San José Department of Housing - Programs - New Developments

Eligible Applicants

Sponsors and developers can be for-profit or nonprofit organizations. Any individual or entity capable of entering into a legally enforceable contract may be eligible to become a sponsor. Applicants must demonstrate ability or experience in owning, developing, constructing and operating housing similar to the type and scale of housing being proposed.

Applicants must demonstrate that the project could not be developed without City gap financing (the difference between total project costs and the amount financed by other sources) and that other sources of financing (federal, State and/or private) are committed to the project.

Eligible Properties

Projects must be located within the city limits of San José. Eligible projects include: (1) family rental apartments, senior rental apartments, Single-Room Occupancy (SRO) hotels, transitional housing, and other special needs housing; and (2) for-sale townhouses or condominiums. Eligible projects may be either new construction or acquisition/ rehabilitation of existing apartment complexes.

Eligible Acquisition/Rehabilitation Projects

In order for the Housing Department to recommend funding for the acquisition/rehabilitation of apartment complexes, the project must meet one of the following criteria:

Preservation Project - The apartment complex was funded by the U.S. Department of Housing and Urban Development (HUD) and there is the potential that the HUD restrictions will expire and rents would thereby be increased to market rents.
Neighborhood Revitalization - The apartment complex constitutes a serious blight impact on the surrounding neighborhood, and rehabilitation of the property would make a significant contribution to revitalizing that neighborhood.
Minimal Per-Unit Subsidy - The amount of gap financing needed from the City is extraordinarily low.

Loan Limits

There is no specific loan limit, with the exception of certain acquisition/rehabilitation projects (noted below). The amount of the loan will vary depending upon the income group(s) to be served, location, construction type, and need and availability of funds. The City strives to achieve maximum leverage of limited funds; as a general rule, the City expects that each City dollar will generate at least three dollars from other sources. Additionally, the City's objective is to spend 70%+ of its rental housing development program funds on units affordable to lower-income individuals and households.

Loan Terms

City financial assistance will be in the form of loans, rather than grants or rental assistance to the developer. Loan terms vary depending on the type of loan requested, income group served, and type of construction and location. The City provides gap financing rather than primary financing. The applicant may propose business terms, which will be reviewed by the Department of Housing. If necessary, loan payments may be deferred for a period of time to provide project feasibility. Developments proposing faster and more favorable repayment terms and conditions receive a higher ranking as long as long-term affordability of the City-assisted units is not jeopardized.

Eligible Use of Funds

Funds may be used for predevelopment, acquisition, construction and permanent financing phases of the proposed project.

Other Conditions

The City requires minimum 30-year Affordability Restrictions to be recorded on assisted units funded by the Department. These restrictions will be effective for not less than 30 years and must run with the land for the duration of the affordability period. The restrictions will be recorded against the property in the most senior position possible.

Application Process

Proposals involving City assistance may be submitted at any time. Projects are selected for funding based upon certain threshold and ranking criteria. Threshold criteria include site suitability, site control, developer capacity, project feasibility and project design. A more favorable ranking will be determined in accordance with how well the City's housing objectives are met by the project. Specific objectives that receive a more favorable evaluation are:

Degree of Affordability: Projects that provide a high proportion of units affordable to very low-income persons and households at or below 50% of median-income.
Mixed Income Housing: The extent to which City-assisted units are successfully combined and integrated with market-rate units. City-assisted units should not differ in size or amenity from non-assisted or market rate units.
Maximizing Long-Term Affordability: Projects that exceed the minimum requirement for 30-year Affordability Restrictions.
Cost Effectiveness/Leveraging: Projects that demonstrate the most effective use of City funds, based on the number of affordable units to be built or assisted per City dollar. This includes the extent to which the project is able to draw upon other sources of funds and favorable repayment provisions.
Amenities: Projects that provide a wide variety of services and recreation facilities, available to all residents.

For further information and application forms, contact a Project Development Manager at:

City of San José
Housing - Project Development Programs
200 East Santa Clara Street
San José, CA 95113

Phone: 408-535-8236
Fax: 408-998-3183
kristen.clements@sanjoseca.gov