San Jose: Mayor Matt Mahan’s controversial housing plan to reallocate Measure E dollars goes down amid budget hearings

Following a monthslong salvo over how to best spend tens of millions of dollars on the city’s homelessness crisis, San Jose has decided to move roughly $8 million away from affordable housing to support interim solutions — millions less than Mayor Matt Mahan initially hoped.

The debate came to a head Tuesday evening in the midst of budget discussions, with Councilmembers Dev Davis and David Cohen leading the charge to help all sides reach a compromise.

Since taking office earlier this year, Mahan has focused on creating 1,439 temporary beds by 2030 for the city’s unhoused population to live in until they find more permanent housing. Last month, the mayor unveiled a controversial plan that would take $38 million of Measure E money away from affordable housing and diver it to interim solutions like tiny homes, hotel rooms and safe parking sites.

The 2020 ballot initiative was passed by voters in 2020 and taxes real estate purchases over $2 million with the goal of creating a dedicated revenue stream in San Jose for affordable housing and homelessness. A majority of the money was originally set aside for permanent affordable housing, while the rest was allocated for homeless prevention measures such as rental assistance and temporary shelters.

The mayor’s plan sparked tensions at city hall and among housing advocates, many of whom rebuked the plan, arguing that temporary housing, while necessary, will only serve as a stopgap and will cost more in the long run.

On Tuesday evening, the council voted 10-1 to approve a compromise that would take $8 million of $12.7 million from a bucket dedicated to moderately affordable housing and move it to fund support programs and the construction and operation of interim shelters. $4.3 million of an $11 million inflation reserve coffer would also be redirected to program administration. Councilmember Bien Doan cast the dissenting vote.

Following the vote, Mahan said he was “disappointed it wasn’t more.”

“I think we’ll be back to this conversation next year,” he said. “But I think it’s certainly a move in the right direction.”

In a statement, Cohen said it was his goal to try and preserve money for new affordable housing while also funding the interim housing the council has already approved.

“This compromise allows for the city to add staff needed to quickly move to open interim housing, operate the programs and help move people off the streets,” he said. “And we preserved all of the money that had been earmarked for low-income housing developments.”

The fight over how to spend San Jose’s Measure E dollars has become part of a larger debate over what the best approach is for getting people off the streets. Interim housing has been billed by its supporters as a quicker — and less expensive — solution since building new affordable housing typically takes years.

But a recent analysis by budget director Jim Shannon found that funding interim housing year after year could be costly. If San Jose completes its plans to add all 1,439 interim beds, hotel rooms and safe parking sites, it could cost the city upwards of $60 million a year by 2030 — more than double the city is expected to spend on interim housing next year.

Davis said it is critical for the city the “send a strong message that we are and remain committed to building new permanent affordable housing.”

“We need to send that message to affordable housing developers so they will continue to identify local sites even though Measure A funds have been depleted,” she said of the county’s $950 million affordable housing bond measure.

The council also unanimously approved San Jose’s $5.2 billion budget for the upcoming fiscal year. City officials forecasted a $35.3 million surplus in the upcoming year followed by a $18.8 million shortfall in 2024-25.

The budget, which is largely shaped by the mayor with his “back-to-the-basics” approach, focused on public safety, reducing blight and investing in new jobs and housing. Some of those priorities include adding 31 new sworn and unsworn officers — including six new community service officers — and increasing funding for the city’s vehicle abatement program.