Plans Formally Filed for 100% Affordable 246-Unit Housing Project in San Jose

The Schoennauer Company, AO Architects, Maracor Development, 802 S. 1st Street, San Jose, Marcus & Millichap
Courtesy of AO Architects

By Meghan Hall

Another housing project could soon be coming to San Jose as the City continues to grapple with its chronic housing shortage. This past week, plans were formally filed for a new, 100 percent affordable housing project that will contain 246 housing units. The filing comes after the San Jose City Council voted to approve updates to the San Jose 2040 General Plan and the Martha Gardens Specific Plan earlier this year.

The project site, located at 802 S. First St., totals 1.2 acres. Currently, the property is developed with a vacant 31,152 square foot commercial building that will be demolished in order to make way for the project. The project will include 246 units, as well as 1,506 square feet of ground floor retail and about 86 parking spaces.

The goal of the project, proposed by San Francisco-based Maracor Development and designed by Orange, Calif.-based AO Architects, is to revamp an underutilized property in a pedestrian-friendly neighborhood of San Jose.

“This project is consistent with the City’s Martha Gardens Specific Plan that is encouraging new investment south of  Interstate 280,” explained Erik Schoennauer, the land use consultant guiding the project team through entitlements. “And, this project will provide affordable workforce housing for service workers, teachers, nurses and others who work in the greater Downtown area. When the City is in a severe housing crisis, all new housing is critical.”

The project site is located just off of Interstate 280 and State Route 87, just outside of downtown San Jose. Attractions in the area include Solar4America Ice Rink, Happy Hollow Park and Zoo,  Clandestine Brewing and Foundry Commons.

The pitch for the project comes at a time when San Jose is struggling to produce enough  housing, even though over the past three years, the CIty of San Jose has been working hard to increase the number of housing units within its limits. Overall, the City has set an “ambitious” goal to create 25,000 new units by 2023, with at least 10,000 units designated as affordable. Officials have approved more than 8,000 units and issued permits for nearly 7,000 additional units; however, just 3,000 of these are occupied according to an August memorandum released by Mayor Sam Liccardo. 

“To be sure, much has to do with challenges getting project financing, particularly as construction costs have skyrocketed,” notes Liccardo, who has asked City staff to evaluate why developers with entitlements have not moved forward with building projects. 

Liccardo continues, adding, “There are other challenges as well, however. Council would benefit from a clear understanding of those hindrances, particularly where they are of the City’s making. For that reason, I again urge that we do better to understand what clogs the housing pipeline, particularly where those issues do not involve economic factors over which we have no control.”

Rents were still down about 6.1 percent through the beginning of 2021, while at the same time, lumber costs have added tens of thousands of dollars to construction costs, the City of San Jose reports. Construction starts and stops, pandemic worries and other factors continue to slow construction.

On a slightly brighter note, the affordable housing pipeline had its best year in 2020, according to City documents. 818 affordable units are under construction, and an additional 1,747 have been approved.

However, for now, challenges remain. Rents in San Jose remain some of the highest in the country. During the second quarter, renters paid $2,545 per month across Silicon Valley, based on data from Marcus & Millichap. With limited supply, rents are likely to keep rising, especially in submarkets near major companies and tech employers as new job growth continues to outstrip the local housing market.

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