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California City Solutions: Campbell Partners to Transform Blighted Water District Parcel into Affordable Housing

May 16, 2014
This story is part of an ongoing series featuring Helen Putnam Award entries.
These entries are also now available on the League’s website as a resource for cities in a searchable database called California City Solutions. Campbell’s Maravilla Townhomes and Cottages project was submitted in 2013 for the Housing Programs and Innovations award category.

The small city of Campbell has a population of nearly 41,000 and is mostly built out, leaving few areas available for new housing developments. This creates many challenges for the city when providing its fair share of state required affordable housing. With a limited availability of new space to build, the city must look at repurposing existing land sites, which can increase costs and complicate the production of affordable housing. This challenge inspired the city to partner with multiple entities to transform an existing area of town to create a beautiful new community that includes affordable housing.
The city identified an underutilized property with potential to become an affordable housing site. Originally owned by the Campbell Water Company, the parcel was sold to the San Jose Water Company (SJWC) in the 1980s and used for wells and storage tanks. SJWC declared this site as surplus property and then sold it to the Santa Clara Valley Water District (SCVWD) in the early 2000s. SCVWD provides and manages the water distribution that serves Santa Clara County. Because of the blighted appearance of the site, the city’s former Redevelopment Agency (RDA) declared it a redevelopment project area. Not long after, a nonprofit, Charities Housing approached Campbell’s RDA with the concept for an affordable housing development on the property. SCVWD accepted the proposal and the three entities developed a viable concept together that balanced a number of primary goals: the water district’s goal of coordinating water management, the RDA’s goals to remove blight and promote affordable housing opportunities; and a nonprofit’s desire to build affordable units.
Charities Housing originally intended to secure the funding for the entire project as affordable units but the difficult economy and financing conditions made securing the necessary funding impossible. The group identified a new approach with Campbell’s RDA seeking builders and developers willing to construct both market rate and affordable housing units. Ultimately Summerhill Homes was selected.
How to co-locate water management equipment around housing became the next fundamental challenge. The city hired consultants to design and build three well sites to serve SCVWD’s needs. The well houses were constructed to look architecturally like residences and compliment the planned community. The district retained ownership of the portions of the property on which their equipment is situated. The new equipment is more functional than the old and serves as a backup system for SCVWD to extract ground water for sale to retail water distributors. SCVWD then sold the property to the RDA and constructed the three well houses they would still need on site.

The city utilized its RDA set-aside 20 percent housing funds to partner in the development of 24 sales restricted affordable units. The new housing development, Maravilla Townhomes & Cottages, was a balance of 16 market-rate and 24 affordable housing units. Charities Housing provided invaluable assistance to the potential low-income buyers for the affordable units and helped them through the process of securing financing.
The financing solution for the Maravilla development incorporated funds from four sources:
  1. Primary lenders provided mortgages by working through the nonprofit Charities Housing, Wells Fargo Bank and a mortgage lender. The primary (or first) loan paid as a traditional mortgage over 30 years.
  2. The state served as the secondary lender and provided $94,000 per sales restricted affordable unit.
  3. The city (initially through its now defunct RDA and later the city itself) served as third lender with a deferred loan of $76,000 for some buyers (with incomes between 81 and 100 percent of median income levels) and $138,000 (for buyers with income levels at 80 percent or below median income levels).
  4. The fourth lender was the Santa Clara County Housing Trust that provided $30,625 for the 16 low-income-household homebuyers.
The affordable units will remain sales restricted affordable units. If a current resident must sell, that unit must be made available to another qualified buyer who would enter into the same deferred financing agreement. While 24 units may seem small, the number is significant to a city of Campbell’s size, where space for new housing is very limited.
Traditionally housing developments occur by the developer approaching the city to construct on a particular site. In most cases, the proposed development follows the current zoning provisions and in some cases a request to amend the zoning is submitted.
A city of Campbell’s size does not typically have the staff resources to seek out creative ways to develop a community; therefore forming a partnership between multiple agencies has had a very positive impact on community development. The collaboration — the utility (SCVWD), lenders, a nonprofit agency (Charities Housing), state, federal and city financial contributions and a residential builder (Summerhill Homes) — built a beautiful community within a larger community, provides affordable housing and gives 24 families a chance to be a home owner. These residents are proud of their homes and for many of them this is their first home purchase.
The once underutilized less than attractive utility function parcel is now a vibrant residential community with 40 households that can join the Campbell community, walk to its charming downtown core and contribute to the vitality of the city. This project demonstrates how in these difficult economic times various government, utility and private agencies can combine resources to achieve common goals. Such partnerships are both necessary and beneficial in meeting public needs for today and tomorrow. They result in enhancement, growth and improvement of a community. Integrating the housing units on a site used for groundwater/well extraction creatively combines two otherwise inconsistent land uses in a harmonious manner.

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