Our Partner and COO, Josh Burroughs, joined the City of San Jose Housing Department's Dwellings podcast for a wide-ranging conversation about the policy levers, market realities, and creative tools that are starting to move the needle on housing production in Silicon Valley. Josh sat down with Banu San, Deputy Director of the San Jose Housing Department, and Jia Li of Alpha X RE Capital, in a discussion hosted by Jeff Scott.
The episode, titled "Incentivizing the Housing of Tomorrow," dives into the sweeping package of housing policy changes the San Jose City Council approved on January 27, 2026, a day many at City Hall now refer to as "Housing Day."
Why This Conversation Matters to Us
San Jose, like much of California, is staring down a deep housing shortage at every income level. In 2024, the city saw essentially zero market-rate construction starts. That stark data point framed the Council's recent overhaul of the Inclusionary Housing Ordinance (IHO) and the extension and expansion of several construction incentive programs. As Banu San explained on the show, the goal was to modernize policy based on actual development outcomes, align requirements with market realities, and activate underused tools already on the books.
For us at Urban Catalyst, this isn't theoretical. As a ground-up developer of multifamily, hotel, student housing, townhome, and senior living projects in downtown San Jose, we live inside the spreadsheets where these policies either pencil or don't.
Incentives Work, and They've Helped Us Get Projects Built
One of Josh's clearest takeaways: incentives matter, and they have a track record. As he put it on the podcast, he can't name a single high-rise in downtown San Jose that got financed without a city incentive program in place. Each real estate cycle, these programs help squeeze one or two larger projects across the financing finish line. Compared to peer cities like Austin or Seattle, downtown San Jose still has fewer cranes in the air than its population and economic dynamics would suggest, but targeted incentives are moving projects forward that would otherwise stall.
Josh pointed to our own Aquino project on the West San Carlos corridor between Diridon Station and the downtown core as a direct example. It was honestly the city's incentive program that allowed Aquino to get over the line. The project is now under construction and will deliver close to 300 apartments housing roughly 500 residents, all within walking distance of downtown's restaurants, arts, theaters, and transit. That's exactly the kind of urban, amenity-rich, transit-connected living we set out to build when we founded Urban Catalyst.
Updates to the Inclusionary Housing Ordinance
The Council's IHO update made several important shifts. The threshold for inclusionary requirements moved from projects of 10 or more units to 20 or more units, recognizing that smaller infill builders face the same regulatory and administrative burden as a 300-unit tower without the economies of scale to absorb it. Area Median Income (AMI) targets shifted toward the workforce range of roughly 60 percent to 120 percent AMI, reflecting what developers have actually been delivering over the last five years and aligning policy with real-world outcomes. The Council also removed the highest AMI band cap for on-site units, eliminating an administrative burden on rental properties already leasing at or above market rates.
From our perspective, anytime red tape can be removed so units don't sit vacant due to compliance friction, that's a net positive. The point is to get people indoors, into housing.
Anti-Displacement Through Market-Rate Production
One of the more thought-provoking threads of the conversation was Joshua's framing of market-rate housing production as anti-displacement policy. San Jose's naturally affordable housing stock, much of it built in the 1970s, 1980s, and 1990s, has traditionally housed essential workers. When the region fails to produce enough new market-rate housing for higher earners, those tenants compete for that older, naturally affordable supply and push essential workers out.
Josh also offered helpful historical context, noting how Proposition 13's limits on property tax revenue and the dissolution of redevelopment agencies have left cities leaning more heavily on fees tied to market-rate development. The challenge is finding the tipping point: tax housing too heavily, and nothing gets built at all. Right-sizing fees and incentives is how we keep the system functioning.
Office-to-Residential Conversions and the Downtown Incentive Expansion
The Council expanded the Downtown High-Rise Incentive Program to include office-to-residential conversions. Josh was candid that conversions are highly site-dependent: residential layouts need particular dimensions, hallways, and window access that not every existing office building can accommodate. Still, for the right candidates, conversions can reactivate blighted or long-vacant buildings. He pointed to the recent groundbreaking on the Bank of Italy historic tower conversion by Westbank, and noted that 152 North 3rd at St. James Park looks like another strong candidate.
Surplus Credits, Templates, and Tools that Reduce Risk
Jia Li of Alpha X RE Capital walked through the Surplus Credits Exchange Program, which lets developers earn and transfer credits when they produce more affordable units than required, then apply those credits to other market-rate projects. Banu San described this as activating a previously dormant section of the ordinance, with implementation details now nearly finalized.
Josh emphasized that beyond specific incentives, the city's effort to introduce administrative tools, visual guides, and templates is itself valuable. Real estate is an alternative investment, and we're constantly pitching investors who don't live in San Jose on why they should put capital into our city. The more clarity, simplicity, and stability the entitlement and approval process can offer, the easier it is for us to package the opportunity and bring capital to housing here.
Should These Be Permanent Programs?
The Multifamily Housing Incentive Program was extended and its capacity increased. On the podcast, Joshua suggested that, given the depth of the market-rate housing crisis and its connection to displacement, an incentive of this kind should arguably be a permanent program with no end date. A permanent program is a form of certainty for investors, and certainty is the currency that gets housing built.
