SAN JOSE — A developer has scuttled an affordable housing development that would have produced well over 100 residences in San Jose, a disquieting move spawned by unfriendly economic headwinds.
USA Properties Fund sought to replace a shopworn small retail center at 1190 Hillsdale Avenue in San Jose on a site west of a cluster of automotive dealerships.
The real estate firm had proposed 160 affordable apartments on the site, now occupied by a shuttered retail strip center. Grafitti defaces part of the center, which is partly boarded up.
Some neighbors opposed the project, saying it would have been an unwelcome addition to the neighborhood, which is known as the Valley View Reed area of San Jose.
“I am very happy that the eight-story affordable housing project on Hillsdale Avenue was averted,” said John Hernandez, who lives in the area of the project site. Hernandez described the area as a “quiet neighborhood.”
The developer, however, believes the neighborhood opposition didn’t impede the project, according to an email on file with San Jose city officials.
“Despite extensive analysis to determine if there could be a viable project at this location, we have come to the conclusion that we cannot make the numbers work for our planned affordable housing project at 1190 Hillsdale,” the project development team stated in an email to city officials.
Economic factors were the primary obstacle in the way of the project.
“High construction costs, high interest rates, and challenges in the capital markets make this project infeasible for us at this time,” the development stated in the email to the city.
It’s believed that inflation and sky-high costs for construction financing have created problems for numerous projects in the Bay Area.
One development expert believes interest rates will remain high enough that major construction projects are unlikely in the Bay Area until at least well into 2025, even if the Federal Reserve cuts short-term interest rates in 2024.
The proposed San Jose project’s 160 units would have consisted of 119 one-bedroom and 41 two-bedroom units, according to a project proposal.
The demise of the housing proposal means the unoccupied and underutilized conditions at the retail center might continue for a considerable time.
Hernandez suggested that state government officials have gone too far to enable the creation of affordable housing projects around the state and that some residential developments can harm local communities.
“State of California bills that allow developers to build 100% affordable housing impact legacy neighborhoods unfairly,” Hernandez said.
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