The expansion comes in response to growing interest from builders eager to participate in the incentive program, which was introduced to accelerate housing construction across San Jose. Officials said the goal is to support developers willing to break ground on projects at a time when the city faces significant demand for housing and affordability challenges.
In addition to expanding the eligible home count, city officials approved a $4.1 million tax break for a 278-apartment development located at 498 West San Carlos Street. This follows an earlier approval of a $4.9 million tax cut for a 345-unit apartment project on North Capitol Avenue. That same developer recently benefited from an estimated $20 million in avoided park fees by incorporating open space and a plaza into the design of a 1,472-unit residential complex elsewhere in the city.
The housing incentive program, originally approved in December, grants tax reductions to projects through the remainder of 2025. Starting in January 2025, the program will continue offering a 25% reduction in building and structure taxes on the first 1,500 homes built. It also includes adjustments to the city’s park fee structure, especially in North San Jose, and allows some flexibility for developers who do not meet the city’s 15% affordable housing requirement.
City housing officials reported that the program is seeing strong momentum, with multiple developers actively pursuing projects under the incentive structure. They also highlighted progress with a separate downtown development initiative, which has similarly offered tax reductions to encourage high-rise residential construction.
City leadership emphasized the importance of maintaining a pro-housing stance. The mayor expressed frustration with criticisms that the city has not been aggressive enough in supporting development, stating that flexibility around fees and project locations is key to producing the housing San Jose needs.
Another development now under consideration involves a residential project originally proposed in 2016. The project, which includes a five-story building with 258 units, was inadvertently excluded from the current incentive program despite having paid required affordable housing fees. Although construction has not yet begun, the developer’s permit remains valid through April 2026, and city staff confirmed the project is preparing to pull building permits this year.
The city is evaluating a $3.4 million refund of previously paid affordable housing impact fees for that project, with a final decision expected at a public subsidy hearing scheduled for June 10. As San Jose continues working to close its housing gap, programs like these are designed to reduce costs for developers and speed up construction timelines. By extending financial incentives and reducing regulatory hurdles, city leaders aim to keep development moving forward, ultimately bringing more homes online for current and future residents.
