In exchange for a $13.9 million payment, the San Jose Planning Commission has accepted modifications to the previously approved El Paseo de Saratoga Shopping Center urban village project, which include removing the majority of its affordable housing and lowering it by a few hundred residential units.
Sand Hill Property Co. representatives stated that because the city first approved plans for 994 apartments in 2022, including 150 that qualified as affordable housing, the developers needed to modify the project to fit market conditions.
According to the most recent configuration, the project will construct a senior assisted living and memory care center in addition to 772 residential units, 39 of which will be at 100% local median income.
Commissioner Justin Lardinois stated, “I was really excited about the initial project and the current land use at El Paseo is very old-fashioned and very much not making full use of the land.” The mixed-use development there excites me greatly. While I’m sad that the project actually includes decreases across the board, I also understand that economic realities do change when these things go through a multi-year planning process.
After paying $146.6 million for the property in 2019, Sand Hill has plans to renovate around one-third of the 30-acre shopping mall located in southwest San Jose at 1312 El Paseo and 1777 Saratoga Ave.
The city’s inclusionary housing policy, which mandates that residential developments set aside 15% for affordable housing or pay an in-lieu fee, served as the foundation for the first 150-unit affordable housing component.
According to Steve Lynch, Sand Hill’s director of entitlement and planning, this is the most we believe we can handle for the project. That’s the bottom line, after all. We would like doing 15%. We would want to do more, but since we are merely repeatedly calculating the figures, we still believe that some inclusive housing may be included in the project, which is crucial.
High mortgage rates, labor and material costs, and significant shifts in the office market have caused the mixed-use development’s residential and commercial components to undergo a number of modifications.
According to a survey published last month by the commercial real estate company JLL, Silicon Valley had a 22% vacancy rate in the third quarter of 2024, indicating that the main markets in the Bay Area were still struggling.
The initial plans called for all four structures to be between nine and twelve stories tall, including both business and residential space.
One of those structures was a Whole Foods market with apartments constructed on top.
However, Sand Hill’s permit was amended by the city last year, converting the 11-story building into a single-story structure that is anchored by the supermarket. According to Lynch, the supermarket’s developer anticipated starting construction the following year.
Sand Hill, which currently collaborates with Sunrise Senior Living and real estate company Holland Partners, also planned to increase the density of two other buildings to somewhat compensate for the loss of the residential space in that structure.
In addition to the supermarket, the amended plans now include a 7-story, 230,305-square-foot residential care facility, a 10-story structure with 374 units and 17,447 square feet of commercial space, and a 12-story building with 398 units and 14,139 square feet of commercial space.
Lynch stated that we must bring it down to the point where we believe we have a project that we can populate with individuals who wish to live there. A thousand units is a lot of units to transfer, especially in this region of the city where your job base isn’t quite nearby. In light of these facts, we believe that these reductions have kind of hit the correct place.
“The in-lieu fee could also help finance other affordable housing projects in the city, including a 100% below-market-rate development Sand Hill is eyeing,” said Housing Director Erik Solivan.
In addition to looking at ways to finance the kind of parent-sibling deal, we are able to bring affordable units back on-site to the project. This gives the city the advantage of both market-rate units and affordable units on-site and off-site, thereby increasing the city’s housing supply, Solivan stated.
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