San Jose leaders and developers are touting the benefits of a multifamily housing incentive program, crediting it with helping the city address the shortage of homes and challenging market conditions as a new urban village project breaks ground in North San Jose at the site of the former Sakuaye Family Farm.

With high interest rates, skyrocketing construction costs and high development fees bringing the housing market to a halt, San Jose officials implemented a new tool last year that waived in-lieu fees and 50% of construction taxes that stopped developers from putting shovels in the ground for projects that had submitted complete applications by June 2022 and received a building permit by the end of December 2025.

The Hanover Co.’s development, Coyote Creek Village, will eventually bring 18,965 square feet of commercial space and 1,472 housing units, the first batch of which are expected to come online in 2027.

“We’re moving beyond the rhetoric of saying housing is a priority to actually delivering results for our residents, creating the conditions that drive housing production,” San Jose Mayor Matt Mahan said. “We’re cutting red tape, reducing barriers, and putting housing production first because San Jose families deserve a city where they can afford to live, work and raise the next generation.”

Despite the state mandating that San Jose needed to plan for 62,200 new homes by 2031, the city has struggled to start market-rate multifamily projects, averaging about one new development per year over the past few years. Last year was particularly challenging for San Jose as it saw zero new developments for market-rate housing developments of 20 units or more.

Along with the increased materials and labor costs, San Jose and California impose higher development fees than other states.

A recent RAND study showed that in Texas, cities averaged about $1,000 in one-time fees per unit, while Colorado imposed an average of $12,000 per unit. California was notably worse, averaging about $29,000 per unit, and in San Jose, Mahan said it was nearly twice the amount when factoring in the city’s inclusionary housing fees.

The Coyote Creek Village project saved about $6 million with a fee reduction.

The city’s housing incentive program has already begun to bear fruit, with multiple projects applying for a fee waiver and the city increasing the cap for homes eligible for a discount this year to 1,800 units.

Along with Coyote Creek Village, the Hanover Co. received a fee waiver for its project at 905 N. Capitol Ave.

“Make no mistake, the only reason we’re here today, with construction behind us underway on over 1470 residential units, is because this mayor and this council had the vision to see that and the vision to see and recognize that simply rezoning the plot for housing was not good enough,” said Scott Youdall, West Coast regional development partner at the Hanover Co.

District 4 Councilmember David Cohen, who represents North San Jose, said the project was a significant development for this section of the city, which he said would be the epicenter for new housing over the next decade.

Out of the 62,200 housing units San Jose must plan for, 24,000 are targeted in this part of the city.

Cohen also added that the development was more than just housing. The project includes a 2.5-acre park named after Eiichi “Edward” Sakauye, adding another amenity to an area Cohen said was under-resourced.

“It also will have the first dog park in North San Jose, which is really important for the community,” Cohen said. “In addition, the project here will include retail. North San Jose is very, very short on retail.”

In crediting San Jose for adapting to market conditions to help facilitate housing, Youdall said other cities in the state should take note if they were earnest about solving the housing crisis.

“For those who care about housing production, come here and see what San Jose is doing,” Youdall said. “They’ve come up with a model to actually get shovels in the ground, and because of that, I look forward to seeing new housing delivered over this site for the next several years and new San Jose residents enjoying this community.”