San Jose officials have committed a significant public subsidy for the Gateway Tower project, a step that will help the first high-rise workforce housing complex downtown begin construction early next year and add hundreds of much-needed units to the city’s housing stock.

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The City Council approved more than $38 million in loans for Core Cos.’ 15-story, 220-unit project at 470 S. Market St. that will ultimately cost more than $197 million to build.

“The total cost of development just speaks to the high challenge we have in building these types of developments within the downtown area,” Housing Director Erik Solivan said. “As we look at how we further advance our goals around redeveloping and building out more downtown, we have to look at ways in which we either continue to expand public subsidies and all their forms and incentives or alternatives, as these developments are just challenging to bring forward.”

The most recent iteration of Gateway Tower represents a scaled-down version of the project approved nearly a decade ago, which envisioned a 25-story, 300-unit complex.

During a community meeting last year, representatives of the developer noted that switching to a 100% affordable project would improve its chances of securing financing to build the project, which had been on the shelf for years.

Along with securing a loan from the city, developers will receive more than $25 million in county financing. Altogether, public subsidies for the project amount to $513,000 per unit. The total development cost per unit is approximately $896,000.

Out of the 220 total units, 120 are reserved for extremely low-income households. Rents for a studio apartment would be capped at $1,055, while a three-bedroom unit could cost as much as $1,567.

Ninety-eight other units would be reserved for households with incomes between 50% and 70% of the area median income (AMI). At 50% AMI, rent could range between $1,758 for a studio and $2,611 for a three-bedroom apartment.

The remaining two apartments will be reserved as manager’s units.

Construction could begin in March 2026, with the project taking around 24 months to complete.

Over the past few years, developers have struggled to put shovels in the ground due to harsh economic conditions, despite the city approving dozens of projects.

In 2024, San Jose saw zero new market-rate developments of over 20 units break ground, prompting the City Council to rethink its policy approaches, like creating a multi-family housing incentive program, which has already led to several projects getting underway.

With the region facing an affordability crisis and struggling to keep up with state mandates on housing production, city officials touted the benefits of the Gateway Tower project.

“I think that once this project is built, it’s really going to add to the character of the southern gateway to our downtown,” said District 3 Councilmember Anthony Tordillos, who represents the area. “It’s also unique as the only purpose-built affordable housing high-rise in our downtown. I’m excited that we will soon have 220 new workforce housing units, contributing to our downtown core.”

Citing its location in the SoFA District and its proximity to arts and cultural amenities, Tordillos also emphasized the importance of supporting the local economy and its workforce, noting that they generate nearly $300 million, according to the Arts & Economic Prosperity 6 study.

Tordillos, District 4 Councilmember David Cohen, and Mayor Matt Mahan have requested that the city collaborate with Core Cos. on creating a tenant preference policy for 10% of the low-income units, which would give artists priority during the application process.

“San Jose has rightfully become the center of arts and culture for all of Silicon Valley, but our local arts community and our local creative economy cannot succeed without artists,” Tordillos said. “As housing costs have continued to rise, our local artists are increasingly under pressure and at risk of being priced out of our city. With the Gateway Tower, we have a unique opportunity here.”