Ordinances and Fees Programs

What is the Inclusionary Housing Ordinance (IHO)?

The Inclusionary Housing Ordinance, Chapter 5.08 of the San José Municipal Code, was adopted on January 12, 2010 and recently amended in 2021. The IHO requires all residential developers who create new, additional, or modified For-Sale or Rental units to provide 15% of housing on-site that is affordable to income qualified buyers/renters specified below. The base obligation is where 15% of the Inclusionary Units are provided On-Site. The Inclusionary Housing Ordinance allows developers multiple option to satisfy the affordable housing obligation. Please see the following table below that summarizes the alternative compliance options.

WHICH PROJECTS ARE SUBJECT TO THE IHO?

Developments in San Jose that create 10 or more new, additional, or modified dwelling units are subject to the requirements of the IHO. The Housing Department has prepared the following documents that outline the process for fulfilling the IHO requirements:

Ordinance 28689: Inclusionary Housing Ordinance Number 28689

IHO IMPLEMENTATION GUIDELINES

The City of San José has updated the IHO Implementation Guidelines. Please refer to the ordinance's subchapters detailing the IHO compliance options.

Ordinances and Fees program fees

WHAT IS THE AFFORDABLE HOUSING COMPLIANCE PLAN?

The Affordable Housing Compliance Plan Application packet: 1) provides background and a general understanding of the Affordable Housing Programs, 2) defines what information must be provided for the Housing Department to determine if the project has an affordable housing obligation, and 3) describes the process of selecting an IHO Compliance Option to satisfy that affordable housing obligation.

In order to determine the extent of the affordable housing obligation, and whether any exemptions may apply, all development projects with residential dwelling units seeking permits are required to submit an Affordable Housing Compliance Plan application. Developers who claim their project is exempt or waived from the IHO must comply with this process in order for the claim to be evaluated by Housing Department staff.

A formal submittal of the Compliance Plan does require a developer to also submit an application fee. The Compliance Plan does have information that may be used for estimation purposes. Please download a copy of the Compliance Plan to your computer to activate the functionality, including a fillable worksheet to estimate the In-Lieu Fee Compliance Option:

Affordable Housing Compliance Plan

Application of Fees

Application Type	Fee per application
Standard Application	$4,524.00
Abbreviated Application	$986.00

This Compliance plan is posted for questions and clarification. If you have questions or need clarifications on the application, please email Elisha. Stlaurent@sanjoseca.gov and/or Bianca.Alvarez@sanjoseca.gov

CHANGES TO THE IHO

On February 23, 2021, City Council approved amendments to the IHO to encourage the production of affordable housing. Please see the following memorandum, ordinance, and resolutions that reflect these changes.

The summary of changes include:

Lowering the minimum threshold for the Ordinances so it applies to developments with 10 units or more, and setting the fee at half the rate that would otherwise apply for developments with less than 20 units that provide at least 90% of the maximum density allowed by the General Plan;
Revising the on-site and off-site inclusionary affordability requirements for rental developments;
Restructuring the in-lieu fee from a per unit to a per square footage basis, setting the initial fee for rental housing at $43 per square foot and for-sale housing at $25, and establishing an annual fee escalator reflecting the prior year's construction cost index;
Adding four new compliance options to encourage affordable housing production;
Extending the period of affordability to 99 years with voluntary demolition after 55 years, and relocation benefits for residents of the inclusionary units.
Allowing streamlining for 100% affordable housing developments and allowing 100% affordable developments funding and restricted by the City of San Jose to be exempt from the Ordinance;
Establishing a transition process for existing residential developments;
Providing more flexible marketing rules for projects that are consistent with the City's goals regarding affirmatively furthering fair housing and anti-displacement.

The new amendments are effective starting May 1, 2021. The Housing Department will create the updated guidelines for public comments and City Manager approval in the upcoming months.

Existing projects may choose to transition into the new IHO, if the following criteria are met:

Have planning permits before May 1, 2021, or otherwise final under state law;
Building permit has not been issued;
Has not paid any inclusionary in-lieu fees;
Has not recorded an inclusionary agreement; and
Submit a replacement affordable housing compliance plan and record the inclusionary agreement.

