Image: Swenson. New Facchino development at Berryessa BART urban village, delivering 260 affordable homes through the IHO
Did you know San José is considering a housing policy that would label some homes as ‘affordable,’ even though they’d actually cost more than the rent on a typical apartment? Right now, most of our Inclusionary Housing units, the affordable homes market-rate developers are required to include when they build new projects are priced below market rents. A proposed amendment to the Inclusionary Housing Ordinance (IHO) in San Jose would flip that, so most of those units could rent above market average.
Call or email San Jose’s Mayor and City Councilmembers to let them know you support maintaining the current levels of affordability in the Inclusionary Housing Ordinance!
What can advocates do?
Call or email San Jose’s Mayor and City Councilmembers to let them know you support maintaining the current levels of affordability in the Inclusionary Housing Ordinance! Affordable housing is critical to ensuring that all of San Jose’s residents have access to a safe, stable home. Now more than ever, we must protect and use all the tools we have to build and preserve more affordable housing!
How does San Jose’s IHO work?
The purpose of an Inclusionary Housing Ordinance (IHO) is to produce affordable homes, usually between 50% and 100% of the area median income (AMI), to make sure people who cannot afford rising Silicon Valley rents can still live here. The City of San Jose has historically been a leader in California in implementing an IHO for rental housing. The City’s original ordinance passed with strong advocacy and support from a broad coalition of partners ranging from the affordable housing community to prominent business groups. The City’s policy was carefully crafted through extensive analysis and stakeholder outreach, including developer partnership, to ensure that it did not create an impediment to development.
What changes could be coming?
The current base obligation for developers of market rate housing is for 15% of the units to be affordable: 5% for families and individuals earning 50% of AMI, 5% at 60% AMI, and 5% at 100% AMI. Now, based on direction in the Council-adopted 2025 March Budget Message, Housing Department staff is bringing a proposal to Council, tentatively scheduled for November 18th, that would reduce required affordability in the IHO.
If the proposed amendments pass, ⅔ of required affordable homes would rent for more than the average apartment in San Jose. Market rents in San Jose are affordable at about 70% of AMI right now.
The Housing Department has also indicated that during next year’s City budget process, they intend to increase in-lieu fees, an option that allows developers to pay the City instead of including affordable homes in their development. The Housing Department invests that money into subsidies for more deeply affordable housing across San José. A dramatic increase would incentivize developers to build more homes instead of paying fees – but if the IHO amendments pass, the homes would not be affordable to San Jose’s residents who need them most.
Why is the City doing this?
The City’s goal is to make it easier for the market to build more housing. Market rate units are really important because they meet the needs of a large proportion of our population – but cities are legally required to “assist in the development of adequate housing to meet the needs of extremely low, very low, low-, and moderate-income households” – not just produce more units at any cost. (Government Code Section 65583(c)(2)) And there is tremendous need for more affordable homes below average market rents: almost half of SJ residents have incomes below 80% of AMI.
Changes could cause homes to sit vacant, even in a housing crisis. We know from experiences in other cities in the Bay Area that units as high as 110% AMI are more likely to go unlived-in, providing housing to no one, even during our severe housing shortage.
One reason for these higher income, restricted units to remain vacant is the burden on both developers and residents of income certification, an annual process of determining that residents income qualify for the home. How hard will it be for developers to go through this process every year with tenants who can afford to compete on the open market?
The current IHO is effective.
IHO in-lieu fees provide an important source of funds to subsidize deeply affordable housing. An analysis from the City’s Housing Department shows the IHO has generated $47 million 2019-2025 to date, which supplements Measure E funds, a real estate transfer tax passed to fund the production and preservation of affordable housing that has been redirected towards the city’s growing shelter system in its most recent budget cycles.
In addition to in-lieu fees, the IHO has delivered an average of 288 new affordable homes each year, almost the same as the number of affordable homes the city subsidizes directly each year- effectively doubling the City’s share of affordable housing production. In fact, just a few days ago, even in our current very challenging economic environment, we saw news coverage of a new development at San Jose’s Berryessa BART station with 708 new homes, including 260 units of affordable housing at the AMIs of the current IHO.
What can advocates do?
Call or email San Jose’s Mayor and City Councilmembers to let them know you support maintaining the current levels of affordability in the Inclusionary Housing Ordinance! Housing affordable to low income residents is critical to ensuring that all of San Jose’s residents have access to a safe, stable home. Now more than ever, we must protect and use all the tools we have to build and preserve more affordable housing so that our community members vulnerable to displacement can stay and thrive!