by Katy Chase

Location, location, location.

The old maxim has never rung so true as in East Palo Alto, where young professionals and middle-class families are pouring into one of the last bastions of affordable housing -- with a prime location on the Peninsula. Houses still are going up in University Square, a subdivision of 217 homes that makes up the third phase of the Gateway 101 redevelopment plan. The three- and four-bedroom homes, which range from 1,761 to 2,359 square feet, are available in seven models, all of which include multiple bathrooms and two-car garages. Some also have options for state-of-the-art wiring materials and computer workstations. Even the location within the location has its appeal. The homes are just a short walk away from Ravenswood 101 Retail Center, also part of the redevelopment plan, which hosts a Good Guys and a Home Depot. Proximity to job centers adds to the allure of the subdivision, which is a joint venture between Signature Properties and Ponderosa Homes, both Pleasanton-based. "I love it," said Archelle FunniČ, who moved into his Oakes Street home with his wife in July 2000. "Between Menlo Park and Palo Alto, we pretty much have access to everything we need." After moving from San Mateo to San Leandro several years ago as prices on the Peninsula went up, FunniČ saw the University Square development as a rare opportunity to return and secure affordable housing. "It seemed like it was one of the few opportunities to build a community of this scale on the Peninsula," said Mark Steis, general counsel at Signature. "East Palo Alto is well-suited in terms of location to job centers. We saw an opportunity to redevelop an underutilized area in East Palo Alto and provide a new segment of the market for existing residents." Ali Lane, Ponderosa project sales manager for University Square, agreed that the location was prime for new housing. "So many communities in the Bay Area are sitting there saying, 'No, we don't want change,'" she said. "But a city like East Palo Alto was crying for change. It's the heart of the Peninsula, and it's an area that cries out for redevelopment." The lowest price tag on one of these homes currently is $540,900, but some have sold for more than $700,000 apiece. That price is a far cry from East Palo Alto's median, which was $268,000 last year. This disparity bothers FunniČ, who said he wants to be part of a community beyond just University Square. "The downside is the inequality you have between the haves and the have-nots," said FunniČ, a marketing manager who grew up in inner-city Pittsburgh. "I wasn't always a person who had. I understand what it means to have not." He said University Square residents have more in common with the rest of East Palo Alto than those from either group might realize. "But it may be hard to communicate that to people one block away," he said, referring to invisible barriers that he fears may separate University Square from the older neighborhoods surrounding it. "We're struggling just like everyone else. You're always going to have people with more, but you're always going to share the same kinds of struggles." Nathalie Brochstein, who lives in a Baines Street home with her partner, said the name East Palo Alto carries a stigma she hopes will fade with time. "The location is wonderful, everyone is really friendly," said Brochstein, who lived in Cupertino before moving into her home in May 2000. The University Square subdivision also includes 22 below-market-rate homes. More than 300 low- and moderate-income families competed in three fierce lotteries for the chance to purchase one of these homes, designated as affordable housing units, which have sold from the $100,000s to the mid-$200,000s. In June 2000 construction worker Alberto Gonsalez became the first of a lucky few to be selected to purchase one of the homes, which are dependent upon income qualifications. Steis said a priority list has been prepared based on the most recent lottery, which took place in March. But for those who can shoulder costs beginning in the mid-$500,000s, there are still homes up for grabs. Twelve currently are being built, with another 19 still to be put under construction. (The first building phase began in late 1999.) The houses are put on the market when building begins. When the homes first came on the market in early 2000, people from neighboring communities, many of them young professionals looking for investment potential, lined up for the chance at more affordable housing. "When they first started going up, they were sold on the very same day," Lane said. Steis called that time period "a very strong real-estate market overall," adding that it would be difficult to say the University Square community did especially well. But, he said, it was "very well-received." But a year and a half later, post-dot-com bust, business isn't rolling with quite the same momentum. "With the dot-com problem, we've seen a little bit of a slower pace," Lane said. "We've seen people lose a job and not be able to continue their purchase." Although houses are no longer being sold the first day they go on the market, Lane said about one is sold each week. "The dot-coms do not make the world go round, but in this area, yes, we were affected by that adjustment," she said. "They were the ones driving the marketplace. "We have seen the market trends and we've tried to adjust to them," Lane said. "We're still at a fairly good pace because we're one of the only new communities on the Peninsula." She added that young tech professionals, as well as two-income families, make up a good part of the neighborhood. Professors from Stanford also have bought homes there, she said. Antonio Alcazar moved into his Baines Street home with his wife and three children in June 2000, just as he earned his business degree from Stanford University. But his Silicon Valley job soon evaporated under the economic downturn. "I was working for a start-up, and then the start-up closed," he explained. While looking for work, he's taking care of his three kids - aged 3 months, 4 and 5 - until the neighborhood's day-care center is completed. Plans have been approved by the city and a building permit was pulled during the last week of August, Steis said. The center will be donated to a non-profit day-care provider, which Steis said already has been selected but is not yet public information. They had been considering the East Palo Alto YMCA, Creative Montessori and EPA Creative Adventures Learning Center. The community also includes a tree-lined public park, comprising two acres of green lawn and a playground. In April the East Palo Alto City Council delayed a decision on whether to levy a park maintenance assessment on homeowners in the subdivision. The assessment, which will resurface for discussion at a council meeting in late September, would have University Square homeowners pay for upkeep at the public park. Steis said Ravenswood Village, the joint venture between Signature and Ponderosa, will present a proposal that would do away with the assessment concept. A hard-hitting issue for many University Square residents is where their children will get an education. The closest schools are in the troubled Ravenswood School District, plagued recently by low test scores and allegations of mismanagement. Alcazar's family has joined the Tinsley Project, a voluntary program to transfer kids to Palo Alto schools. His 5-year-old will attend Escondido Elementary School in Palo Alto, and his 4-year-old will attend Kirk House, a Menlo Park pre-school. FunniČ said the quality of education is the bottom line. "I don't have anything against mostly minority schools," he said. "From a social perspective, I would not raise kids that don't have a glimpse of the real world. It's more so who are the educators, and are they going to give my kids a quality education." He said improving local schools would be a great solution. "I live here, obviously I'd want my kids to go to school here," he said, adding he had many reasons for making the move to East Palo Alto. "I wanted to live a decent life, have a good house in a neighborhood that is already evolving. The people themselves are good people. There are good families here."