NATIONAL CITY -- National City has agreed to work with a nonprofit San Ysidro social services agency on a $3 million plan to buy, rehabilitate and manage two small housing complexes for low-income residents.

The City Council adopted a resolution July 1 at a public hearing to approve issuing $1.25 million in state multifamily housing revenue bonds to Casa Familiar.

At the required hearing, council members decided to go ahead with the deal after finding that the financing of the projects with a private loan between the California Statewide Communities Development Authority and Casa Familiar will result in significant public benefit to city residents.

The city will kick in an additional loan of $1.78 million. The only source of funding for the loan so far identified is $182,466 in federal Home Investment Partnership, or HOME, grants. The rest may come from redevelopment housing funds and more HOME grants. The city will consider the loan and its funding sources next month.

Of the $1.25 million in bonds, $650,000 will be used on an eight-unit complex at 1111 D Ave., and $600,000 on a 10-unit apartment building at 1101-19 E Ave. Both are between East Plaza Boulevard and Kimball Way. City officials say their loan can be used to acquire or rehabilitate the properties and for any associated fees.

Mayor Ron Morrison said the city is fortunate that Casa Familiar wants to upgrade the properties. He said the city needed to be creative to bring these complexes up to par.

"If you take a look at our city, the vast majority of our properties are older, built in the '40s and '50s when there were entirely different standards," Morrison said. "They are not up to our current standards, and left by themselves, they never will be."

Casa Familiar will make the apartments available to low-income residents for the life of the city's 55-year loan. Both are older apartment complexes currently privately owned.

The apartments must be occupied by families earning less than 50 percent and 60 percent of the area median income. For a family of three, that would be $35,550 and $42,660, respectively. The city and county will review tenants' income annually.

Alfredo Ybarra with the city's Community Development Department said Casa Familiar will buy the properties in the next few months. About $35,000 will be invested in each apartment. They will be upgraded to look brand-new inside and out. Work on the apartments may be completed by June.

Ybarra said all current residents qualify and will be able to keep their apartments after they are renovated. The residents will be moved temporarily, at Casa Familiar's expense, while their units are being remodeled.

Ybarra said the properties were appraised at a combined $1.85 million. Many of the units are small, including some one-bedroom units measuring 320 square feet. He said plans include adding 100 square feet to those units.

Since 1968, Casa Familiar has offered social programs and health care services to San Ysidro-area residents. In recent years, it has expanded its property development, management and acquisition efforts. Casa Familiar acquired some land in San Ysidro and built eight affordable homes, which were sold in 2004.

Two years later, it partnered with Steadfast Properties, an Orange County developer, to acquire and manage the 37-building, 389-apartment Villa Nueva complex in San Ysidro. Most apartments are getting major upgrades.

Casa Familiar's involvement with National City marks the first time the agency has extended its community development efforts outside of San Ysidro.

Each year, National City invites agencies and groups to apply for its Community Development Block Grant and HOME funding. HOME grants are designed to create affordable housing for low-income residents. The federal government gives $2 billion annually to states and cities nationwide.

Morrison said federal officials encourage the redevelopment of affordable projects by nonprofit groups. That was the case with Casa del Sol, on Q Avenue and 16th Street. He called that rehabilitation project a great success story.

"That was the worst housing project in the city," Morrison said, referring to the complex before a major renovation by the nonprofit Southern California Housing Development Corp. "One-seventh of all police calls in the city went there. Now you look at it and you'd say they were brand-new."

The annual interest rate on the loan from the city will be 3 percent. The city will require Casa Familiar to pay it half of any cash-flow balance the agency ends up with at the end of the year. If nothing is left over at year's end, Casa Familiar pays nothing. At the end of the 55-year loan, the balance is due. If the property is sold, the loan will be due and payable unless the new owners agree to the low-income housing requirement.

The estimated total development cost of the projects is $3 million.

"This will really impact the livability of the citizens of our city," Councilman Frank Parra has said.

Copyright 2008 The San Diego Union-Tribune