With more people buying homes downtown, South County Housing no
longer needs a $675,000 loan from the city.
With more people buying homes downtown, South County Housing no longer needs a $675,000 loan from the city.
The news comes three months after a split council approved the financial help, which some criticized as a bailout, for the nonprofit.
“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. “We absolutely appreciate the support from the City Council, but after many months of slow sales, we’ve been successful the last few months.”
Prices remain relatively low, but home sales throughout the county jumped 33 percent over last year, up to 2,199 units in July. 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.
South County Housing, the area’s leading nonprofit home builder, has just one townhouse left to sell for $340,000 – down from the $600,000 to $800,000 range similar units were priced at during the height of the housing market. The home is in the first phase of The Cannery project, near Forest and Lewis streets. The nonprofit had six units left to sell in June when the council voted 4-2 to approve the controversial loan. That money would have garnered the city a 50-percent stake in four units, which South County planned to rent and manage for four years before selling and repaying the city with interest.
That’s moot at this point, however, as the nonprofit has sold five of its six units and used the money plus another secondary loan to reduce its debt with Union Bank. Many council members had not heard of the sales when the Dispatch contacted them Wednesday because Lalor was in the process of notifying them, he said. When told of the news, Councilman Craig Gartman, who voted against the loan along with Councilman Bob Dillon, said he called it. Councilman Perry Woodward recused himself because he owns a home in the area.
“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,” Gartman said.
South County’s resurgence also delighted Councilman Dion Bracco, who cast the deciding vote for the bailout after initially rejecting the loan request. He said the council made the right decision to help South County, but he cheered the company’s independent recovery.
Downtown developer Gary Walton also smiled at the good news even though he said retailers still face a “very difficult” situation downtown because of the lack of foot traffic and earthquake-safe buildings. He is working on five projects downtown that include a restaurant, condos, shops and an entertainment venue.
“I’m very happy that South County Housing’s fortunes have changed. It looks like the market’s coming back,” Walton said of the “pivotal downtown project.”
Once the final Forest Park unit sells and South County repays the last $300,000 on the $17 million loan it took from Union Bank for the 39-unit first phase, the lender will release its lien on that portion. The second phase, known as Alexander Place, contains eight houses now, and construction of the remaining 24 units will begin once those eight sell, allowing South County to renew a $1.5 million state construction loan it has combined with an additional loan from South Valley National Bank.
The 210-unit project has been estimated at $100 million. The Cannery’s affordable units are in Alexander Place and the 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.
To get things moving Tuesday, a bulldozer cleared rubbish from the Alexander Place lot. To the north, a dry, overgrown drainage ditch divides Alexander Place and Forest Park, where Joe Laguna lives. The young professional paid more than $500,000 for his home two years ago when he moved here from San Jose with his wife. He lobbied council members, whom he lauded, to approve the loan, but he cocked his head upon hearing that he and others’ hard work ended up not being necessary. It’s just another indicator of the general lack of communication between South County and its residents – something that manifests itself in “eyesores” like the desiccated, overgrown waterway – he said.
“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. Despite the loan approvals, 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 project gathers steam again.
