A shocking revelation has emerged from a recent state audit, highlighting a potential misuse of funds intended for student housing. The report, released on Tuesday, alleges that San Jose State University (SJSU) officials plan to divert $89 million in state funds, originally allocated for an affordable housing project, towards an unauthorized development.
The California State auditor's report evaluates the housing efforts of the University of California, California State University, and California Community Colleges systems. With student homelessness and housing insecurity on the rise, the state Legislature directed this audit.
In July 2023, SJSU received a substantial grant of $89 million through the Higher Education Student Housing Grant Program. This funding was specifically for constructing affordable student housing, with a focus on providing beds below market rate.
The state audit reveals that SJSU was initially granted these funds for the Campus Village 3 project, a 12-story building that would have offered over 1,000 student beds, including 517 affordable units. However, the audit alleges that California State University and SJSU leaders shifted their focus to a different project, known as Spartan Village, in the fall of 2023. This project, occupying the former south tower of the Signia by Hilton San Jose hotel, was not authorized by the state under the grant program.
Spartan Village, estimated to cost $45 million, was completed in August 2024 and provides 675 beds across 11 residential floors, including 124 affordable units. SJSU partnered with Throckmorton Partners, who purchased the tower for $73 million. The university plans to lease the building until 2056 and then buy it by the end of 2025, using the state funds.
The state auditor argues that by funding Spartan Village with the $89 million, the university system will bypass the grant program's application process, preventing the state from evaluating the project and ensuring its commitment to affordable housing. Furthermore, the auditor points out that Spartan Village provides fewer student beds at a higher cost per bed compared to the original Campus Village project, reducing the overall cost-effectiveness of the state's investment.
SJSU has redirected questions to CSU officials, who disagree with the audit's findings. They maintain that the Spartan Village project was authorized and followed all appropriate processes. CSU officials argue that Spartan Village is a superior option, citing benefits such as earlier student occupancy, lower costs per affordable bed, and opportunities for community collaboration and downtown revitalization.
In a statement, CSU highlighted their efforts to address student housing demand, adding over 2,300 beds since 2022 and currently constructing another 4,425. While disagreeing with the audit's unauthorized project claim, CSU expressed appreciation for the state auditor's focus on student housing and welcomed further discussions on meeting student needs.
The audit's general findings paint a concerning picture. Despite California's efforts, the state's three largest university systems have largely failed to accurately assess and address student housing demands. Campuses' websites often lack accurate housing information and details about housing assistance programs, making it difficult for students to make informed financial decisions.
The report recommends establishing a collaborative student housing working group across the three system offices to better assess and meet student housing needs. It also suggests directing system leaders to take a stronger leadership role in planning for housing across their systems, regularly monitoring unmet housing demands, and ensuring affordable housing options are available.
This audit comes at a time when student homelessness and housing insecurity are rising post-pandemic. In 2020, the UCLA Center for the Transformation of Schools found that 1 in 5 California Community College students experienced homelessness, along with 1 in 10 CSU students and 1 in 20 UC students. A 2023 California Student Aid Commission survey also revealed that 53% of financial aid applicants were considered housing insecure, with the highest rates among California Community College students at 65%.
Additionally, Governor Gavin Newsom has signed several student housing bills, including AB 648, AB 357, and AB 893, aimed at easing California's student housing crunch. These bills make it easier for community colleges and colleges in coastal areas to build student housing and expand affordable housing options near state college campuses.
This story was originally published on October 15, 2025, at 4:30 AM PDT.
