Like many Americans grappling with tough economic times, South
County Housing is looking to the government (and hard workers) for
some relief.
Like many Americans grappling with tough economic times, South County Housing is looking to the government (and hard workers) for some relief.
Gilroy’s nonprofit housing builder planned to largely subsidize the 101 affordable units in its downtown Cannery Project with the revenue from 39 market-rate townhouses and single-family homes in its completed first phase, known as Forest Park.
“But when the market crashed, we didn’t have much of a choice but to work really hard to get state and federal subsidies to make that up,” SCH President and CEO Dennis Lalor said. “At the time we structured (the Cannery Project), we felt we could depend on the market to create enough margin to subsidize the low-income units because we could not depend on what (government) subsidy sources would be available.”
City officials and housing experts agreed that for the past 20 years, SCH’s market-cum-affordable strategy has worked, especially in Gilroy, which has a self-imposed growth limit and lacks a redevelopment agency to help finance affordable housing. For these two reasons, the city’s current housing plan did not satisfy regional affordable housing quotas and did not receive state approval. This meant Gilroy was barred from the state’s $2.8 billion pot for affordable housing, and SCH has had to adjust accordingly with its market-rate strategy.
But things have changed dramatically.
Monday the city council will consider administering $1.5 million in state loans ahead of schedule to SCH, according to Housing and Community Development Coordinator Marilyn Roaf. SCH could then pass the 3-percent-fixed-rate loans onto buyers who are also helping to paint and landscape 21 of the 28 affordable units at Alexander Place, the project’s 32-unit second phase that is under construction; the remaining four units are market rate. “Affordable housing” is reserved for those earning up to 120 percent of the county’s median income, or $88,600 for an individual and $126,600 for a family of four.
Expanding the sweat equity program and securing $1.5 million in loans will help SCH make up for its lost market-rate revenue, Lalor said. But Roaf said that money was originally intended for the Cannery’s 139-unit third phase, known simply as “the Cannery,” which is temporarily on hold, yet will include condominiums and lofts with retail space below.
All this considered, councilmembers have expressed mixed feelings about helping the nonprofit get out of its financial bind.
“SCH was playing the market, and it didn’t work out,” Bracco said. “It’s not our job as the city to get into the housing market.”
But Councilman Bob Dillon – who said last month that residents struggling to find affordable housing were “not my problem” – said he had no problem conducting funds from the state because it’s not Gilroy’s money, and “SCH does excellent work.” If the council does not support the partially-built project, Dillon added, then it will be left to rot and become a drag on the downtown.
Councilwoman Cat Tucker said she would have to consider the loan proposal more, and Councilman Craig Gartman said he supported simply administering state funds, but he encouraged SCH and other affordable builders to develop more modest, austere units to avoid dire cost situations like this.
While SCH is bound to fulfill its affordable housing promise as long as it retains the affordable units, Lalor said the nonprofit will reconsider the Cannery’s layout to make sure the entire project pencils out; until then, he could not say how many affordable units the third phase will ultimately include.
“We’ve had to hustle” to figure things out, Lalor said.
In Salinas – where the area median income is $55,600 for a family of four, or $33,000 less than in Santa Clara County, according to U.S. Census Bureau figures – the nonprofit Community Housing Improvement Systems and Planning Association has not suffered from the market as much as SCH. That is because CHISPA relies primarily on government money and less on market leverage, said its President and CEO Alfred Diaz-Infante.
“What SCH is doing, on one hand, has the potential to generate income to subsidize future affordable housing, but as the market goes south, and you’re relying on that income, then you’ve put yourself at a higher risk,” Diaz-Infante said.
For that reason, CHISPA has continued to rely mostly on tax dollars and competitive grants: SCH and CHISPA tap into the same state coffers. CHISPA did briefly enter the market as it heated up throughout the past five years, though, and sold some homes as prices climbed higher than usual, but Diaz-Infante said when he noticed prices rising and median income levels not, “we knew something had to give.”
Something gave, indeed, but in a city where state money’s already tight and affordable housing a big concern, SCH is just one of many parties bruised by an inflated market.
