Young Home Buyers Get Boost in Gardena : Housing: Unique program lends down payments to moderate-income people who otherwise wouldn’t qualify to buy. The goal is to keep the city prosperous and vital.

They were living a good life as newlyweds, dining out, traveling, enjoying their comfortable incomes.

In fact, Anita and Scott Attwood say, they may have been living too well: They had not saved enough for a down payment on a home.

“We thought there was no way we were going to get in a home,” Anita Attwood, 34, recalled.

So when the city of Gardena, thirsting for young couples to help rejuvenate the city, offered to help them buy a home, the Attwoods jumped at the chance--even though it wasn’t in tony Manhattan Beach, where Scott had dreamed of living some day.

“This was affluent for the area, even though it’s away from the beach area,” said Scott Attwood, 32, resting on the sofa of the couple’s spacious townhome in Gardena Townhouse Estates.

Gardena sees young people like the Attwoods as so important to its future that the city will help them buy a house. It is the only city in California authorized to do so.

Legislation sponsored by state Sen. Ralph Dills (D-Gardena) and enacted two years ago authorized Gardena to issue bonds, with the proceeds going toward home loan assistance.

But unlike other government assistance programs, Gardena’s specifically targets people who don’t qualify for low- and moderate-income programs yet still can’t afford to finance a home on their own through conventional loans.

“These are the people who fall through the cracks,” said Councilman Paul Tsukahara, who joined Councilman Jim Cragin in pushing for the program.

Gardena’s program, lauded by national city government organizations, enables people to purchase a home with a down payment of as little as 5% of the selling price. Gardena typically funds 20% of the loans, which have gone to couples with incomes as high as $70,000 a year. The innovative project last year earned Gardena an “outstanding performance” award from the U.S. Conference of Mayors.

The program has drawn hundreds of inquiries and applicants, said Millie Hotta, the city’s housing program coordinator. Single people as well as couples may apply, but only those who cannot get conventional financing qualify for the program. It is open to all California residents, but the home must be purchased in Gardena.

Gardena does not use money from its general fund for the program, which has made loans to 67 borrowers through two bond issues totaling $9 million, said City Manager Kenneth W. Landau. The bonds are paid off with the money received from borrowers paying off the city loans.

“I think it’s an exciting concept they have devised,” said Kathleen Connell, an investment banker and managing director of the Center for Finance and Real Estate at UCLA’s John E. Anderson Graduate School of Management.

“At a point in time when cities have limited resources to help home buyers, it is unusual for a city to devise such a program and particularly unusual for a small city to put forth a program that is clearly going to have an impact on its financial viability,” said Connell, who served on the Conference of Mayors committee that made the award to Gardena.

The program is open to couples with incomes as high as $93,800. The purchase price of a home or condominium can’t exceed $268,000, although the largest loan so far was $259,000. The interest rate is currently fixed at 10.875%.

Hotta, the city housing coordinator, offered this example of how the program works:

A couple earning $63,300 a year purchases a $200,000 home. The borrower puts down $10,000 and pays the closing costs of $5,000 to $10,000. The city lends the couple $40,000, and the bank lends the remaining $150,000. Monthly payments, which include the mortgage, taxes and insurance, amount to $1,750, within the 33% ratio of monthly income to housing expenses recommended by lenders.

Mary Moss of Western Federal Savings and Loan, one of three financial institutions that have participated in the program, said it has helped those who don’t meet the rigid requirements of other government assistance programs intended for moderate-income people.

“It’s been worthwhile,” she said.

Long-term financial benefits for Gardena might include a boost in sales tax revenue when young people shop in the community, Connell said. If the new buyers start families--something program boosters hope for--it could stave off school closures and revitalize youth recreation programs, experts said.

That was what Councilman Cragin had in mind when he first proposed the program in 1990 after watching three of his four adult children move out of Gardena because they could not afford the $20,000 to $40,000 necessary for a down payment on a home in the city. The median price for a house in Gardena at the time was about $200,000. It is slightly higher now.

Something else also bothered Cragin: Observing the people who attend civic functions and youth programs, he said, “we could see we were losing our young people.”

Like other South Bay cities, Gardena has “grayed” in recent years. Its over-65 population has grown about three times as fast as the city as a whole between 1980 and 1990, according to U.S. Census figures. Its under-25 population has dropped by about 20% over the same period.

