T
he City of San Jose has proposed a solution to revive the stalled multifamily construction pipeline, which saw no market-rate projects larger than 20 units break ground this year. The city council has approved a 50% reduction in construction taxes for the first 1,500 units in designated growth areas that applied by June 2022 and received building permits by the end of next year. Additionally, eligible projects starting in 2026 will receive a 25% tax cut on up to 8,539 units.

    The city is also reducing park fees in North San Jose by nearly half and delaying tax payments until a certificate of occupancy is received. This incentive package could benefit around 35 projects, including 7,357 market-rate and 2,276 other units. Mayor Matt Mahan emphasized the importance of getting housing built, stating that it's better to have some revenue from property and sales taxes than none at all.

    High interest rates and rising labor and material costs have hindered development in San Jose. To address this, the city has introduced building incentives, including office leasing incentives for new tenants and a Downtown high-rise project with reduced taxes for projects meeting certain deadlines. The city aims to build 62,200 homes by 2031, but has struggled to meet its average annual target of 7,775 units.

    Housing advocates raised concerns about the proposal's details, particularly waivers on in-lieu fees for affordable housing projects. They argued that these fees are crucial for funding other affordable housing initiatives.