Low income housing developers, home buyers and small businesses
will benefit from up to $5 million in loans authorized by the
Morgan Hill Redevelopment Agency.
Low income housing developers, home buyers and small businesses will benefit from up to $5 million in loans authorized by the Morgan Hill Redevelopment Agency.
Funding for the loans, which were approved by the city council last week, will come from a variety of sources, including local, state and private money.
The loans include an agreement with the National Development Council to offer up to $2 million in small business assistance loans to local businesses. With $500,000 in local RDA money, the NDC will provide the rest to enter into a minimum two-year commitment with the agency that allows the national nonprofit community organization to establish the “Grow Morgan Hill Fund.”
With the fund, the NDC will package, underwrite and structure a series of loans to small businesses that qualify. The RDA will also pay the NDC $130,000 for two years’ worth of “technical assistance” to the RDA and loan recipients.
The loan program is more flexible than other RDA loans, because the local money cannot be used for operating expenses. SBA loans from the NDC can be used for such purposes, as well as capital expenses, City Manager Ed Tewes said.
The loans will be available to businesses citywide, with at least 25 percent of the loans required to be provided within the RDA area. Most businesses in Morgan Hill are classified as small businesses and could be eligible for the program, Tewes added.
The funds will be available starting July 1.
In an effort directed more at consumers, the city council also approved the use of up to $1.4 million in voter-approved state funds for down payment assistance loans for potential buyers of affordable homes at the Madrone Plaza residential development.
The project at the corner of Cochrane Road and Butterfield Boulevard is a 95-unit, mixed-income development, with 71 of the units designated as affordable housing. Seven of the market-rate homes have been sold, and only 36 of the affordable townhomes have been sold. Ten of the home sites remain undeveloped.
In a complicated shifting of funds and modification of existing loans, the council’s vote will allow the developer, South County Housing, to proceed on the development and sale of affordable units before selling more market-rate homes, according to Matt Huerta, director of housing development for SCH. The backwards housing market conditions show virtually no demand for market-rate homes, while the demand for affordable housing remains strong. That means bank loans are now easier to acquire for affordable homes than market-rate ones, Huerta said.
Since the current housing crisis started in 2008, the price of affordable units has fallen by $50,000 to $100,000 per home, according to a city staff report. Market-rate prices have dropped by up to $200,000 per unit.
Or, as the mayor said, “Market-rate is affordable housing.”
He added that the units that are completed at Madrone Plaza are “state of the art.”
Madrone Plaza has benefited from about $6.4 million in RDA loans, most of which has been repaid.
The $1.4 million approved by the RDA last week will be available for individual buyers of the affordable homes, and comes from state housing funds.
Voting against the loan modification was Councilwoman Marby Lee, who noted her concern last week with a provision in the modified loan that allows the city to purchase market-rate lots in the event of a default.
In another transaction that is intended to improve SCH’s chances at completing another long-awaited Morgan Hill project, the RDA approved a loan for up to $1.6 million for the rehabilitation of Crest Avenue Apartments.
South County Housing has purchased 10 properties consisting of 52 individual apartment units on Crest Avenue since 2008, Huerta said. The RDA loaned the company $4.4 million for the acquisition of the properties.
Since then, the builder’s plan has been to “substantially upgrade” the apartment complexes, some of which are visibly in disrepair. The project, which is projected to end up costing more than $17 million including the cost of property purchases, has been delayed for more than a year, Huerta said.
The project includes minor repairs, as well as interior work on floors, sheetrock, doors, hardware, appliances and energy efficiency improvements, Huerta said. The builder also plans to work with the city and local nonprofits to provide residents access to social services, and with the police to establish a neighborhood watch program.
“A big benefit to the neighborhood is all these buildings will be under one property management company,” Huerta said.
SCH hopes the $1.6-million RDA loan will improve the builder’s chances of winning about $7 million in highly competitive federal tax credits, Huerta said. With that federal funding, the builder would have all the money it needs and could proceed on the project later this year.
