USA Properties Kills Affordable Housing Project in San Jose

USA Properties Fund has torn up plans to replace a defunct strip mall in south San Jose with a 160-unit affordable apartment complex, saying it was financially unfeasible.

The Roseville-based affordable housing developer scrubbed plans to build the eight-story complex at 1190 Hillsdale Avenue, in Valley View Reed, the San Jose Mercury News reported. It would have replaced a vacant shopping center now tagged with graffiti.

Plans for the gray, white and orange complex had called for 160 affordable apartments, including 119 one-bedroom and 41 two-bedroom units, above a two-story parking garage. The project, designed by A.C. Martin, was to serve low-income and very low-income households.

USA Properties pointed to economic factors for the project cancellation. The firm informed the city it had found, after extensive analysis, that it couldn’t “make the numbers work.”

“High construction costs, high interest rates and challenges in the capital markets make this project infeasible for us at this time,” the developer told the city in an email.

The demise of the 0.9-acre housing project means the unoccupied condition at the retail center may continue for the foreseeable future, according to the Mercury News.

One development expert told the newspaper he thinks interest rates will remain high enough that major construction projects are unlikely in the Bay Area well into next year, even if the Federal Reserve cuts short-term interest rates.

Some neighbors opposed the affordable housing project, saying it would have been an unwelcome addition to the neighborhood. USA Properties, however, believes the neighborhood opposition didn’t impede the project, according to its email to the city.

John Hernandez, who lives in the area, said state government officials have gone too far to enable the creation of affordable housing projects that can harm local communities.

“State of California bills that allow developers to build 100-percent affordable housing impact legacy neighborhoods unfairly,” Hernandez told the Mercury News.

USA Properties Fund, founded in Santa Monica by J.B. Brown in 1981, owns and manages more than 11,000 units of family and senior apartments in 85 complexes in California and Nevada, according to its LinkedIn Page.

In 2022, the company led by his son, Geoffrey Brown, sold a 92-unit apartment complex in Santa Clara for $53 million, or $576,087 per unit.

— Dana Bartholomew