This Zoning Ordinance Update stem from commitments that San Jose has made in its state mandated Housing Element. The Overlay Districts allow certain housing projects to proceed with a ministerial approval process when certain affordability levels are met.  Please visit the San Jose’s Housing Element page for information. 

Housing Element Residential Overlay (HERO)

The Housing Element Residential Overlay is used to encourage the production of affordable homes. The sites selected are a part of the 4^th and 5^th Cycle Housing Element. Since no housing was built, and the sites are included in the 6^th Cycle Housing Element, the City is required by state law to rezone these sites. The rezoning will allow residential use by right for housing development in which at least 20 percent of the units are affordable to lower income households. In addition, sites must allow a minimum density of at least 30 dwelling units per acre. Pursuant to Gov. Code § 65583.2(i), “use by right” means the housing development may not require a conditional use permit, planned unit development permit, or other discretionary local government review or approval. For more information about state law requirements, please visit Gov. Code § 65583.2.

List of Housing Element Residential Overlay Sites

Transit Employment Residential Overlay (TERO)

Transit Employment Residential Overlay (TERO) areas were designated in the ADP to encourage housing production, and this established five key areas comprising 285 acres to support the development of 18,650 residential units. These areas provide more than half the 32,000 housing units envisioned within ADP boundaries.  Approximately 6,900 units of the Phase 1 housing allocations have been built on TERO sites since 2005, with about 156 acres remaining eligible for residential development.   In 2024, the minimum density was increased from 55 DU/AC to 75 DU/AC so approximately 18,350 units could be approved and constructed.  City Council also approved the removal of the minimum floor area ratio (previously FAR range is 2.0 to 12.0) in the TERO in order to encourage greater residential density and achieve an appropriate balance between residential and commercial space for mixed-use development.

Affordable Housing Overlay (AHO)

An Affordable Housing Overlay has been used by several cities throughout California in recent years to encourage the production of affordable homes. This tool is similar to San José’s existing TERO General Plan (p. 27) and zoning overlay which allows for residential development as an additional use in the base Industrial Park land use designation. Rather than imposing restrictions, an Affordable Housing Overlay would provide developers with the opportunity to build affordable housing in lieu of building the industrial, office, and research and development uses that are allowed on the property, thereby incentivizing the development of affordable housing in North San José. 

In order to fulfill the obligations of the Affordable Housing Overlay, each project would have to be restricted to affordable rents or sale prices for households with incomes of less than 80% Area Median Income and provide a minimum density of 75 dwelling units per acre.

List of Affordable Housing Overlay Sites

Mixed Income Housing Overlay (MIHO)

While the proposed affordable housing overlay (AHO) sites would supply a large portion of the future affordable units in North San José, this would not come close to meeting the proposed new affordable housing goal of 5,800 units in North San José stemming from the Housing Element. It is necessary to provide additional opportunities to construct inclusionary housing units on-site, as opposed to paying an in-lieu fee which is allowed under the City’s Inclusionary Housing Ordinance and is often chosen by market-rate housing developers. This tool is also similar to San José’s existing TERO General Plan (p. 27) and zoning overlay which allows for residential development as an additional use in the base Industrial Park land use designation. Rather than imposing restrictions, a Mixed Income Housing Overlay would provide developers with the opportunity to build housing with a significant affordable component in lieu of building the industrial, office, and research and development uses allowed in the Industrial Park land use designation and zoning district, thereby incentivizing the development of affordable housing in North San José. 

This overlay supports residential development that provides a minimum density of 75 dwelling units per acre and restricts least 25% of the units as affordable (less than 80% Area Median Income). The affordable units are to be included in the projects and the developer will not have the option to pay the housing in-lieu fee, meaning all affordable units must be constructed on site.

List of Mixed Income Housing Overlay Sites

CONTACT

Jerad Ferguson, Principal Planner at Jerad.Ferguson@sanjoseca.gov

FAQs

1. What is the difference between a zoning district and a zoning overlay district?

   A zoning district applies to individual properties with specific rules, including height, setbacks, and permits required for proposed developments.

   A zoning overlay district allows certain types of housing development to move forward with a ministerial approval process when certain affordability criteria are met. The property may continue to develop through the underlying zoning district. With certain exceptions.

2. Is this an affordable housing project?

   No, the zoning overlays do not include any new development proposal.

3. What is the difference between General Plan Overlay and Zoning Overlay District?
   The Zoning Overlay implements the General Plan Overlay through detailed development standards and permitting process. Since the underlying General Plan land use designation does not allow for housing, a General Plan Overlay is needed for a conforming Zoning Overlay to allow for housing development.

Upcoming

Staff is currently analyzing and identifying additional sites in North San José for the Affordable Housing Overlay and Mixed Income Housing Overlay. The project to apply these overlays on additional sites is expected to go to City Council for consideration in early 2026.