San Jose Hopes High-Rise Development Will Ease Housing Crisis
When it comes to multifamily development, San Jose may be the only major city in California that loves building up. The city embraces high-rise multifamily development to help meet its need for more housing.
Silicon Valley’s land supply constraints make high-rise infill development one of the only options for developers.
To incentivize housing creation, the city wants to waive the inclusionary housing ordinance, reduce park fees and slash construction fees in half.
These fees are making it harder for new development projects to pencil, and the city wants nothing to do with them, Mayor Matt Mahan told Bisnow.
“As a former CEO, I've built a couple of companies and firmly believe that we're better off getting the building in the ground, getting the housing, getting new residents, and organically growing the economy,” Mahan said. “If we do this, then we get the recurring revenue every year, additional property taxes and additional sales taxes, plus all the vibrancy and housing that we need.”
San Jose needs to provide nearly 70,000 housing units by 2031, the equivalent of 7,775 units per year, according to the state-mandated housing plan.
San Jose’s steady pipeline of tech jobs has piqued the interest of multifamily developers for decades. Jobs created by local tech stalwarts such as Apple and Google, as well as advanced manufacturing companies like Nvidia, are fueling demand for apartments.
According to Marcus & Millichap’s Q2 research report, the professional and tech jobs sector added over 1,000 positions to the local economy in Q1.
Vacancy remained below the national average at 4.6% at the end of Q1, with North San Jose/Milpitas and North Sunnyvale registering the lowest vacancies at around 4% respectively.
Roughly 7,600 apartment units are under construction, near the all-time high level of construction activity, NAI NorCal reported.
“We have some of the most intense demand for multifamily anywhere on earth in Silicon Valley because we created so many jobs,” said Erik Hayden, founder and Managing Partner of developer Urban Catalyst, which oversees several Opportunity Zone projects.
Google plans to develop 4,000 housing units as part of its new San Jose campus, which has sparked the revitalization of downtown San Jose, Hayden said.
The Mountain View-based tech behemoth announced plans for a massive redevelopment of San Jose's Diridon Station in 2019 but has since run into a number of roadblocks. In February, the company confirmed the project would indeed go forward.
The project will be part of the largest mass transportation hub on the West Coast, connecting downtown San Jose and the SAP Center to BART and numerous light rail and bus lines. Connecting San Jose directly to BART has been a project decades-long in the making. According to Valley Transit Authority, the project is slated to bring 14M SF of office space, 13,000 housing units and 1M SF of retail and cultural space.
Urban Catalyst is also riding the transit-oriented development train with the development of a 26-story project. The Icon will be a 700-unit tower on Santa Clara street in the central business district with 14-foot floor heights and floor-to-ceiling windows.
The firm also plans to break ground by year’s end on Aquino at Downtown West, a 250-unit property with a mix of studios, one-, two- and three-bedroom units adjacent to Diridon Station.
