San Jose Will Subsidize Rent for Teachers and Other Public Workers Who Can’t Afford To Live There

One of the most expensive housing markets in the nation has an innovative new plan to help teachers and other public workers afford to live in the community that they serve.

San Jose, CA, has the highest rental costs among the nation’s 50 largest metro areas, with a median asking rent of $3,306 in April—almost twice the national median of $1,673.

Now, some public employees there will finally get some long-awaited rental relief through the city’s Lower Income Voucher and Equity (LIVE) pilot program, which will reduce their rent without costing taxpayer money in the long term, if all goes according to plan.

The program will offer 197 below-market-rate one- and two-bedroom units at The Fay, a 23-story residential building in the South First Area, to eligible public workers—such as teachers, firefighters, and police officers—and other middle-income households.

"Public employees are the preference in the beginning, so they effectively get 'first dibs' at applications and getting access to these units," Erik Solivan, the director of housing for the city of San Jose, tells Realtor.com®.

The pilot program is intended to serve households earning roughly 80% to 110% of Area Median Income (AMI), with a focus on middle-income affordability rather than extremely low-income housing.

"The intent of this is to service core workforce. You're looking at a salary range of roughly just over $100,000 up to, for a family of three, closer to $140,000," says Solivan.

He says many of his own employees in the housing department within that income range are currently forced to commute long distances because affordable rental housing is so difficult to find in the city.

Those who are accepted into this program would receive a voucher to subsidize a portion of their rent.

A standard one-bedroom at The Fay starts at $2,900, while a standard two-bedroom starts at $3,450 before subsidies.

"We'll buy that down a couple of hundred dollars per month as part of the program, depending on where in that 80% to 110% of AMI that they're at," says Solivan.

Details of the deal

Solivan says the city is investing $11.2 million to help reduce rents for part of The Fay development.

The Fay—a luxury apartment building that opened in 2024 featuring a rooftop pool, yoga studio, and fitness center—has faced high vacancy rates and bankruptcy.

"This is an opportunity to take an existing sort of distressed asset in the marketplace and gain some affordability out of it, and to do so in a very short period of time," says Solivan.

The project is financed through a combination of debt and equity, utilizing a 10-year master-lease agreement with the city as a guaranteed revenue stream for the developers of The Fay.

While San Jose is providing an upfront subsidy investment to enter the ownership structure, it isn't a permanent payout. At the end of the 10-year contract, the building's owner must repay the city its entire subsidy investment, plus interest.

Solivan says that a typical affordable housing development takes four years—but they were able to put this deal together in just eight months.

"So it's a streamlined, very effective way to buy down affordability," he explains.

Solivan says this is a pioneering initiative for the city council to take on master leasing.

"It's been done in a few other cities in a few different ways," he explains. "This is the first of its kind to do it for a distressed asset, and to take that distressed asset and make it affordable with targeting public employees. Here's a fast route for immediate affordability that impacts our workforce."

"Our housing affordability crisis requires creative solutions, and this program is an exciting new tool to help improve affordability for San Jose residents," San Jose City Councilmember Anthony Tordillos tells Realtor.com.

"It’s an innovative and efficient use of our limited public dollars, and it shows that investing in affordable housing doesn’t always mean getting shovels in the ground on new construction. In this case, it means stepping in to buy down the affordability of a recently completed, world-class building, ensuring both affordability and stability."

Solivan says the city is already in discussions to do additional deals that are similarly structured, but at even lower qualifying income levels.

"We know that there is need across that entire income stream, so there's opportunity as we look at future office-to-residential conversions or residential developments that already have inclusionary housing ordinance in it," he says. "Where do we expand some of that affordability and continue to make it affordable lower on the income scale?"

Applications now open

The LIVE program officially launched this week and is already drawing strong interest from public employees.

"We've already had about two dozen public employees sign up as interested, and we anticipate with more coverage and promotion of the program to see significant interest," Sarah Fields, deputy director of the city’s Housing Department, tells Realtor.com.

Applications are now being accepted through the city's website through June 30, and Fields anticipates that recipients will start to move in as soon as Aug. 1.

Any units that go unfilled by public servants will later be offered to the general public.

"The program provides public employees a first preference to apply," San Jose Mayor Matt Mahan's office tells Realtor.com. "But because the units are not held, set aside, or guaranteed for public employees, eligible non-public-employee households may also apply consistent with program requirements."