San Jose launches workforce housing effort at downtown housing tower

SAN JOSE — A program designed to bring middle-income households into a prominent San Jose housing tower is officially underway, an effort that could lead to hundreds more residents downtown.

Officially called LIVE (Lower Income Voucher and Equity), the city’s affordable housing pilot program enabled San Jose to master-lease 197 apartments in The Fay and provide a subsidy to reduce rents.

At 10 East Reed St. in the SoFA neighborhood, the 23-story tower has 336 units, of which roughly 175 are occupied.

In January, a lender took back the building through a foreclosure that valued the high-rise at $110 million, a sharp discount from the property’s delinquent construction loan of $182.5 million.

By using existing units in the tower, the affordable housing can become available more quickly and at a lower cost compared with a project built from the ground up.

“This is an immediate impact,” San Jose Mayor Matt Mahan said. “We can make an investment in this building and then deed-restrict certain units to be immediately available at those lower incomes.”

Interest in the apartments has already begun to emerge.

“We have over a dozen applicants so far,” said Sarah Fields, a deputy director with the San Jose Housing Department. “There’s a lot of interest.”

The initial move-in dates are scheduled for August, according to Fields.

Officials said the idea of the affordable housing program is to help teachers, police officers, firefighters, city workers and other public servants live closer to where they work. Preferences will be given to people in these fields, but the units will also become available to the public at large.

Mahan said the program would reduce rents in all 197 units that are part of the program, meaning apartments would be available to people with an annual income ranging from 80% to 110% of the area median income.

San Jose intends to invest $11.2 million over an initial five-year period in the tower, according to Housing Director Erik Solivan.

The city will recoup its investment with interest under the pilot program, according to Mahan.

Although the tower went into foreclosure, its fundamentals remain solid.

“This building has great bones,” said Andrew Jacobson, a San Jose-based real estate executive who is leading this effort. “The units are spectacular.”

The affordable housing pilot program would apply to 150 one-bedroom apartments and 47 two-bedroom units, city officials said.

“The units are smaller than what you might see in other housing projects, but there are great amenities in this building,” said Gary Dillabough, a Bay Area real estate executive who is working with Jacobson to direct the affordable housing program in the tower.

The LIVE program comes at a time when unexpected dynamics have emerged regarding the housing market in California, particularly affordable housing.

It’s less expensive for private-sector developers to build the same affordable housing unit using private funding sources than is the case for projects that are led by government agencies, according to a recent report on housing development costs in California.

“California’s publicly subsidized affordable housing costs are substantially higher than new, high-end market-rate projects in the state,” according to a RAND Corp. report on housing that the think tank released in April 2025. “On a square footage basis, such projects in California are 1.5 times the average cost of market-rate housing in the state.”

Mahan agreed these dynamics are a reality that the LIVE program might be able to address.

“Given that the private market can build the same unit for about 25 to 30% less than it costs us to subsidize through the public sector, it is incumbent upon us to invest in other approaches that can secure more affordable units faster and more cost-effectively,” Mahan said.

When the city passes a bond to help finance an affordable housing development, the costs for public funding can greatly exceed purely private financing, according to Mahan.

Mahan said it might make more sense for San Jose to encourage development of many market-rate units as quickly as possible, with the city then striking a deal to create a significant number of subsidized units in the project after completion.

“Buying affordability in existing units that are vacant or in new market-rate units may be a more efficient and scalable way to secure affordable housing for folks than what we have been doing,” Mahan said. “This is about policy innovation. We are trying new things.”

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This story was originally published May 26, 2026 at 3:24 PM.