TWO MAJOR HOUSING DEVELOPMENTS in San Jose are the first to be approved as part of Mayor Matt Mahan’s latest initiative to expedite projects that provide “extraordinary benefits” to the city.
The San Jose City Council voted unanimously April 8 to accept proposals from Canada-based real estate company Westbank to develop 1,492 homes across two multi-story towers in downtown — along with twin data centers. The company proposed both projects to city officials after Mahan and Vice Mayor Pam Foley announced the Innovative Project Pathway Program last November. Designed to win over housing developers, the program allows them to override the city’s usual development standards — including a reduction in construction taxes and the waiving of affordable housing impact fees on specific projects — to open up more areas downtown for housing.
“We don’t want our zoning and current land use designations to get in the way of innovation that might pencil today. We understand how hard it is to attract investment into our downtown,” Mahan said at the meeting. “We have approved a lot of housing that has sat on the shelf and hasn’t gotten built because it doesn’t get financing.”
City leaders launched initiatives like the Innovative Project Pathway Program after the housing department revealed it saw zero multifamily housing projects start construction last year.
The construction of a 99-megawatt data center would provide an estimated $3.5 million to $6.4 million annually in new property and utility-user taxes, city officials discovered.
Not quite what leaders want for downtown
But Mahan and Foley noted data centers aren’t necessarily compatible with downtown and the city’s goal of beautifying the area and making it more dynamic.
“Data centers are low employment uses that don’t generate foot traffic or create vibrancy, and of course, that’s what we want,” Foley said at the meeting. “It’s critical that we demand certain conditions in order to stay true to the spirit of the general plan — the reason we’re considering data centers in downtown is because (this project) accompanies high-density housing.”
The 18-story apartment complex with 345 homes is planned at 323 Terraine St. with an 11-story data center and a 10-story parking garage with 621 parking spaces incorporated into the design.
The three high-rise towers will be 30-stories tall each, with 1,147 homes to be developed at 300 S. First St. with a neighboring 10-story data center, five levels of underground parking and more than 18,000 square feet of ground floor retail space.
Andrew Jacobson, vice president of U.S. development for Westbank, said data centers are going to be at the forefront of the artificial intelligence economy and San Jose has an opportunity to capitalize on the trend.
“We all know the struggles here in the Bay Area and of tech companies actually having enough housing, which is driving people out of our communities,” he said at the meeting. “We think the data centers and the housing are very complimentary … We’ll capture the waste heat from the data center and feed that into the housing project next door.”
Councilmember Peter Ortiz asked Jacobson the number of affordable homes expected for both projects. The Westbank representative said they are still working with city officials to satisfy the affordable homes requirement.
Making it all work together
Mahan said the residential buildings will be constructed first, recognizing that data centers are easier to finance amid the AI economy. Because data centers won’t bring foot traffic to downtown, city officials will explore tying a percentage of the data center’s future revenue to arts, entertainment and cultural initiatives.
“Lastly, we do ask in our multi-signature memo that the builder ensure the ground floor of the data center is creatively activated above and beyond a public art installment,” Mahan said. “(We’re) inviting the applicant to be really creative in how we activate that space.”
“We all know the struggles here in the Bay Area and of tech companies actually having enough housing, which is driving people out of our communities. We think the data centers and the housing are very complimentary. …”
Andrew Jacobson, vice president of U.S. development for Westbank
City Planning Director Chris Burton said both projects will likely come back to the city council for final approval after plans are finalized with Westbank. He doesn’t want the city to make policy changes that would impact downtown more broadly.
“We’ve been working hard to entice new residential development, especially high rise residential development throughout our downtown,” Burton said at the meeting. “The idea here was to … give council the opportunity to give us early feedback on individual projects that we could then craft a process that would follow on the back end.”
Contact Vicente Vera at vicente@sanjosespotlight.com or follow @VicenteJVera on X.
This story originally appeared in San Jose Spotlight.
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