{"id":8283,"date":"2026-09-03T04:13:27","date_gmt":"2026-09-03T04:13:27","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=8283"},"modified":"2026-09-03T04:13:27","modified_gmt":"2026-09-03T04:13:27","slug":"why-does-it-take-so-long-to-build-new-homes-the-problem-isnt-just-zoning-its-cash-san-jose-officials-say","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=8283","title":{"rendered":"Why does it take so long to build new homes? The problem isn\u2019t just zoning \u2014 it\u2019s cash, San Jose officials say."},"content":{"rendered":"
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Across the Bay Area, the pace of homebuilding is painfully slow. But San Jose officials are trying to look beyond dragged-out zoning and density debates to highlight another element keeping construction at a snail\u2019s pace in their backyard: financing.<\/p>\n

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As federal and state funds for housing have largely dried up, San Jose has been forced to rethink its approach to affordable housing, shifting its focus away from 100% affordable developments \u2014 which officials believe are a difficult sell to developers who wouldn\u2019t make as much money from them as they would from market-rate units \u2014 toward mixed-income projects.<\/p>\n

To bring homes from mere plans to reality, the City Council unanimously approved a pilot program Tuesday to experiment with mixing and matching funding models for the city\u2019s housing projects in new ways. The strategy includes using city loans to increase affordable units in high-density developments, securing tax-exempt bonds, and slashing fees for developers who agree to let the city lease their apartments to guarantee them steady income.<\/p>\n

By guaranteeing rental income and reducing upfront construction costs, the city hopes to woo developers to break ground while lowering rents for low-to-moderate-income families.<\/p>\n

The financing methods for a project will be approved on a case-by-case basis, and the city\u2019s housing department will track the results and report back to the council in March before any long-term policy changes are finalized.<\/p>\n

Consistently ranked among the most unaffordable cities in the country, San Jose is required to make room for at least 62,000 new homes by 2031, the second-highest target in the region behind San Francisco. While the city has already greenlit more than 31,000 units over the past decade, according to housing staff, nearly two-thirds of them \u2014 over 20,000 homes \u2014 determined to be financially unfeasible \u2014 remain stuck on paper.<\/p>\n

The median home sale price in San Jose reached $1.42 million as of June, while the average rent for a two-bedroom property stood at $3,325, according to real estate website Zillow.<\/p>\n

Housing officials noted that the rental vacancy rate sits at just 3%, highlighting the urgent need to build as much \u2014 and as fast \u2014 as possible. But with sky-high construction costs and interest rates, developers say they simply can\u2019t afford to break ground.<\/p>\n

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That reality is reflected in the actual number of homes built. Over the past three years, San Jose constructed fewer than 4,500 total units \u2014 averaging around 1,500 homes a year, with affordable housing making up roughly 40% of the total, according to a housing department presentation Tuesday. A little more than 3,000 units are currently under construction.<\/p>\n

\u201cWe have said yes, typically unanimously, to virtually every housing proposal that has come before the council,\u201d Mayor Matt Mahan said at the council meeting. \u201cThe challenge we face today is less about zoning, height limits \u2014\u00a0 it\u2019s more about the cost of construction.\u201d<\/p>\n

Last month, contention over a major overhaul of the city\u2019s zoning laws \u2014 to be finalized next year \u2014 pitted housing advocates against residents who worry that proposals to quadruple density in single-family zones could degrade the quality of life in their neighborhoods.<\/p>\n

But even when the city does approve zoning changes, without incentives to build, those projects may remain stuck on paper, officials said.<\/p>\n

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\u201cWe need to bring in capital, public and private capital,\u201d Deputy Housing Director Banu San told council. \u201cPublic dollars alone are not enough to build housing, and we really need to strategically use public resources to create innovative ways of financing development overall.\u201d<\/p>\n

While support for the financing models was unanimous, some leaders and community members raised concerns over limited public funds being used to finance market- or moderate-income housing, instead of directing those resources toward residents in the lowest income brackets.<\/p>\n

\u201cBoth gap financing and master leasing rely on limited city funding, so maintaining the right balance as these programs are implemented will be important,\u201d Councilmember Peter Ortiz said. \u201cAnd I don\u2019t deny that building more housing in the long run may make housing more affordable, but our residents need intervention now, so we can\u2019t lose sight of that overall goal.\u201d<\/p>\n

Councilmember Pamela Campos pointed out the city\u2019s skewed Area Median Income \u2014 a federal formula factored into affordable housing eligibility \u2014 where a large segment of the population works in high-paying tech jobs.<\/p>\n

\u201cThe Area Median Income for a family of four is over $200,000, which means an extremely low-income family of four makes $62,000 a year. These are working people who clean our buildings and homes, watch our kids, and prepare our food,\u201d she said. \u201cAn affordable housing strategy that does not include extremely low-income housing risks leaving behind tens of thousands of hardworking people who need housing in our city.\u201d<\/p>\n

Housing Director Erik Soliv\u00e1n pointed out that outdated tax credits for fully affordable housing are unsustainable, forcing rents up 5% to 8% a year just to keep buildings viable for property owners and the city, even if residents\u2019 incomes do not grow at that rate.<\/p>\n

While the city is looking for solutions to maintain funding for its existing affordable building projects, Soliv\u00e1n said he believes the path forward is to combine income levels in one building in order to make housing projects financially sustainable long term.<\/p>\n

\u201cThat\u2019s where we see challenges, but also some opportunities for devising some strategies to keep those buildings preserved, while also looking at new production that\u2019s stabilized by some higher-income units in the building,\u201d he said.<\/p>\n

Mahan acknowledged concerns about neglecting housing for the city\u2019s lowest-income residents, but remained confident that mixing income levels in projects is the right path forward.<\/p>\n

\u201cI do think the data should guide us,\u201d Mahan said, asking staff to bring back findings next year. He argued that projects must have a sustainable mix of different incomes to survive without requiring constant public bailouts or risking buildings having to shut down altogether, adding that \u201cit\u2019s a real challenge to balance this.\u201d<\/p>\n

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‘The challenge we face today is less about zoning, height limits — it’s more about the cost of construction,’ says Mayor Matt Mahan.<\/p>\n","protected":false},"author":1,"featured_media":5401,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-8283","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\nWhy does it take so long to build new homes? 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