Updated Obligations to IHO

	Obligation	For-Sale	Rental
On-Site*	15%	Purchasers must be at or below 120% AMI	5% at 100% AMI 5% at 60% AMI 5% at 50% AMI OR 10% at 30% AMI
Off-Site*	20%	Purchasers must be at or below 110% AMI	5% at 80% AMI 5% at 60% AMI 10% at 50% AMI
In-Lieu Fee*	20% (applied to all units-based square foot)	$29.07 per square foot applied to interior residential square foot	Per square footage which requires a change in methodology towards the entire building Strong Market: $49.99/ft2 Moderate Market: $21.74/ft2
Mixed Compliance Option	20%	Not applicable	Strong Market 5% at 100% AMI, AND Pay in-lieu fee of $21.74/ft2 in lieu for all rentable areas Moderate Market 5% at 100% AMI, AND Pay in-lieu fee of $13.80/ft2 in lieu for all rentable areas
Dedication of Land		Marketable title, general plan designation zoned for residential development and at a density required, and suitable for inclusionary units. Must comply with the requirements as listed in the Municipal Code 5.08.530.A.
Credits and Transfers*		Developers may purchase or transfer credits for affordable housing units that are available for occupancy concurrently with market rate units. Must comply with the requirements as listed in the Municipal Code 5.08.540.C.
Acquisition and Rehab of Units*		Rehabilitate existing market rate units for conversion to units affordable to Lower and Very Low Income Households. Number of Rehabilitation units must be 2 to 1 of the base inclusionary obligation. Must comply with the requirements as listed in the Municipal Code 5.08.550.
HUD Restricted Units*		Developers may provide units that are restricted to Affordable Housing Cost for Lower or Very Low Income Households through entering into an agreement with the U.S. Department of Housing and Urban Development (HUD). Must comply with the requirements as listed in the Municipal Code 5.08.560.H.
Combination of Methods		Developers may propose any combination of methods to satisfy the project's inclusionary housing obligation. Must comply with the requirements as listed in the Municipal Code 5.08.570.
Option to Purchase		This compliance option allows developers to purchase a property and dedicate the entitled property to the City. Must comply with the requirements as listed in the Municipal Code 5.08.580.
Partnership for Clustered Units	15%	If located on an immediately adjacent parcel and in close proximity to the market rate building, then subject to only the 15% requirement. Must have Low Income Housing Tax Credit Financing or other public financing that requires separation. Establish a minimum contribution from market rate developer to affordable developer equivalent of 75% of the required in-lieu fee obligation. Must comply with the requirements as listed in the Municipal Code 5.008.590.

*These Compliance Options also require Developers to provide the same bedroom ratio of affordable units in comparison to the total. Please see IHO Guidelines below for more details on each Compliance Option.

Resources

Inclusionary Housing Team

All questions pertaining to the Inclusionary Housing Ordinance should be directed to:

Elisha St Laurent
(408)535-8273, elisha.stlaurent@sanjoseca.gov
Bianca Álvarez
(408)794-7425, Bianca.Alvarez@sanjoseca.gov

Additional Information

Senate Bill 330

Overview

The HCA generally prohibits zoning changes or new development standards that would reduce the capacity for housing. Cities may only approve demolition of existing housing units if the new development will create at least as many new units (No Net Loss). Additionally, if certain Protected Units are to be demolished, they must be replaced by units that meet specific conditions related to affordability and tenant protections, under a process called a Replacement Unit Determination (RUD). This applies to all “housing development projects” consisting of one or more residential units (as well as other types of mixed-use projects). Non-residential projects are not subject to the HCA and may be approved, disapproved, or subject to conditions of approval in accordance with existing local requirements.

SB 330 Director’s Letter

Please contact Pedro Leal at Pedro.Leal@sanjoseca.gov for more information about demolition of existing housing units.

REPLACEMENT UNIT DETERMINATION

The HCA requires housing projects that will demolish one or more existing residential units to create at least as many units as demolished. If the building at the project site was demolished within the five years prior to submission of the development application, the new project must provide at least the maximum number of units at the building site within that five-year period.

If the project demolishes “Protected Units,” special conditions apply. Protected Units include those that, within the 5 years prior to submission of the development application, are:

subject to a deed-restricted covenant of affordability to households earning below 80 percent of Area Median Income (AMI); or
subject to a local rent control program; or
rented by low-income households earning below 80 percent of AMI; or
withdrawn from the rental market under the Ellis Act within 10 years prior to submission.

Except in limited circumstances, any development project that would demolish any Protected Units shall, as a condition of approval, replace those units with the same number of bedrooms, and at an affordable rent or sales price to households of the same or lower income category as that of the last household in occupancy. Such rental units shall remain under the affordability restriction for a period of at least 55 years.

Replacement Unit Determination Form

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