SAN JOSE — City officials have paved the path to convert a choice apartment complex in downtown San Jose into all-affordable housing near the footprint of Google’s proposed mixed-use transit village.
Modera The Alameda, a 168-unit apartment building on The Alameda near the SAP Center and Diridon train station, is a step closer to transformation into an affordable housing complex following a unanimous vote by the San Jose City Council.
A $100 million package of tax-exempt bonds to finance the purchase of Modera The Alameda is the funding centerpiece of the affordable housing conversion.
The city’s decision paves the way for the anticipated future owner of the property to pursue the financing for the apartment complex at 787 The Alameda.
The $100 million financing package would be used for “the acquisition, rehabilitation, improvement, and equipping of 167 apartments and one manager’s unit to transition to an affordable housing development,” a city staff report states.
The California Municipal Finance Authority, an agency jointly established in 2004 by multiple government agencies, is slated to issue the bonds for the purchase of the Modera apartment complex.
“This will allow the Modera development to move forward with its current financing plan and create much-needed affordable housing,” the city staff report stated, referring to the financing package to convert Modera into affordable housing.
The California Municipal Finance Authority acts as a conduit for tax-exempt bonds to finance an array of projects to promote economic development.
“San Jose lacks a sufficient amount of affordable housing to meet residents’ needs,” the city staff report states.
The conversion proposal sketches out a plan whereby Catalyst Impact Fund, a nonprofit, would purchase Modera, the city documents show. Catalyst Impact would buy Modera the Alameda from current owner AEW Capital Management.
Once the apartments are converted to affordable housing, they would be set aside for very low-income and low-income individuals and families.
People who live in Modera typically pay monthly rents that range from a low of slightly more than $2,300 a month to nearly $4,600 a month, apartments.com reports.
“To avoid displacement of any current market-rate residents, units will transition to affordable upon move-out,” the city staff report states. “Existing residents who income-qualify will be offered affordable rates upon lease renewal.”
Of the 168 units, 34 units will be set aside for people at the 50% area median income level and the remaining 134 units will be restricted to people at the 80% area median income level, city officials say.
“The 2023 income limit for households with 50% area median income is $62,450 to $89,200 a year and the 80% area median income is $96,000 to $137,100 a year,” the city staff report stated.
The city will act as an administrator to ensure Modera remains affordable for the next 75 years, the staff report states.
Modera’s current assessed value is $101.7 million, county documents show.
The proposal would remove Modera from the property tax rolls — which means the complex would no longer generate property tax revenue once the new owner takes over.
About $1 million a year in property tax revenue would be wiped out as a result of conversion to affordable housing.
Despite the loss in property tax revenue, a conversion makes sense, in the view of Bob Staedler, principal executive with Silicon Valley Synergy, a land-use consultancy.
“Existing units can be purchased for less than the exorbitant cost to build new affordable housing,” Staedler said.
Ryan Christopher, a San Jose resident, wrote an email to city staffers that raised questions about the wisdom of the conversion to affordable housing, especially if a significant hit to San Jose’s revenue from property taxes is in the offing.
“It appears to me that the 80% area median income rents are very similar to the current rents at the property,” Christopher wrote in a Nov. 14 email to the city. “As such, it seems questionable that there is a public benefit, and certainly questionable that we should forgo tax revenue to support this.”
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