The San Jose City Council has approved a set of measures aimed at encouraging local housing development by adjusting requirements that homebuilders say have hindered new projects. The council passed two measures expanding incentive programs and a third revamping the city’s inclusionary housing policy, which requires market-rate developers to contribute to affordable housing for low-income residents. Both incentive program measures passed unanimously, while the inclusionary housing policy adjustment was approved in a 9-2 vote.
The changes are intended to address challenges faced by San Jose’s housing industry, which has struggled with economic headwinds and difficulty launching new projects. Supporters say the package will provide relief for developers, but some advocates argue it may weaken support for affordable housing.
Alison Cingolani, director at SV@Home, an affordable housing advocacy nonprofit, said, “Because of the city’s position financially, because of dwindling federal support, we’re running out of ways to assist the production of affordable housing,” according to San José Spotlight. However, Mayor Matt Mahan argued that current fees and requirements have compounded barriers to new construction. “Affordable housing policies only work if housing actually gets built (…) With high construction costs, tighter financing, and higher interest rates, the rules are no longer aligned with market reality — and that means less housing gets built, rents rise, and displacement increases,” Mahan said in an email sent to constituents.
The revised inclusionary policy recalibrates how many affordable homes developers must provide and what income levels they must target. Previously, developers could set aside 15% of units for renters earning between 50% and 100% of area median income or 10% for those earning just 30%. The new policy modifies these options and introduces a third: setting aside 7% of apartments for people making 50% of area median income. The median income for a family of four in Santa Clara County is $195,200.
Councilmember Domingo Candelas sought to defer parts of the policy update but was unsuccessful. “I do believe there is an opportunity to craft an inclusionary ordinance and update it, but one that does not leave out our disadvantaged communities,” he said.
The council also extended its development incentive program—originally passed in December 2024—which reduces taxes and fees for qualifying projects. Backers credit this program with helping five projects totaling more than 1,400 homes begin construction last year; no market-rate project started during all of 2024 otherwise. The extension pushes the end date back another year and raises participation limits. Another measure expanded financial waivers for downtown office-to-housing conversions as part of efforts to encourage redevelopment.
Officials estimate that extending the incentive program will mean foregoing about $6.6 million in revenue used for transit programs and parks. Land use consultant Erik Schoennauer said without these changes many projects would remain stalled: “It needs to be understood that this is truly a 911, five-alarm emergency. The lack of housing is really the root cause of many of our challenges (…) The city council must take every step to make it cheaper, faster and easier to build housing. The industry and the market needs help,” Schoennauer told San José Spotlight.