Although the program does not impose any age restriction, it was designed with the idea that first-time home buyers would be in their 20s and 30s. So far those who have received loans have fit that age group, Hotta said.

The new homeowners, a good mix of ethnic backgrounds and occupations, are especially welcome since it’s not always easy to attract people to Gardena.

The heavily industrial, primarily working-class city does not have the physical beauty that entices people to other, more glamorous parts of the Los Angeles area.

“We are not blessed with a coastline,” said Councilman Paul Tsukahara. “We just don’t have the mountains or the sea or the harbor or the natural attributes that attract people to build a city. But we have to keep the city healthy, so you have to have programs like this.”

Still, some have wondered if enough is being done for low-income people.

Advocates for the poor attacked Dills’ original legislation, which would have allowed all California cities to set up programs like Gardena’s. They said the bill was misguided at a time when housing for poor families was scarce.

Dills neutralized the opposition by amending the bill to apply only to Gardena, which has a track record of providing housing for low-income people through a large senior citizen housing project and the purchase of a mobile home park.

The Western Center on Law and Poverty and California Rural Legal Assistance, the two principal objectors to Dills’ original bill, remain somewhat wary of Gardena’s program, although neither group officially opposes it.

The Western Center on Law and Poverty has recognized the need to help first-time home buyers and does not oppose programs that seek to help them as long as “it does not become something that acts to exclude low-income households,” said Christine Minnehan, the organization’s legislative analyst.

“Subsidizing people making $60,000 and $70,000 a year would not be high on my list of priorities,” said Mark Brown of California Rural Legal Assistance.

Other cities have not rushed to copy Gardena’s program, primarily because of the legislative battle involved and their own focus on providing low- and moderate-income housing, said LeRoy Jackson, president of the South Bay City Managers Assn.

Nevertheless, UCLA’s Connell and other experts are monitoring the program and may offer it as a nationwide example for other cities. Connell said she is unaware of any other city in the country that has done something similar.

Interest in the program from potential home buyers has waned recently with the drop in housing prices, but the city intends to keep the program going at least until the real estate market stabilizes.

City officials do not see the program as the answer to all their problems.

“It’s a small step in the right direction,” Tsukahara said.

Some of the buyers, who are required to stay in the home they purchase for at least two years, say they worry about starting and keeping a family in Gardena because of the poor reputation of the Los Angeles city school system, which serves Gardena.

Others see the purchase as a steppingstone to a home in a more glamorous area, although few voiced serious complaints about Gardena, thankful that they had the opportunity to purchase anywhere in the first place.

“It’s a nice, innovative program. The people in it seem to be good, hard-working middle-class people,” said Richard Pierce, 37, who received the first loan in the program in 1991 with his wife, Theresa. “People like us could not afford to buy in the city.”

“I think Gardena has a lot of potential,” said buyer Luz Iyama, 32. Without the program, she said, “we would have had to pay through our nose to afford a home.”

The Attwoods, who said their combined incomes top $60,000, still dream about Manhattan Beach, although Gardena is convenient for Scott, a manager of an air freight company at Los Angeles International Airport, and for Anita, an office manager who is active in the Hawaiian community in Carson.

At their home, the Attwoods have to put up with a too-short driveway, and a builder who failed to install the air-conditioning system properly.

But such problems seem minor when they measure their joy in owning--especially in the Los Angeles area’s tough market.

Said Scott Attwood: “This is Los Angeles, and being able to get in was very special.”

Home-Buying Help

Gardena lends money to first-time homebuyers to help them make their down payments. The city is the only one in the state to offer such assistance. Location: Within Gardena city limits Properties: Single-family residences, condominiums and townhomes (income properties not eligible) Buyers: California residents; first-time buyers (have not owned home in prior 36 months) Maximum purchase price: $268,000; no minimum Down payment: 5% of purchase price City loan: 20% fully amortized over 30 or 15 years; 10.875% fixed interest rate; 2% loan fee*, 2% administrative fee*; Not assumable, no prepayment penalty Bank loan: 75% first trust deed; Interest rate, terms and conditions as per lender Income limits: $93,800 maximum income Occupancy requirements: Must reside on property first two years Co-Mortgagors: Co-borrowers must meet all eligibility requirements; not required to occupy property * subject to change