What is an inclusionary housing ordinance?

Cities use inclusionary housing ordinances to make sure that as new neighborhoods are built, they include homes that households with a range of incomes can afford. Instead of only building market-rate units, developers must either:

• Set aside a percentage of the new homes as affordable;
• Build affordable homes at another site; or
• Pay a fee (called an ‘in-lieu fee’) so the city can build affordable housing elsewhere.

The goal is to create mixed-income communities, prevent displacement, and increase the overall supply of affordable housing.

Objectives of Changes to San Jose’s IHO 

The San José City Council approved changes to its Inclusionary Housing Ordinance on January 27, 2026. These changes are intended to:

• Update the IHO so developers can easily understand the rules, know what to expect, and plan projects in a way that matches real-world construction and financing costs;
• Support the construction of a more abundant housing stock;
• Promote the building of homes that people who work in San José — e.g., teachers, nurses, public employees, retail workers — can actually afford; and
• Align the IHO with the City Council Focus Area of Building More Housing to increase housing supply for households at all income levels.

Summary of Changes

• Streamlining IHO compliance for 100% affordable development projects;
• Setting the affordability period for inclusionary units at 55 years, which is consistent with the State density bonus law, builder’s remedy law, and California Tax Credit Allocation Committee standards;
• Applying IHO requirements to projects with 20+ units, and exempting projects with fewer than 20 units;
• For projects with a density of at least 30 dwelling units per acre:
  • In rental developments, the on-site requirement is 10% of units must be inclusionary -- 5% affordable to households earning up to 60% of the area median income (AMI), and 5% at 80% AMI;
  • The on-site requirement that 5% of rental units must be affordable at 110% AMI has been removed;
  • In for-sale developments, 10% of the units built must be sold to income-qualified buyers at or below 120% AMI
  • Alternative IHO compliance options were added -- 7% of on-site units are inclusionary at 50% AMI, or 5% of on-site units are inclusionary at 30% AMI.
• Retaining off-site compliance options and AMI levels.

Public Engagement in the Process

The Housing Department hosted an online community meeting on October 9, 2025, to discuss the proposed changes to the IHO. To view that meeting and the archived materials presented, please see the following:

• Video recording of full meeting
• Presentation
• Transcript of full meeting

A second online community meeting was held on December 10, 2025. To view that meeting and the materials presented, please see the following:

• Video recording of full meeting
• Presentation

A third community meeting was held in person on January 14, 2026, at San José City Hall.