San Jose is starting over on one of its most troubled homeless housing sites. The City Council voted unanimously on Tuesday to let city housing staff negotiate with a new developer, Episcopal Community Services of San Francisco, to take over the Arena Hotel, a 90-room shelter on The Alameda a short walk from SAP Center, Hoodline reported, citing The Mercury News.
What the council approved
According to the resolution posted on the city's legislative site, the vote authorizes a three-year exclusive negotiating agreement with the nonprofit, with two optional six-month extensions. The deal has two parts. The existing hotel would be converted into housing with rents kept within the limits of its state Homekey agreement. Separately, the nonprofit could later build mixed-income housing on the site's surface parking lot for households earning up to 120% of the area median income.
Using the state's 2026 income limits, that ceiling works out to $246,600 a year for a family of four in Santa Clara County, according to Houseberry's breakdown of the item. That is moderate income: the band that often earns too much for subsidized housing and too little for a typical San Jose home.
If the talks fall through, the same authority passes to the second-ranked bidder, PropertyWorx LLC. The council also told staff to ask the state housing department to drop the project's original partners, developer Urban Housing Communities and operator HomeFirst Services of Santa Clara County, from the Homekey contract and make the city the sole grantee. Hoodline, citing The Mercury News, reported city officials concluded the earlier proposals weren't financially feasible.
A rocky three years
The site opened as interim housing in 2023 at a total cost of $45.2 million, combining a $25.2 million state Homekey grant with $20.8 million from the city's Measure E property transfer tax, Houseberry reported. Residents later complained of broken elevators, food-safety problems and gaps in services, and the city brought in the nonprofit WeHope to run the shelter starting Dec. 1, 2025, under a $2.7 million contract.
The vote had been pushed back from late summer so the city could hold community meetings after neighbors and merchants raised concerns, Hoodline reported. Earlier long-range plans had called for tearing the building down for up to 200 permanent affordable apartments. The new approach keeps the hotel and adds housing next door instead.
What's still unknown
This is a negotiating agreement, not a building permit. No unit counts or budget appear in the resolution, any new construction will need its own environmental review, and a final deal has to come back to the council. The city also hasn't said where current Arena Hotel residents will live while renovation work is underway.