Our View: Modesto has bad track record with ‘affordable housing’

09/05/2013 6:29 PM

09/05/2013 8:46 PM

Back in 2008 and 2009, The Modesto Bee supported the development of the 150-unit Archway Commons project, a complex of one-, two- and three-bedroom units on North Ninth Street and Carver Road. We still appreciate the need for decent affordable housing for low-income families.

But as reporter J.N. Sbranti explained in the front-page story in Sunday’s Bee , Archway Commons is only about half the size as originally estimated but costs nearly the same amount of money.

The cost works out to an astounding $276,000 per apartment – about $100,000 more per unit than the original estimate and more than twice what it costs to buy a very livable single-family home in today’s market.

So while the units will be affordable for the tenants, this project sure does not pencil out as affordable to the taxpayers who paid for the land and are basically subsidizing the construction through tax credits.

By law, the city had redevelopment money that could only be spent toward providing housing for low-income residents. And affordable housing was in short supply in the mid-2000s, when real estate prices were skyrocketing.

But the real estate market had clearly crashed by 2008 and 2009, and yet the city proceeded to pay far more for the land than it was really worth by the time the real estate deal was complete in April 2009. Because the negotiations took place behind closed doors, there is no evidence that city staff or council members looked for a way to get out of or modify the deal to reflect current values.

In fact, the city’s payments to Paul Draper’s 4701 Stoddard LLC and his partner Sylvia Cox were inflated by almost half a million dollars in contract extension and settlement fees.

The high price paid to the partnership, $14.07 per square foot, stands in stark contrast to the $6 per square foot that the city paid a small church for an adjoining parcel.

Government moves slowly on land purchases, as it does on so many things. In this case, the city paid too much because it didn’t, couldn’t or wouldn’t adjust to a new market reality.

Of course the city also overpaid for some of the property and the remodeling that it oversaw through the Neighborhood Stabilization Program, the federal effort to aid cities hard hit by the foreclosure crisis and by abandoned and blighted houses. The two experiences raise legitimate questions about whether city has the expertise to be directly involved in residential real estate projects. Perhaps it should stick to the basic public works projects – roads, fire stations, etc.

Archway Commons is a done deal, so there doesn’t appear to be anything the City Council can do today to remedy the high cost of those units. We’re troubled that council members show very little concern about the high land cost.

The city is now involved in negotiations to acquire the parcels for the new downtown courthouse. The council is using Draper as its representative and it is being secretive about all aspects of the negotiations. Will the city be able to assemble and prepare the property at a price that is fully covered by the state court system? Or will the city end up tapping its lean general fund to complete a real estate deal?

Citizens, also known as taxpayers, have reason to be skeptical based on the experiences with the Neighborhood Stabilization Program and with Archway Commons.

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