San Jose Uses Housing Vouchers to Fill Vacant High-Rise Units

San Jose is launching a new program aimed at filling vacant high-rise units while providing affordable housing options downtown. The initiative, named the Lower Income Voucher and Equity Program, was approved by the City Council. The program allocates up to $11.2 million to subsidize rents for 197 apartments in The Fay, a 23-story luxury building in the SoFA District. The Fay, located at 10 East Reed St., has struggled since its opening in 2024, currently facing a significant vacancy rate.

Addressing Housing Challenges

San Jose’s latest housing initiative seeks to stabilize The Fay and promote increased occupancy. District 3 Councilmember Anthony Tordillos emphasized the objective to attract residents, enhance foot traffic, and boost downtown density. The program specifically targets middle-income tenants with annual earnings between 80% and 110% of the area median income, which is approximately $111,000 to $150,000.

Key Features of the Voucher Program

• Subsidizes rent for 197 apartments at The Fay.
• Prioritizes city workers in the application process.
• City will become the master tenant through an agreement with ASJ Development.
• Rents will gradually increase, returning to market levels after ten years.

A two-bedroom apartment for a family earning 80% of the area median income would cost about $3,590 per month. Brian Kurtz, CEO of the San Jose Downtown Association, noted that attracting more middle-income workers to downtown would provide considerable economic benefits. He highlighted that having city employees live nearby fosters connections, reduces commutes, and supports local businesses.

The Fay’s Challenges

The Fay currently has a vacancy rate of 60%, significantly lower than anticipated. According to housing officials, the city will secure an ownership stake in the property, which should allow the investment of $11.2 million to be recouped over time with interest. Funding for the vouchers will come from a fund established by Measure E, a property transfer tax approved by voters in 2020.

Future Implications

City housing officials believe this program can potentially stabilize The Fay and create demand for its vacant units. However, as the city’s housing challenges persist, there are discussions about utilizing a similar master lease approach for other struggling developments. Public sentiment around this program indicates a cautious optimism. City workers acknowledge the necessity of such assistance amid rising housing costs but also highlight the need for broader solutions to the growing affordability crisis.