San José’s new housing program offers reduced-rent apartments at The Fay downtown high-rise for teachers, police officers, firefighters and other middle-income public employees struggling with high Bay Area housing costs.
A bedroom inside The Fay, a downtown San José high-rise where the city has launched a first-of-its-kind program to offer reduced rents to public employees, on Tuesday, May 26, 2026. (Courtesy of City and County of San José )
Mayor Matt Mahan said Tuesday the program is meant to support teachers, firefighters, police officers and other public servants who struggle to afford living in one of the country’s most expensive cities.
“This was an opportunity to invest in units that are available today,” Mahan said. “Buying affordability in existing buildings is an immediate way to get people into restricted affordable units faster and more cost-effectively — and because we’re taking an equity position in the building, we actually get paid back.”
The program comes as San José grapples with one of the most expensive rental markets in the country.
The median rent for a one-bedroom apartment regularly exceeds $2,800, making it increasingly difficult for public sector workers to afford to live near where they work. Mahan said some city employees currently commute from as far as the Central Valley.
Eligibility is based on earning between 80 and 120 percent of the area median income and is not meant to target low-income residents.
Rather than constructing new affordable housing — which Mahan said could cost taxpayers $150 to $200 million for a comparable number of units — the city is investing $11.2 million to buy down rents in a portion of The Fay. The investment is structured as an equity position, meaning the city expects to be repaid with interest over a 15-year period.
The program gives public employees preference but does not restrict units exclusively to them. If units go unfilled, they will be opened to the general public.
Councilmember Anthony Tordillos, who represents the district, said the structure reflects the city’s need to be creative with limited resources.
“Investing in affordable housing does not always mean new construction,” Tordillos said. “In this case, it means buying down the affordability of a recently completed and really world-class building, ensuring both stability and affordability. We are doing it while ensuring that the city not only recoups every public dollar invested, but also gains interest that can then be reinvested into additional affordable housing projects in the future.”
The Fay, located at 10 E. Reed St. near galleries, cafes and music venues in the SoFA District, is steps from VTA Light Rail and about a mile from Caltrain. The building features a rooftop pool with panoramic views, a fitness center, yoga studio and coworking spaces.
Despite its amenities, it has faced vacancy challenges since a previous ownership group ran into financial trouble unrelated to the property itself, according to development partner Andrew Jacobson of West Bank.
“It has great bones to it, great amenities,” Jacobson said. “Not only will we be able to bring city employees and service members into the building, we will be investing more into it, enhancing it, rebranding in the future, and activating the ground floor. To us, this is the starting gate.”
More than two dozen people had already signed up through an interest form before Tuesday’s public announcement, according to Sarah Fields, deputy director of the city’s Housing Department. Applications are now open through the city’s housing department website.
“This pilot doesn’t solve our housing crisis on its own; no single program can,” Mahan said. “But it’s one more creative and bold attempt to create room for more people.”
