San Jose rewrites affordable housing rules, defers mobile home changes

San Jose
City Council Meeting
January 27, 2026

TL;DR

• Council rewrote the Inclusionary Housing Ordinance 9-2. They dropped the 110% AMI requirement, added a 7% at 50% AMI option, kept 30% AMI as an alternative at 5%, and shortened deed-restriction terms from 99 to 55 years.
• The proposed mobile home rent ordinance overhaul, including a 10% rent bump on resale, was deferred to Fall 2026. Only state-law-required updates passed.
• Downtown Residential Incentive Program expanded to cover office-to-residential conversions, with the Phase 1 cap raised to 7,000 units and a new prevailing-wage incentive tier.
• Multifamily Housing Incentive Program extended through February 2027. The 50% construction tax cut now covers 3,600 units instead of 1,800.
• Council directed staff to return in March with an SB 79 industrial-lands exemption ordinance ahead of the state law's July 1 effective date.

What happened

1. Inclusionary housing rules rewritten on a 9-2 vote
   1. Council approved Ordinance 31303 amending the Inclusionary Housing Ordinance (IHO) after roughly five hours of debate and more than 50 public commenters. For rental projects at 30 or more units per acre, the 5% requirement at 110% AMI is gone. In its place, developers can comply by building 7% of units at 50% AMI, or 5% at 30% AMI, alongside the existing 60% and 80% AMI options. The deed-restriction term drops from 99 years to 55 years, aligning with state LIHTC standards and other major California cities. The first 20 units of any project up to 30 units no longer count toward the inclusionary requirement, intended to unlock smaller infill projects. Councilmembers Candelas and Campos voted no. A substitute motion from Candelas to defer for more analysis failed 3-8.
   2. What this means for you: Future market-rate apartment buildings in San Jose will be required to include affordable units at deeper levels (50% AMI rather than 110%), but with fewer units and shorter affordability terms. Staff also reported that zero units have been built at the 30% AMI tier since it was added in 2021. Council separately directed staff to return by March 10 with an informational memo on alternative funding for affordable housing development.
2. Mobile home rent ordinance overhaul deferred to Fall 2026
   1. Vice Mayor Foley's substitute motion passed 10-1, with Doan voting no. Only the changes required to comply with state law went through as Ordinance 31305. The rest of the proposed overhaul, including a one-time 10% rent increase when a mobile home is sold, a capital improvement pass-through process, and an expanded rental registry, was deferred. Council directed the City Manager to hold joint meetings with park owners and residents, run an outreach campaign, study the effect of a 10% increase on mobile home values, and explore other ways to increase park revenue.
   2. What this means for you: San Jose has 58 mobile home parks and more than 10,700 units, the largest concentration in California. Existing residents see no change to their annual rent caps. The proposed 10% bump on resale, which drew hours of opposition from residents, won't come back to Council until the fall.
3. Downtown incentive program expanded to office conversions, cap raised to 7,000 units
   1. Council passed Ordinance 31301 and three related resolutions. They renamed the program the Downtown Residential Incentive Program and extended it to office-to-residential conversion projects. The Phase 1 unit count for new construction climbed to 7,000. A new "High Road" tier offers deeper Parkland In-Lieu fee reductions (75% in Phase 1, 50% in Phase 2) for projects that use prevailing wage and skilled apprenticeship programs. Strict timeline deadlines for pulling building permits were removed; phasing is now tied to unit count. Conversion Phase 1 returns to Council in December 2027 for review.
   2. What this means for you: The program is now a tool for converting underused downtown office buildings into housing. Staff estimated the combined assessment impact at $16.4 million across waived fees and taxes. Only one new residential tower has broken ground downtown in the past eight years.
4. Multifamily housing incentive extended to February 2027
   1. Council passed Ordinance 31302 and adopted Resolution 2026-22 extending the Multifamily Housing Incentive Program (MHIP). The 50% construction tax reduction now applies to 3,600 units instead of 1,800. Seven projects were added to the eligible list. A 25% reduction applies to units beyond the first 3,600. The Rental Inclusionary In-Lieu Fee drops to $0 for eligible projects that include at least 5% of units onsite at up to 110% AMI.
   2. What this means for you: Roughly 1,400 units are already under construction under the original MHIP, with another large project expected soon to push the total past 2,000. The extension is meant to keep that pipeline moving. The program covers both market-rate and 100% affordable projects, including the Martha Gardens affordable development in District 3, which received over $500,000 in fee reductions.
5. SB 79 implementation: industrial lands ordinance coming in March
   1. Council accepted the staff report on Senate Bill 79, the state's transit-oriented development law that takes effect July 1, 2026. In March, staff will return with an ordinance designating six qualifying industrial areas as "industrial employment hubs." Sites in those areas would be exempt from SB 79 to remain available for Jose and tax base. The law covers 56 stations and over 40,000 parcels in San Jose. Council declined to direct staff to pursue a separate ordinance temporarily exempting designated historic resources. Instead, staff will include an analysis of how AB 130 and CEQA interact with SB 79 around historic resources when they return in March.
   2. What this means for you: From July 1, residential development becomes allowed on most commercial and mixed-use sites within a half-mile of qualifying transit. The minimum density floor is 30 units per acre. Projects with 11 or more units must include on-site affordable housing.

