jose will continue or slow down considerably once higher prices take full effect.
However, the city aims to construct 62,200 housing units by 2031 to meet the mandate established by the Regional Housing Needs Allocation.
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