SONOMA COUNTY – While building homes for low-income families remains a part of Habitat for Humanity’s mission in Sonoma County, local volunteers say they’ve found a cost-effective alternative in the current economy – purchasing and renovating foreclosed houses.

The yet-to-be-named initiative, which officially kicks off on Jan. 25, involves a coordinated effort from local banks, volunteers and the Santa Rosa Housing and Redevelopment Board. Habitat for Humanity of Sonoma County just completed the purchase of its first home, and organization officers said they hope to provide 100 percent, interest-free financing to low-income families for six homes this year.

“If you put it in the context of business – when the economy shrank, nonprofits like Habitat had to look for a new model,” said Gregory Putnam, treasurer for Habitat in Sonoma County. “Instead of building from the ground-up, we started looking at foreclosures.”

Talks of the approach first began last year, an idea Mr. Putnam said made immediate economic sense.

Building a three-or-four-bedroom home on donated land – the typical Habitat approach -- could cost $250,000 to $300,000 and take two years, he said. Meanwhile, foreclosed homes in the county were selling at prices from $180,000 to $250,000, and Sonoma County had nearly 1,300 bank-owned properties as of last week, according to the online foreclosure data company Realtytrac.

“It was strictly the ‘dollars and cents’ model,” Mr. Putnam said. “If the market wasn’t where it is today, this wouldn’t work.”

Financing for the effort was coordinated through the Sonoma County Loan Consortium, a coalition of eight North Bay banks that meets quarterly to cooperate on financing for affordable housing. Institutions take turns financing projects, joining up for larger loans.

Three members extended a $500,000 line of credit to completely finance the purchases: First Community Bank, Exchange Bank and Luther Burbank Savings and Loan.

“Having the consortium is a great plus for the community.  It provides the local banks the opportunity to participate in funding affordable housing projects, which is always a focus of community banks,” said Janet Connors, senior vice president at First Community Bank and current chair of the consortium.

Redwood Credit Union also extended a $250,000 credit line to Habitat, though their financing structure has different requirements. That financing will be used for a yet-determined future housing effort, according to Habitat for Humanity

Further funding came from the Santa Rosa Housing and Redevelopment Board, which voted in December to provide a $280,000 Community Development Block Grant to Habitat for Humanity at low interest, with payments deferred for 30 years. PG&E donated $12,500 in solar installations for the first two homes.

“This is not just Habitat – this is Habitat facilitating this effort for the community,” said Katheryn Fong, executive director of Habitat for Humanity of Sonoma County.

David Harts, a volunteer on Habitat’s site built committee and Santa Rosa real estate broker, has helped conduct work related to searching for and purchasing the homes. By design, the initiative looks for homes in need of significant renovation.

“It’s a very different client – they don’t want the home to be in a perfect neighborhood, or for it to be in perfect shape,” he said. “While it’s a small correction to the market, these are the homes that need to be absorbed.”

By targeting those homes, local Habitat Board President and former Santa Rosa Mayor Jane Bender said that renovations could have a greater impact on the surrounding neighborhood.

“Back when I was walking precincts, I’d go into neighborhoods where there would be a foreclosed home. Neighbors were nervous – they had put their life savings into their own home, and (the foreclosed home) was making it deteriorate in value.”

The organization estimates that homes will require $25,000 to $50,000 worth of renovations, paid for through the housing board’s financing and donations.

Restrictions on the deed of trust will help insure that the house remains affordable. Future owners must first offer the home to Habitat, then to a low-income family, Mr. Putnam said. Habitat will administer the loan for the home buyer and develop a payment schedule.

Habitat is currently reviewing applications for homes. An information session in September drew more than 100 people, and outreach efforts have drawn many more inquiries, Ms. Fong said.

“We know these families are out there. We call them the working poor … they’re trying to achieve the American Dream,” Ms. Fong said.

Families who find homes through the program must make no more than 60 percent of the county’s median income and put in 500 “sweat hours” towards the renovation of their home or other Habitat projects. The organization hopes to purchase and renovate another group of homes next year, and is looking for donations to help cover the renovation costs.

The kickoff event will be held at Habitat for Humanity of Sonoma County headquarters at 3273 Airway Drive in Santa Rosa on Jan. 25 from 4-6 p.m.