Cupertino is welcoming a slew of new housing developments, but might lose the heart of the city along the way. 

That was a message Mayor Liang Chao shared during her first State of the City address Wednesday night.

The former Vice Mayor touted the city’s recent efforts to move along multiple housing projects in the city, while expressing her concerns about dozens of potential new townhouses sprouting along the downtown area. In her speech, Chao also mulled over the future of the city’s financial prospects as leaders navigate a multi-million dollar deficit in the upcoming years.

Delivering her address at the Quinlan Center in front of more than 100 residents, Chao said the city is reviewing multiple applications to build townhomes along the bustling Stevens Creek Boulevard.

Housing has been a hot topic in Cupertino for decades, dividing leaders and residents between those who encourage creating more housing units, and those against bringing more people and congestion into the moderately-populated suburbia.

One downtown application proposes building 59 townhomes on a 2.97-acre lot that currently houses a Staples, along with a vacant Pizza Hut and Italian restaurant. Another application seeks to build 55 townhomes with 10 Accessible Dwelling Units a few miles down the road at the site of a United Furniture store. The projects will fulfill, or partially fulfill, the city’s housing element — a state-mandated plan to add around 4,588 new homes by 2031.

Chao said she is worried the the new housing means residents will lose a “stretch of walkable commercial areas.”

“We will also be losing much needed retail revenue,” she said.

The city last year added housing into the area, including the 48-unit Westport Senior Apartments, which provides affordable rental housing for seniors, and Alan Row – a nine-unit townhome development on Stevens Creek  Boulevard. Chao added that new projects are underway, including Canyon Crossing, an 18-unit mixed-use development with 4,500 square feet of commercial space that broke ground in 2022 on Foothill Boulevard.

She also voiced concerns about the city’s budget, and how more housing sites will lead to a loss of sales tax revenue.

“We’re losing more sales tax as each commercial site is converted to housing,” she said.

In the upcoming years, Cupertino is anticipating a $10 to 20 million budget shortfall. The deficit was spurred when the state stopped a sales tax agreement between the city and Apple, whose headquarters are in Cupertino. The state did allow Cupertino to keep $74.5 million in Apple sales tax revenue it generated over the past two years, but the city is now looking for alternative ways to replenish the funds.

Chao added that the city missed out on the chance to acquire $77 millions in sales tax dollars from The Rise last year. The council had agreed to waive the fees for developers in order to move forward with building the city’s largest housing development at the site of the old Vallco Mall.

Cupertino imposes one-time fees on property developers to offset the financial impact their new development will have on public infrastructure, including roads, water and sewerage among other services.

To wrap up her speech, Chao asked residents to help the city better connect with neighboring big companies and businesses.

‘We are small but mighty,” she said. “Help us build a better Cupertino.”