ULI: Higher financing costs, market uncertainty squeezing new housing in Santa Clara

Santa Clara — Speakers from the Urban Land Institute told the Santa Clara City Council on March 11 that rising financing costs and market uncertainty are the main reasons many new housing projects are not proceeding despite a sizable pipeline of planned units.

"Money is impartial. It just looks for the highest returns for the lowest risk," said Eric Tao, a ULI volunteer and multifamily developer. Tao and fellow ULI volunteers explained that with Treasury yields much higher than during the 2019 boom, institutional investors now demand larger returns (higher cap rates) that reduce the price they will pay for completed assets — and therefore the price a developer can pay for land.

Why it matters: Santa Clara officials and developers in the audience were shown how the change in capital markets squeezes the part of a project that funds land acquisition. The presenters said that short‑term market shifts can make previously viable projects infeasible and that local policy choices can either blunt or worsen that effect.

ULI’s core findings and local context ULI presenters described four interconnected pressures on development financing: higher Treasury yields and lender underwriting standards; elevated construction and insurance costs; weaker demand for some property types (notably office and certain retail); and the lingering effects of pandemic-era and post‑pandemic shifts such as hybrid work.

Libby Seifel, a real‑estat…