San Jose Launches Innovative Housing Program to Revitalize Downtown

San Jose is implementing a new housing voucher program aimed at addressing both the need for affordable housing and the financial struggles of a downtown residential complex. The Lower Income Voucher and Equity Program, approved by the City Council on February 25, 2026, will subsidize rents for nearly 200 apartments and seek to stabilize a financially distressed property.

Addressing Vacancy and Financial Distress at The Fay

The program focuses on The Fay, a 23-story, 336-unit apartment tower located at 10 East Reed Street in the SoFA District. Opened in 2024, the luxury building has experienced high vacancy rates and faced potential bankruptcy according to reports. Currently, approximately 60% of the units remain vacant.

How the Lower Income Voucher and Equity Program Works

Under the program, the city will master-lease 197 units, providing a subsidy to lower rents for moderate-income households. The program targets tenants earning between 80% and 110% of the area median income, which is roughly $111,000 to $150,000 annually. City workers will receive priority in the application process. The city will invest $11.2 million, funded by Measure E, a property transfer tax approved by voters in 2020, and expects to recoup its investment plus interest over the program’s duration.

A Novel Approach to Affordable Housing

Unlike traditional affordable housing programs, the rent reductions are not permanent. Rents in the subsidized units will gradually increase over time, returning to market levels after 10 years. A two-bedroom apartment for a family earning 80% of the area’s median income would initially cost $3,590 per month.

Economic Benefits and Future Expansion

City officials and local business leaders believe the program will stimulate the downtown economy by increasing foot traffic and attracting residents. Brian Kurtz, CEO of the San Jose Downtown Association, emphasized the value of having employees live where they work, strengthening connections and supporting local businesses. The city is considering applying this master lease approach to other financially struggling residential properties in San Jose.

Concerns and Considerations

While the program is seen as a positive step, some have raised concerns about the broader housing challenges faced by public employees, even those earning middle-class salaries. John Tucker, a union representative, noted that the program highlights the increasing difficulty of homeownership for city workers.

Further details regarding the program’s financing mechanism were not readily available in public documents as reported by San Jose Spotlight.