What residents brought up

• The IHO and mobile home items drew hours of testimony. On the IHO, the executive director of Sacred Heart Community Service, who helped pass the original 2010 ordinance, said the proposed changes water down a policy built for inclusion, and that low-income families are the ones at risk of displacement, not those earning six figures. A District 3 resident speaking through Somos Mayfair said she was unable to qualify for affordable housing in her own neighborhood because she didn't meet the higher income thresholds, and asked how the youth she works with will afford to stay. A Housing Choices coordinator said the organization has spent 25 years partnering with developers to set aside units for people with intellectual and developmental disabilities to tap DDS funds, and asked where the data is to justify changing the existing structure.
• On the mobile home ordinance, a Quail Hollow resident said park owners already have a fair return petition process, and that the proposed 10% vacancy decontrol amounts to a guaranteed reimbursement without showing financial need. A Mountain Springs resident said her space rent has risen 52.57% over 13 years under existing rent control, and that mobile home owners already cover their own roof, plumbing, and major repairs. A Villa Teresa resident and longtime realtor told Council that appraisers and lenders both confirm higher space rent reduces appraisal value and lending capacity, because buyers must earn three times the space rent to qualify.
• A South Bay resident said her household works three jobs to fall into the AMI ranges being discussed, and that an apartment in her complex sits half-empty at market rent, arguing the proposed levels won't house the people who actually need housing.

Also happened

• Council authorized joining an amicus brief supporting Minnesota in a federal lawsuit over civil immigration enforcement laws (closed session report).
• Approved the Soft Story Seismic Retrofit Pilot Financing Program, expanding the Guidehouse Inc. contract by $1,616,900 to fund retrofits on roughly 15-20 highest-priority buildings through a voluntary loan program at 3% over 7 years.
• Approved acquiring and moving the historic Sakauye Farmhouse from 0 Seely Avenue to History Park, with over $800,000 raised through community partners.
• Accepted the Annual Report on City Services for 2024-2025. Satisfaction with 12 city services rose significantly year over year; the largest jump was on cleanup of illegal dumping, from 15% to 28% rating it excellent or good.
• Approved the 2025-2027 Supplemental Law Enforcement Services Grant spending plan at $1,496,772, and accepted a $641,658 federal grant for the Internet Crimes Against Children Task Force.
• Adjourned in memory of Max Ryan, the 26-year-old Housing Department employee on the Homeless Response Outreach Team who was killed in a triple homicide on September 16, 2025.

For any updates or corrections, please email steven@polisdesk.com