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San Jose wanted to revitalize its downtown with more housing, and in 2022 the city waived nearly $9.9 million in taxes and fees for a fully market-rate development, The Fay. The concessions eliminated an $8.844 million affordable-housing obligation. The result was 336 market-rate apartments and no contribution of affordable units. The building opened to fanfare, but quickly proved a disappointment. Its studios leased out quickly, but the one- and two-bedroom units barely filled, leaving the building roughly 60% vacant.

With just 104 parking spaces for 336 apartments, city officials and renters both identified limited parking as a major factor that affected lease-up. The nearest garage was seven blocks away, and the only option was being continually ticketed for on-street parking. California housing laws have removed on-site parking requirements, both to reduce development costs and to encourage reliance on public transit. The Fay put that assumption to a real-world test. The policy removed the parking requirement. It did not remove the demand for parking, and transit did not make up the difference.

By January 2026, The Fay had gone through foreclosure and was valued at just $110 million. With 197 vacant units, the project was destabilized. San Jose stepped in to save it, committing $11.2 million from Measure E funds to master lease the 197 vacant units….

The city subsidized the 150 one-bedroom and 47 two-bedroom apartments, precisely the units that had failed to attract enough renters. The program serves middle-income tenants at 80% to 110% of Area Median Income — roughly $111,000 to $150,000 in annual earnings — with city workers bumped to the front of the applicant pool. It creates no low- or very-low-income units, and no permanently affordable units…

HOW THE CITY JUSTIFIES THE LIVE PROGRAM ON THEIR SITE

Continue reading The Fay: When Housing Policy Meets the Real World →