San Jose's City Council voted unanimously to authorize negotiations with a new developer to transform the Arena Hotel, a 90-room interim homeless shelter on The Alameda, into a mixed-income housing complex. The vote clears the way for Episcopal Community Services of San Francisco to replace the site's original development team, but city officials have not yet determined where current shelter residents will be moved once renovation work begins.
The council's resolution designates Episcopal Community Services of San Francisco to take over the Arena Hotel project from prior developer Urban Housing Communities and former operator HomeFirst Services of Santa Clara County, according to The Mercury News. City officials determined the previous developers' proposals were not financially feasible, per the same report. Episcopal Community Services of San Francisco, founded in 1983, is developing projects including the 256-unit 1064 Mission Street complex, according to Episcopal Community Services of San Francisco.
PropertyWorx LLC was designated as a backup developer should the primary agreement fall through, the Mercury News report noted. The city has selected Episcopal Community Services of San Francisco under a three-year exclusive negotiating agreement.
A Two-Phase Plan Hinges on State Approval
The proposal would convert the existing 90-room motel and could include mixed-income housing on the site's surface parking lot. San Jose is seeking state approval to shift the project toward mixed-income housing, including permission to move required extremely low-income units to another location, the Mercury News reported.
San Jose has sought state approval to restructure the project. Under City Council File 26-1035, considered in October, San Jose formally asked the state housing department to amend its Homekey standard agreement to remove original co-grantees Urban Housing Communities LLC and HomeFirst Services, making the city the sole state grantee, according to Legigram. The agreement and related paperwork must be addressed before the project can secure new financing.
The California Department of Housing and Community Development's revised June 23, 2026, memorandum sets Santa Clara County's Area Median Income at $205,500 for a four-person household; 120% of that figure is $246,600 for a family of four, according to the California Department of Housing and Community Development.
Neighbors Pushed for Change
The council had originally deferred its vote from August to allow for community meetings, after neighbors and merchants voiced frustration over conditions under the previous management. Those complaints followed years of resident grievances over broken elevators, food safety problems and service gaps that led San Jose to approve a $2.7 million contract with nonprofit WeHope in October 2025, with the organization set to take over on Dec. 1, 2025, as reported by San José Spotlight.
The Arena Hotel project was described as costing $45.2 million, with a $25.2 million state Project Homekey Round 2 grant and $20.8 million from the city's Measure E real estate transfer tax, according to Houseberry. Altogether, San Jose has received roughly $46 million in combined state and local investment for the site, the Mercury News reported. Voters approved Measure E in 2020.
A Housing Plan in Flux
The Arena Hotel site was initially planned as an 89-unit Homekey project, with a previously reported proposal calling for up to 200 permanent affordable apartments.
The project's path depends on the state's review of San Jose's request to restructure the Homekey arrangement and shift toward mixed-income housing. City officials have not yet determined where current Arena Hotel residents will be moved once renovation work begins.