A Glimpse at AI's Role in Housing Production
The conversation closed with a forward-looking observation. Today, the path from land acquisition through entitlement, building permit review, and construction can stretch four to five years. Joshua planted a seed about AI's potential role in plan check and design review: imagine a process that ingests the California Building Code and a project's plans and turns a 12-month permit cycle into something closer to 10 days. That kind of compression, he noted, could be a huge windfall for housing production statewide.
Listen to the Full Episode
The full conversation is well worth a listen for anyone interested in housing policy, real estate development, or the future of San Jose. Banu, Jia, and Josh cover a lot of ground in roughly 33 minutes, and the discussion captures both the technical substance of the recent policy changes and the on-the-ground developer perspective on what it actually takes to deliver housing in today's market.
Listen to Dwellings Episode 37 — Incentivizing the Housing of Tomorrow
We're grateful to Banu San, Jeff Scott, and the entire San Jose Housing Department team for the thoughtful conversation, and to our friends at Alpha X RE Capital for sharing the mic. We'll keep building.
Important Disclosures
The contents of this communication: (i) do not constitute an offer of securities or a solicitation of an offer to buy securities, (ii) offers can be made only by the confidential Private Placement Memorandum (the “PPM”) which is available upon request, (iii) do not and cannot replace the PPM and is qualified in its entirety by the PPM, and (iv) may not be relied upon in making an investment decision related to any investment offering by an issuer, or any affiliate, or partner thereof ("Issuer").
All potential investors must read the PPM and no person may invest without acknowledging receipt and complete review of the PPM.
With respect to any performance levels outlined herein, these do not constitute a promise of performance, nor is there any assurance that the investment objectives of any program will be attained. All investments carry the risk of loss of some or all of the principal invested. Assumptions are more fully outlined in the Offering Documents/ PPM for the respective offering. Consult the PPM for investment conditions, risk factors, minimum requirements, fees and expenses and other pertinent information with respect to any investment.
These investment opportunities have not been registered under the Securities Act of 1933 and are being offered pursuant to an exemption therefrom and from applicable state securities laws. All offerings are intended only for accredited investors unless otherwise specified.
Past performance are no guarantee of future results. All information is subject to change. You should always consult a tax professional prior to investing. Investment offerings and investment decisions may only be made on the basis of a confidential private placement memorandum issued by Issuer, or one of its partner/issuers. Issuer does not warrant the accuracy or completeness of the information contained herein. Thank you for your cooperation.
Real Estate Risk Disclosure:
- There is no guarantee that any strategy will be successful or achieve investment objectives including, among other things, profits, distributions, tax benefits, exit strategy, etc.;
- Potential for property value loss – All real estate investments have the potential to lose value during the life of the investments;
- Change of tax status – The income stream and depreciation schedule for any investment property may affect the property owner’s income bracket and/or tax status. An unfavorable tax ruling may cancel deferral of capital gains and result in immediate tax liabilities;
- Potential for foreclosure – All financed real estate investments have potential for foreclosure;
- Illiquidity – These assets are commonly offered through private placement offerings and are illiquid securities. There is no secondary market for these investments.
- Reduction or Elimination of Monthly Cash Flow Distributions – Like any investment in real estate, if a property unexpectedly loses tenants or sustains substantial damage, there is potential for suspension of cash flow distributions;
- Impact of fees/expenses – Costs associated with the transaction may impact investors’ returns and may outweigh the tax benefits
- Stated tax benefits – Any stated tax benefits are not guaranteed and are subject to changes in the tax code. Speak to your tax professional prior to investing.
Opportunity Zone Disclosures
- Investing in opportunity zones is speculative. Opportunity zones are newly formed entities with no operating history. There is no assurance of investment return, property appreciation, or profits. The ability to resell the fund’s underlying investment properties or businesses is not guaranteed. Investing in opportunity zone funds may involve a higher level of risk than investing in other established real estate offerings.
- Long-term investment. Opportunity zone funds have illiquid underlying investments that may not be easy to sell and the return of capital and realization of gains, if any, from an investment will generally occur only upon the partial or complete disposition or refinancing of such investments.
- Limited secondary market for redemption. Although secondary markets may provide a liquidity option in limited circumstances, the amount you will receive typically is discounted to current valuations.
- Difficult valuation assessment. The portfolio holdings in opportunity zone funds may be difficult to value because financial markets or exchanges do not usually quote or trade the holdings. As such, market prices for most of a fund’s holdings will not be readily available.
- Capital call default consequences. Meeting capital calls to provide managers with the pledged capital is a contractual obligation of each investor. Failure to meet this requirement in a timely manner could elicit significant adverse consequences, including, without limitation, the forfeiture of your interest in the fund.
- Opportunity zone funds may use leverage in connection with certain investments or participate in investments with highly leveraged capital structures. Leverage involves a high degree of financial risk and may increase the exposure of such investments to factors such as rising interest rates, downturns in the economy or deterioration in the condition of the assets underlying such investments.
- Unregistered investment. As with other unregistered investments, the regulatory protections of the Investment Company Act of 1940 are not available with unregistered securities.
- It is possible, due to tax, regulatory, or investment decisions, that a fund, or its investors, are unable realize any tax benefits. You should evaluate the merits of the underlying investment and not solely invest in an opportunity zone fund for any potential tax advantage.
The above material cannot be altered, revised, and/or modified without the express written consent of Urban Catalyst.