At Sunset Square Apartments, a 96-unit affordable housing complex in East San Jose, roughly a quarter of households earn above the site’s income limits. Two bring in over $300,000 a year, while each has paid around $1,800 a month for a one-bedroom unit — almost $1,000 below the city’s median rent for such apartments.
The property, supported by a mix of taxpayer subsidies that helped finance its construction, is not an isolated case.
A San Jose auditor’s report from June found that in a sample of 878 city-subsidized units across 10 properties, almost 1 in 8 units housed over-income tenants. The issue extends to other California cities, according to separate audit reports, though the state does not track how many households exceed income caps.
The over-earning tenants were not identified, and the reports make no allegations that renters or building operators broke any laws or intentionally violated lease agreements. Government-subsidized affordable housing is generally offered to tenants who show earnings up to a certain percentage of a region’s median income.
For the most part, tenants’ earnings surpass income limits only after they move in, public officials and site operators said.
Under local, state and federal rules, those households are typically allowed to stay indefinitely, often while continuing to pay below-market rent. The rationale is not to punish upward mobility, while recognizing that even as tenants’ earnings grow, they may still struggle to afford market-rate rents.
Many operators, in turn, choose not to remove tenants, officials said, and regulators often have little recourse to require that tenants meet income caps, a limitation acknowledged in the audit.
That’s raised concerns among some operators and state officials about whether vital housing subsidies are being used effectively to help those most burdened by the state’s crushing rents amid a dire affordable housing shortage. Despite recent progress by some cities in adding low-income homes, the state has a shortage of more than 1.2 million affordable rental units, according to the nonprofit California Housing Partnership.
When over-income tenants are allowed to remain in affordable units, they can “take away valuable housing stock and hinder the economic ladder of housing,” said Concord state Assemblymember Anamarie Ávila Farías. She’s authored a new bill that aims to make it easier for operators to remove renters across the state earning significantly above income caps.
Beyond San Jose, a Los Angeles city controller’s report last year found that 13% of affordable properties did not comply with income or rent limits, a finding similar to the San Jose auditor’s sample of affordable units. In Sonoma County, a civil grand jury in 2022 found the county lacked sufficient income monitoring after a whistleblower accused a prominent developer of flouting income restrictions.
Income limits for affordable housing programs are typically determined as a percentage of an area’s median income. The programs are designed so that households pay roughly 30% of their income on housing costs, even though that’s not always the case in practice.
At Sunset Square Apartments, the income cap for most units is half the local median income — meaning a couple earning $80,000 per year would qualify, according to federal guidelines. The maximum rent they could be charged for a one-bedroom unit is around $1,900. The median one-bedroom rent in San Jose is $2,725, according to data from online rental site Apartment List.
For Sunset Square and similar properties, the maximum rent remains tied to a tenant’s income at move-in, regardless of whether they start earning more. The rent ceiling, however, increases incrementally in most years.
That means as long as an over-income tenant continues paying rent, “the property doesn’t have a strong incentive to move that individual out,” San Jose Housing Director Erik Soliván said.
Operators also pointed to the state’s strict renter protection laws for making it difficult to remove renters solely for being over-income.
“Everybody’s operating under the state regulations and fair housing (laws), and that’s what’s happening,” said Mark Mikl, executive director of San Jose nonprofit Charities Housing, which manages Sunset Square.
To free up more affordable units for those who need them most, Ávila Farías’ bill — now awaiting Gov. Gavin Newsom’s signature — would establish “good cause” for removing many tenants earning more than 140% of the local median income. Operators would be able to remove tenants once their lease is up.
The bill, however, does not require operators to take action. And it would apply only to properties composed entirely of affordable units and that receive federal tax credits, one of the most widely used subsidies for building affordable housing. Ávila Farías was unable to say how many units statewide would be covered by the measure.
At Sunset Square, which appears to fall under the bill, operators said that approximately 22 households are currently over-income, including the two two-person households earning more than $300,000 a year. But Charities Housing said all had incomes that qualified for the units when they signed leases.
A document listing all tenants’ rents and incomes for 2025, submitted by the nonprofit to San Jose officials and obtained through a public records request, shows that households in all 93 tenant-occupied units had qualifying incomes upon move-in. At least 11 appeared to report six-figure incomes that were at least $30,000 above annual income limits, according to an analysis of the document by this news organization.
Charities Housing said no public agency has sought to compel it to remove over-income tenants.
The nonprofit declined to make the two households earning more than $300,000 available for an interview or provide information about their incomes or employment, citing privacy concerns.
Charities Housing did not respond to a question about whether it would consider not renewing over-earning households should Ávila Farías’ bill become law. But in an interview, Mikl, the nonprofit’s director, said it’s his hope that over-income tenants would choose to move out voluntarily.
“When people are successful,” he said, “we would like to believe that they would give that opportunity to the next family.”