Stanislaus County's Habitat for Humanity this year found 21 bargain-priced lots that could enable it to build "affordable" homes in west Modesto.
To make the project work, however, the charity needed $317,000 to buy the land. So this February it asked the city of Modesto for a loan.
City officials are considering giving the nonprofit more than triple what it initially requested, but it's keeping tight-lipped about why that would be justified.
Today, a Modesto committee was scheduled to vote on a proposal to give $1 million to Habitat for Humanity to jump-start that new development.
The city's plan is to fund the subdivision with federal bailout money that originally was intended to refurbish foreclosed houses. It would take the money from a $2.95 million Neighborhood Stabilization Program 3 grant that it must spend by March 2014.
Modesto previously received $33 million from the first two rounds of NSP funding. It spent more than $8.3 million of those federal funds buying and fixing foreclosed homes for the controversial Stanislaus Community Assistance Project. Because of concerns over who benefited from those SCAP homes, Modesto won't give that agency additional NSP funds.
Instead, the city wants to switch gears: Rather than fix vacant, foreclosed Modesto homes, it wants to use taxpayer money to build more houses on privately owned land that hasn't been foreclosed.
That plan was supposed to be explained at today's Citizens' Housing & Community Development Committee meeting, but it was canceled and the city hasn't announced when it will be rescheduled.
City officials haven't responded to requests from The Bee for more information about the proposed grant to Habitat, and Habitat officials aren't talking.
"I've been asked not to speak about it prematurely," said Anita Hellam, Habitat's executive director.
The Bee has requested that the city of Modesto provide copies of any "confidentiality agreements" or other nondisclosure requirements it may have imposed on Habitat to prevent it from discussing the $1 million deal. But the city has yet to release those documents.
Here's what is known about the city's spending plan:
Modesto would allocate $1 million in NSP3 funds for "acquisition, pre-development and construction" of 21 homes in what is known as Sportsmen Estates west of Sunset Avenue.
Habitat would not have to pay back taxpayers as long as it fulfills its end of the deal.
Habitat would use $1.8 million in additional funding most of it from various other state and federal government sources to complete the project.
Habitat would build 21 homes, then sell them to people who contribute "sweat equity" by helping build them.
People earning up to 120 percent of Modesto's median income $74,400 for a family of four would be eligible to buy the government-subsidized houses.
Stanislaus County's home affordability rate is at an all-time high. A median-income family could afford to buy 92.5 percent of all homes sold during the first three months of this year.
The Habitat houses would have to be owner-occupied, not used as rentals.
Habitat initially estimated that the 1,250- to-1,500-square-foot houses would sell for an average $138,837 each.
The median price of new homes sold by private builders in Stanislaus County last month was $155,000.
Habitat would provide zero-interest mortgages to those who buy its homes, and Habitat would get to keep all proceeds from mortgage repayments.
The U.S. Census Bureau determined that more than 7.8 percent of Modesto's housing units were vacant in 2010.
Home buyers could resell the Habitat houses, but during the next 20 years they would have to be priced to remain affordable to those earning up to 120 percent of the city's median income.
Selling homes in Sportsmen Estates became virtually impossible for private builders after Modesto's housing market collapsed.
Lots sold below value
An investment and construction group, called Tuleburg Properties LLC, tried and failed to make a go of it after buying the land in 2006 from the neighboring Sportsmen of Stanislaus athletic club.
"We bought the property at the absolute top of the market," said John Anderson, one of the subdivision's owners. "It was an investment that didn't pan out. It was a sign of the economy."
Anderson said he and his partners have not been foreclosed on, but they lost millions on the project. They spent "well over $100,000 per lot" developing the subdivision, but Anderson said they are willing to sell the lots to Habitat for $15,000 each.
In calculating what it needed to buy those lots and cover escrow and closing costs, Habitat's Hellam told The Bee in April that all the nonprofit group needed was $317,000. At the time, she said her agency had enough other money available to build 21 homes there.
How Habitat would spend the $1 million that city officials want to give it instead has not been explained.
Modesto was allocated $2,951,549 in NSP3 funds last year, and it must spend it or return it to the federal treasury by March 2014.
Funds for foreclosures
When the Obama administration originally explained why it needed to spend $1 billion nationwide for NSP3, it said the money would enable local governments "to acquire, redevelop or demolish foreclosed properties."
"We want to make certain that we target these funds to those places with especially high foreclosure activity so we can help turn the tide in our battle against abandonment and blight," U.S. Housing and Urban Development Secretary Shaun Donovan said in announcing the NSP3 grants late in 2010.
How spending $1 million of that money to build new homes on vacant land that has never been foreclosed fits that criteria has not been explained by Modesto's city staff.
In addition to giving the $1 million to Habitat, the city plans to spend $1.56 million to buy and renovate foreclosed or abandoned homes and $100,000 to demolish foreclosed homes.
The city plans to keep 10 percent of the federal grant $295,000 to cover its administrative costs.
If Habitat doesn't spend the $1 million as proposed, Modesto may have to return it and potentially $100,000 of what it planned to spend on city administration to federal coffers.
Bee staff writer J.N. Sbranti can be reached at email@example.com or (209) 578-2196.