San Jose Luxury Multifamily Converts to Affordable with State Funds

California’s state agencies have deployed a variety of tools to spur the development of new affordable housing in the Golden State, including the use of builder’s remedy to overrule local zoning officials and the expansion of higher-density development to neighborhoods of single-family homes.

Now comes an initiative from the California Municipal Finance Authority (CMFA) to make tax-exempt state housing bonds available to finance the purchase of existing luxury apartment campuses for conversion to affordable housing.

According to a report in the Silicon Valley Business Journal, the CMFA last month approved issuing up to $100M in tax-exempt housing bonds to facilitate the sale of Modera The Alameda, a market-rate complex in downtown San Jose located at 787 The Alameda.

Catalyst Housing Group has offered to buy the 168-unit campus from developer Mill Creek Residential Trust in order to rent all of the apartments to lower-income households, the report said.

The San Jose City Council has approved an exemption to its rules, which require the city to issue bonds for affordable housing-related projects, to allow Catalyst to make use of state bonds to buy and convert the six-story property.

Larkspur, CA-based Catalyst, which expects the deal to close in early January, did not disclose the price of its offer to Florida-based Mill Creek. According to the company’s plans, all of the units at Modera The Alameda would be set aside for lower-income residents for 75 years.

The plans call for 34 of the units to rent to tenants who earn less than 50% of the area’s median income, no more than $1,785 per month for a one-bedroom unit. The remaining apartments at the campus would rent to households that earn less than 80% of area median income, no more than $2,743 for a one-bedroom unit.

Rents at the complex currently run from $2,818 to up $5,082 per month for one- and two-bedroom apartments. The units feature 9-foot ceilings, wood-plank flooring, stainless steel appliances and quartz counters.

No information was provided regarding how Catalyst plans to deal with the current Modera tenants or what, if any, physical changes to the apartments will take place as a result of the conversion to affordable housing.

According to the CMFA website, affordable multifamily and senior housing project are eligible to be financed using tax-exempt CMFA bond offerings.