West San Jose housing project scraps 150 affordable homes as developer revises plan

proposed West San Jose housing project that would have added more than 100 affordable homes has been scrapped.

Sand Hill Property Company had a previously approved redesign for nearly 1,000 apartments across four separate buildings at the El Paseo de Saratoga shopping center, 150 of which would have been affordable housing. But the developer went back to the planning department with revised plans to reduce the number of apartments to 867 across three buildings and scrap the affordable housing component.

The revised plans feature a 12-story building with 376 apartments and 13,500 square feet for stores and restaurants. There's also a 10-story building with 371 apartments and 15,500 square feet for retail. A third building will be constructed across the street for a market-rate assisted living facility for older adults with 120 apartments. Plans are still in place for a Whole Foods and a park.

"This is necessary so that the project is financially feasible," Steve Lynch, director of planning at Sand Hill Property Company, told San José Spotlight. "The project still meets all of the requirements of the Urban Village guidelines, and the key features of the project that were most important to the community are unchanged. This includes the main street paseo, the new retail/restaurant spaces, Whole Foods and the public plaza open space. These are the most important aspects for the greater community."

Lynch would not disclose costs of the previous and current proposal. Sand Hill bought the shopping center for about $146 million in 2019 .

Sand Hill submitted its latest plans in December, which are under review. It will need to go back to the San Jose Planning Commission and City Council for a vote. Councilmembers approved the prior project in 2022 after hearing a wave of concerns about traffic impacts, project density and the need for affordable housing.

Advocates said the decision takes away housing in an area that historically has had few options for affordability.

"This is West San Jose. This is Saratoga. There's not a lot of opportunities for development in general, and there's probably even fewer opportunities for affordable housing development," Alex Shoor, executive director at CatalyzeSV, told San José Spotlight. "This part of San Jose needs affordable housing."

San Jose requires all residential developers to make 15% of housing developments affordable under its inclusionary housing policy. Developers who want to avoid this must pay a fee. Jeff Scott, spokesperson for the housing department, said the city is still reviewing the latest Sand Hill proposal.

"The developer's obligation related to affordable housing has not been finalized," Scott told San José Spotlight. "The city is always looking for ways to add affordable housing stock, and we're willing to work with developers and be creative, to do whatever is necessary to to add more affordable housing stock."

The fee that Sand Hill would need to pay to bypass the requirement is not yet known, Scott said.

In desperate need

It's not the first time Sand Hill has changed its plans for affordable housing. The Palo Alto-based company dropped its affordable apartments by one-third at the former Vallco Mall in Cupertino . It also eliminated rooftop parking and decreased retail space by 200,000 square feet.

Sand Hill's pivot to scaling back its projects in the West Valley is due to a number of factors including higher interest rates, rising costs of materials and project delays.

"Within the industry, no one is immune to what the market is imposing on any of us right now," Reed Moulds, managing director for Sand Hill, previously told San José Spotlight. "The pressure is coming on both ends, both in terms of costs and declining values and the growth prospects are down. In order to continue to move forward, you need to make, in certain cases, drastic changes."

While Sand Hill is canceling its affordable apartments in its West San Jose development, it has another proposed project in South San Jose that could potentially see 237 affordable apartments built. Sand Hill is seeking funding for its Cathedral of Faith project .

"Affordable housing is in desperate need in all of San Jose and this is what we are addressing," Lynch said. "Regardless if the new homes are located in the adjacent district, it will help address the most pressing need in my city."

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