Will housing formerly homeless residents in the heart of San Jose’s SoFA district stall the neighborhood’s development momentum, which includes plans for a 520-home highrise on the same block as part of a multi-billion dollar investment?
Some of the district’s developers, property owners and longtime business owners are convinced the fate of the south edge of downtown, which has been deemed “up-and-coming” for decades, is doomed if the city proceeds with plans to transition 72 motel rooms nearby into permanent affordable housing.
The Pacific Motor Inn has historically welcomed visitors and performers seeking a place to stay downtown for less than $350 a night. But for the past 18 months, the 3.7-star complex has served as a non-congregate shelter, housing some of the most physically and mentally vulnerable homeless residents onsite since the start of the Covid-19 pandemic.
The city of San Jose submitted a funding proposal Sept. 30 to transform the property, located at 455 S. 2nd St., into permanent affordable housing, as part of California’s Project Homekey.
Contingent on securing a slice of the $200 million the state dedicated to expand Project Homekey within the Bay Area—out of a whopping $2.75 billion budget statewide—the plan was unanimously approved by the San Jose City Council Oct. 5, joining eight other sites across San Jose, Mountain View, Palo Alto and Santa Clara.
Nearly 50 local business owners, property managers and neighbors met with Housing Department staff at the Guildhouse gaming venue Wednesday afternoon. While several attendees voiced support for helping downtown’s homeless population, a cacophony of dissent primarily focused on negative impacts utilizing the Pacific Motor Inn may create, including attracting more crime and vacant properties, as well as scaring off foot traffic and billions of dollars of outside investments.
Pacific Motor Inn is next door to some of the most expensive urban infill plots in downtown San Jose, notably half a block away from the massive upcoming Valley Title development—a million-square foot complex of offices, retail and residences—headed by local real estate and investment powerhouses Urban Community and Urban Catalyst.
Local developer Gary Dillabough, who co-founded Urban Community with veteran Silicon Valley commercial real estate broker Jeff Arrillaga, cautioned the city to heed concerns of the decades-long tenants of SoFA, worried the affordable housing building may disrupt the entire district’s development strategy for future growth. He likened the announcement of Pacific Motor Inn’s plans to a blunt instrument: slammed directly into a timeline of several other years-long developments.
“[SoFA] is such a fragile environment—we need to think about that and how this [Project Homekey site] fits into that,” Dillabough said. “This is not an attack on the project or housing, but we have to have a dialogue with the city that makes sense … we need to think about these things with a broader perspective.”
Dillabough confirmed to Metro Silicon Valley there’s “definitely a threat” the 2.8 acre Valley Title project, which was first purchased in August 2018, implodes.
Combined with a newfound lack of trust and disconnect with city officials, Dillabough is nervous that WestBank, one of the largest developers in the world and the “big institutional investor” behind the financing of the cluster of developments, may possibly pull its funding for the estimated $1 billion portfolio. Dillabough says WestBank has already seen plans similar to Pacific Motor Inn’s fail before.
While he’s supportive of the housing solutions for the homeless—even sitting on PATH’s San Jose Advisory Board—and the city’s efforts to leverage state funding, he worries that critical boxes remain unchecked when governments act hastily, as is the case of Project Homekey.
Today, plans include demolishing the existing surface parking lot and building to construct a pedestrian mecca between its 20-story commercial buildings, including a residential tower slated for 409 S 2nd St.—the former Bo Town restaurant site, separated from Pacific Motor Inn by a single parking lot—and several parcels along the 500 block of S. 2nd.
All told, the development’s proposed 8,000 affordable, workforce and high-end housing units, 50,000 square-foot public market and tens of millions of dollars in expected tax and economic output could be lost. The highrise’s proposal is set to be discussed at a planning director’s hearing Nov 3.
“Without a general consensus for the neighborhood's foundation and vision, why invest 30 or 40 years into a development in SoFA?” Dillabough asked, referencing his long list of development ventures across Silicon Valley. “Hopefully, I’ll learn from this.”
“Reconsider. Back off.”
According to Rachel VanderVeen, deputy director of San Jose’s Housing Department, the Pacific Motor Inn will provide apartment-style housing (without full kitchens) where formerly unhoused residents will pay rent to maintain tenancy—if and when state dollars are awarded. The city has its eyes set on redeveloping the site into a new affordable housing model down the road, likely constructing multiple, mid-rise buildings in a partnership between the city of San Jose and PATH Ventures, which operates several similar housing complexes, including Villas on the Park.
Nearby on the 400 block of South First Street, the 24-story Gateway Tower highrise transitioned into a Section 8 affordable housing project, utilizing Santa Clara County Measure A money—as opposed to the Core Development’s original plans for market rate luxury housing.
“We want to work with the [SoFA District] to figure out how this can be part of the vision of this neighborhood,” VanderVeen said. “We have lots of time to work through that.”
But dozens of speakers said they don’t want to see Project Homekey’s permanent supportive housing in the neighborhood’s future at all.
SoFA resident Aurelia Sanchez says the city has a history of creating problems but “does little to help us after so many promises,” referencing stories about how similar “housing first” ventures—such as Donner Lofts and Second Street Studios—have compounded crime rates and law enforcement calls for service around their properties.
Kevin Wick, who recently opened up the 18,000-square-foot gamer lounge Guildhouse on S. First Street, is worried the same trends will happen in SoFA, especially before other new businesses can fill vacant properties and increase foot traffic of other residents.
“There’s no one living here and walking around now,” Wick said. “We don’t want to create a negative feedback loop.”
Bridget Brown, a council assistant who works in District 3 Councilmember Raul Peralez’s office, argued that nothing would drastically change in the neighborhood, since Pacific Motor Inn has already housed formerly homeless residents for 18 months.
That’s one reason why Anjee Helstrup-Alvarez, executive director of MACLA, was one of a small handful of attendees to call out a classist, “NIMBY” tone dominating the conversation.
“I’m not concerned about this project driving away business or the youth that come around. I’m concerned about this conversation and how many of us are saying ‘Not in Our Backyard,’” Helstrup-Alvarez said. “These [projects] are trying to act as solutions for the neighborhoods where they’re placed … It feels like we’re really disconnected.”
That didn’t stop Richard Berg, who has spent 45 years in SoFA and owns parcels of land adjacent to the motor inn, from delivering one message to the city: “Reconsider. Back off.”
“[SoFA] has never been better, it’s raring to go—this is going to kill our breeze we’ve been working on for decades,” Berg said. “Without any notice we’re told about this project, right in the geographic center of the SoFA business district. It could not be more inappropriate.”
The room erupted with applause.
Metro has been a tenant in the SoFA District since 1985 and an affiliated company has owned Metro’s office building at 380 S 1st Street since 2014.