San Jose developer comments on what is driving region’s lack of new housing

By John Ramos

If there is one data point that best defines an area’s home construction rate, it is the number of home building permits being issued. And in Silicon Valley, it’s been dropping like a rock.  

A group called HomeAbroad just released a report saying that, nationwide, the average number of permits issued in 2025 compared to 2020 declined by 32 percent in large cities. But leading the list is the San Jose/Sunnyvale/Santa Clara area, where the permits have dropped by a whopping 68 percent from five years ago.

“I wish I could say it surprised me, but it does not, at all,” said Alex Shoor, executive director of Catalyze Silicon Valley, a local housing advocacy group.  

He said it all boils down to how expensive it is to build in the area, from land costs to interest rates to manpower shortages. But those are universal problems, so why was Miami able to increase construction by 160 percent in the same time period?  

Shoor said local officials may say they want a lot more housing, but they’re not acting like it.  

“No. Not with the urgency they need, no,” he said.  “Because, again, they’re not getting the results.  When you focus on outcomes first, and then you think about process later, it’s a whole different way of running a government than if you focus on process and see if you might reach the outcomes.”

Cities like San Jose impose various “impact” and “affordable housing” fees on builders that can add anywhere from $50,000 to $120,000 per unit. And one local developer is very familiar with them.  

Erik Hayden’s company, Urban Catalyst, just broke ground on a new 278-unit complex on San Carlos Street.  =But he said that’s become a pretty rare occurrence of late.

“If the fees are higher, which they are, significantly higher than other places, and construction costs are higher, that just means there’s less deals available,” Hayden said. “So, all those things make it so that between June of 2022 and about four months ago, we saw zero multi-family starts in Silicon Valley.  Not a single market-rate apartment building started construction.”

And Hayden said he doesn’t think it’s an accident.

“Cities don’t want housing,” he said.  “In fact, cities hate housing, because housing does not generate revenue that goes toward their general fund, the same way as retail, office, industrial does.”

He said that unless a project contains at least 65 units per acre, it becomes an economic liability to city budgets.  Add to that the inevitable neighborhood outcry over high-density housing, and Hayden said there is no real incentive for elected officials to embrace, much less encourage, new construction.

“They think of it like, what’s going to get me re-elected?  Not approving housing, that’s one thing, right?” he said.  “So, I cannot approve housing. What else can I do?  I can make it so we have higher fees, so less housing happens. And then I can say we’re going to generate more housing for below-market rate.  And look, we’re building more below-market-rate housing than ever. Yay!  Re-elect me!”

No one from the city of San Jose was available to speak about it on Tuesday.