JORDAN: He Keeps Growing Despite Protests : What’ll the Neighbors Say? : Group Homes for Recovering Addicts Turn a Tidy Profit Amid Community Protests

The dull thud of a hammer reverberates somewhere in the house, a sound quite familiar to Steve Jordan. On a steep hill above San Clemente, in this ramshackle house Jordan is renovating, each thud brings thousands of dollars in profits a little closer.

The thuds also bring Jordan a little closer to another tussle with the neighbors. For Jordan doesn’t merely restore run-down houses; he leases them, at far higher rates than he could get from most renters, as group homes for recovering alcoholics, drug users and women with eating disorders such as bulimia.

What’s more, he wants to build a chain of group homes across Southern California, a profit-making operation that would offer franchises across the nation and eventually sell stock to the public.

But right now, Jordan has a problem to solve. While he dreams, some of the neighbors are having nightmares after discovering that the house next door is home to 10 or so recovering alcoholics or drug addicts. Jordan never tells neighbors beforehand about the homes, and San Clemente homeowners have gone to city officials to see if they can force Jordan out.

Group homes and halfway houses ease recovering alcoholics back into normal lives, usually after they’ve been treated at a hospital or clinic. Traditionally, the homes are small, local, often money-losing operations. For that reason, experts say, there aren’t nearly enough of them.

By making the homes a paying proposition, Jordan said, he can open enough of them to fill the void--and make a tidy profit, too.

“We’re a for-profit company,” he said, “and we’re very proud of that.”

At 45, in his third career, Jordan is talking franchises. Getting the hospitals and the health maintenance organizations interested in buying those franchises. Going public.

Altogether, his company--Property Recycling Co. of El Toro--owns 10 such homes in Orange County in partnership with other investors. He will open five more in January.

“There are 18 million people out there with drinking problems,” Jordan said. “That’s a big market.”

And it’s not just alcoholics. Jordan dreams of group homes for AIDS patients and others with terminal diseases, for stroke victims and patients with head injuries who are facing long recoveries, and, of course, for people kicking the drug habit.

That sort of talk makes some experts “a little queasy,” said Ernest Noble, a former director of the National Institute on Alcohol Abuse and Alcoholism, who is concerned about the idea of group homes becoming big business.

A hospital or clinic with a group-home franchise might be tempted to run the alcoholic back through its hospitalization program--at great expense--if the alcoholic falls off the wagon while in the group home, says Noble, who is now director of the Alcoholism Research Center at UCLA.

“You have the potential for a revolving door, where if the alcoholic falls on his face in the group home, you put him back in the hospital for more treatment,” Noble said.

“I get a little nervous when people want to make a business out of this.”

What Jordan is selling, experts generally agree, is a relatively efficient, cost-effective way of combatting alcoholism.

Here is a testimonial from someone who says he should know: Jordan himself, an alcoholic who swore off booze 12 years ago, when he was vice president of a scrap metal recycling company. Jordan describes himself as blacking out for days at a time from binges, only to wake up and find himself in another city.

“I’m not a doctor, I’m not a psychologist. I’m an ex-drunk,” he said.

“But I know you have to take these people out of the environment in which they drank and give them a structured, supporting environment when they come out of detox. Otherwise, three or four weeks later, some of them are going to be drinking again.”

Jordan started in business as a contractor in Colorado, and he uses a practiced eye in looking at as many as 400 houses to pick one suitable for a profitable renovation.

The house in San Clemente is an example: With a panoramic view of the ocean and three bedrooms, the house cost him $150,000. Only 20 years old, its floors were warped and cracked by shifts in the foundation. Jordan will spend another $35,000 having his own construction crew renovate the house. When finished, the house could be appraised for up to $250,000, Jordan estimates.

That’s approximately the worth of the neighboring houses clinging to the side of the hill in this pleasant, upper-middle-class subdivision. And Jordan owns two more of them: the house across the street, a home for women with eating disorders and alcohol problems; and the one next door, a home for men recovering from alcoholism, where the garage has been fixed up as a meeting room for all three houses.

The houses are sold to another Jordan corporation at a profit. They are then operated as group homes or leased to others, such as James Nugent of Laguna Beach’s Residential Support Group Institute, which runs five of the houses.

Both companies are careful to provide only a place for recovering alcoholics to live. They avoid providing treatment.

That would require a license, says state Department of Alcohol and Drug Programs officials. Just providing a home does not.

Jordan used to sell the first houses he renovated when Property Recycling began operations in 1984. Now he holds onto them; the high rents from the group homes make it a profitable proposition.

Standing on the patio of the house as the carpenters hammer away behind him, Jordan nodded to the ocean undulating lazily not far below and said: “It pays to hold on to real estate. Hey, this house’ll be worth half a million in five years!”

Down the hill from the other houses in San Clemente, workers are unloading a truck full of furniture at a four-bedroom house that Jordan will run as a group home for adolescents recovering from drug and alcohol problems. Each teen-ager--and there could be as many as 10--will be charged $800 a month. As a single-family home, even though it’s a stone’s throw from the ocean, the house wouldn’t rent for anything near $8,000 a month.

The average resident stays three to six months. For some, their group-home expenses are covered by insurance. Most of the residents are referred by hospitals or clinics, which Property Recycling cultivates assiduously.

“People complain that we should be nonprofit,” said John Surge, the company’s director of marketing. “But detoxification is the hospital’s No. 1 moneymaker, and nobody’s asking the hospitals to supply charity.”

After they learn that one of Jordan’s homes has moved in next door, some of Jordan’s neighbors wish he’d go back to his old, less profitable business of fixing up houses and selling them to ordinary homeowners.

“Two or three weeks after it opens, people start saying, ‘Gee, that’s a big family,’ ” Jordan said. “Then they find out, and they call us or the city calls us.”

At that point, Jordan quotes to callers several state and federal court decisions which, he contends, require that group homes be treated as any other family residence.

“They almost always say, ‘We don’t like it, but there’s nothing we can do,’ ” Jordan said. “And after a while, they get used to us.”

“We intend to be good neighbors. But there’s almost always a PR problem at first,” he added.

And sometimes, the public relations problem persists. Not far from Jordan’s group homes in San Clemente, homeowner Floyd Cate has just written a letter to Jordan accusing him of violating restrictive covenants that cover every home in the Shorecliff subdivision. Among a long list of other restrictions, Cate says, the covenants prohibit using the houses to treat “victims of drink or drugs.”

The Assn. of Shorecliff Residents--of which Cate is a former chairman--has also persuaded the city to look into whether Jordan is violating city codes.

“We have compassion, we’re not people with horns down here,” Cate said. “But we’ll never agree to houses treating alcoholics or people who use dope. There are plenty of places in San Clemente without covenants.”

Property Recycling says all its ducks are in a row. The covenants, it says, have already been negated by the court decisions that the company cites to irate callers such as Cate.

Whether that is, in fact, the case may take another court to decide, because the two major cases Property Recycling cites do not specifically refer to drug and alcohol halfway houses. One concerns a home for the elderly and one a group of professionals living together.

But the money at stake makes it worth the fight. Property Recycling says it will take in $5 million in revenues this year and will realize $500,000 in after-tax profits.

“One of the realities of halfway houses is that they need a lot of fiscal support, and there hasn’t been much for them,” said William Butynski, executive director of the National Assn. of State Alcohol and Drug Abuse Directors. “And we’re only treating about 10% of the people with alcoholism who need treatment.

“So if this guy can build more halfway houses, more power to him.”