More people are buying homes downtown, and that means South
County Housing will not have to take a $675,000 loan from the
city.
More people are buying homes downtown, and that means South County Housing will not have to take a $675,000 loan from the city.
“We’re very happy about this … If there hadn’t been this turnaround, we would’ve been in serious, serious trouble,” South County President and CEO Dennis Lalor said Wednesday. “We absolutely appreciate the support from the City Council, but after many months of slow sales, we’ve been successful the last few months.”
The news comes three months after a split council approved the financial help, which some criticized as a bailout, for the nonprofit.
Home sales throughout the county totaled 2,199 in July – a 33 percent jump over last year. That included 90 in Gilroy, the average of which sold for about $348,000, down from nearly $433,000 a year ago, according to MDA DataQuick Information Systems. Prices were similarly down across the county compared to last year.
South County Housing, the area’s leading nonprofit home builder, has just one townhouse left to sell in the first phase of The Cannery project near Forest and Lewis streets. The nonprofit had six in June when the council voted 4-2 to approve the controversial loan. That money would have gained the city a 50-percent stake in four townhomes, which South County planned to rent and manage for four years before selling them and repaying the city with interest.
All of that is moot at this point, however, as the nonprofit has used the money from the five home sales plus another secondary loan to reduce its debt with Union Bank on the first phase. The payment lowered its debt on a $17 million loan that was due in December from $1.3 million in June to $300,000. South County is looking for a buyer to spend $340,000 on the final unit in Forest Park, and then the bank’s lien on the first loan will disappear, Lalor said.
“I guess what I was saying back in June was right – that it was wrong for the city to be bailing out a private developer that could do it itself,” said Councilman Craig Gartman, who voted against the loan along with Councilman Bob Dillon. Councilman Perry Woodward recused himself because he owns a home in the area.
“This is excellent,” Dillon said. “I understand that South County holds a special place in all of our hearts, but they are still developers, and this would’ve set a bad precedent.”
The Cannery’s partially built second phase, known as Alexander Place, is lien free because South County took out an additional loan from South Valley National Bank and combined it with a portion of a $1.5 million state construction loan funneled through the city to pay off a separate Union Bank loan for the second phase. Eight units stand in Alexander Place now, and when those sell, South County will be able to recycle the $1.5 million state loan three more times until all 32 units of Alexander Place are built and sold, Lalor said.
To get things moving, a bulldozer cleared the Alexander Place lot Tuesday, piling up rubbish while a tanker sprayed water on the ground to settle dust. To the north, a dry, overgrown drainage ditch divides Alexander Place and Forest Park, where Joe Laguna lives.
The young professional moved here from San Jose with his wife two years ago and lobbied council members – whom he lauded – to approve the loan. However, he was surprised to hear Wednesday that he and others’ hard work was not going to pay off. It’s just another indicator of the general lack of communication between South County and its residents, he said – something that manifests itself in “eyesores” like the desiccated, overgrown waterway.
“I told them to give me a weed whacker or a law mower and I’d take care of it, but they’re hard to pin down sometimes,” Laguna said of South County personnel, three of whom sit on Forest Park’s five-member board of directors, which provides direction to the Home Owners’ Association. Along with another neighbor, Laguna gathered signatures from every Forest Park resident in June to support the loan and passed them on to the city council, members of which he lauded for having Gilroy’s best intentions in mind, he said. Despite the loan approval, Laguna said he never sensed cooperation between residents and South County.
“We did all this work for them, but at the end of the day they don’t keep us informed,” Laguna said. “I love Gilroy. My wife and I are trying to start a family here … But are we happy? I think the jury’s still out on that right now because I feel like South County is abandoning its customers.”
Lalor said he hadn’t “been out there in a while,” but that may change as the company’s $100 million, 210-unit project gathers steam again.
The Cannery’s affordable units are in the partially built second phase and un-built third phase. Money from the sale of market-rate Forest Park units was suppose to finance the affordable sections, but when the housing market crashed, so did those plans.
The money for the loan would have come from the city’s Housing Trust Fund, which began in 1999 with seed money from the sale of South County Housing units. Restricted deeds on affordable properties here require sellers to give the city of Gilroy the first chance to buy the home and preserve its affordability. Otherwise, the city allows the market-rate sale and collects a 50 percent stake in the equity.
Since 1999, city officials estimate the fund – which began the fiscal year with a balance of $4.1 million, including a $3.1 million reserve – has received more than $4 million from the market-rate sale of 47 affordable units at various South County developments. Collecting interest on those millions throughout the years and distributing loans to first-time home buyers have augmented the fund.
Two weeks after the fiscal year began July 1, a total of nine families had borrowed all $325,000 in the fund set aside for first-time buyers of affordable units, according to Housing and Community Development Coordinator Marilyn Roaf. South County would have borrowed that unrestricted money as part of the $675,000 loan and repaid it with its own restricted state grant for first-time home buyers, which Lalor said the company will now use to help future families moving into the Cannery.
Housing by the numbers
Homes sold in Santa Clara County in July: 2,199
Homes sold in Gilroy in July: 90
Price of homes sold in Santa Clara County in July: $487,000
Price of homes sold in Santa Clara County in July 2008: $615,000
Price of homes sold in Gilroy in July: $348,000
Price of homes sold in Gilroy in July 2008: $433,000
Price of homes sold in Gilroy in June: $196,600
Price of homes sold in Gilroy in June 2008: $210,000
Price of homes sold in Gilroy in June 2007: $405,000
Sources: Santa Clara County Association of Realtors, MDA DataQuick Information Systems
