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Program gives city new options for building affordable housing

By Eli Segall

To attract more builders who specialize in the affordable housing market, the San Jose City Council on Dec. 12 approved a new land-acquisition loan program for affordable housing projects.

Under the existing loan policy, city funds were doled out only after developers had secured rezoning approval and a commitment from every funding source, which takes about a year to complete. The new policy will shorten that process.

The city can provide loans equal to half of the land acquisition price before other resources are committed.

Housing Director Leslye Krutko said the prior policy was too restrictive. The amended policy makes it easier to obtain funding.

The housing department worked with Silicon Valley developers to craft the program.

"Cities are often hesitant about doing acquisition loans; if something happens and the project isn't built, their money sits idly," said Chris Block, executive director of San Jose-based Charities Housing, one of the groups that worked on the deal.

"This loan program will enable us to say, 'Hey, we can perform.' "

Over the past few years, various nonprofit groups have stepped in to fill the financing gap left by the city. In 2002 Lenders for Community Development provided $400,000 in loans for an East San Jose affordable housing project; the Sobrato Affordable Housing Fund has set aside a $10 million interest-free loan account for groups that need it; and the Lucile Packard Foundation has also worked extensively toward reconciling the affordable housing shortage.

Affordable housing units are marked by lower monthly rents and controlled rent increases. Monthly rent is calculated by cutting the city's median income household level down by 30 to 50 percent, and then dividing that number by 12, Krutko said.

Block said rents at market rates can increase annually by 10 percent, whereas increases for affordable housing units are significantly lower at 2 percent to 3 percent.

At the council meeting, members expressed gratitude for the new loan program.

"Thank you for thinking outside the box on this," said City Councilwoman Nora Campos said to Krutko. "This will bring more affordable housing to our city."