San Diego is one of the most expensive places in America to buy a house. But thanks to funds provided by state taxpayers, academics at the University of California are able to dip into a $6.8 billion pool of cash to finance their home purchases on terms more favorable than those available to the average Joe. Since the year 2000, according to county records, nearly a hundred professors at UCSD have taken advantage of the program, which a spokeswoman says currently offers a variable interest rate of 3.8 percent on a 30-year mortgage.
Prices of the houses purchased in the San Diego area with the taxpayer-sponsored mortgages have ranged from a high of $1,930,000 for economist Roger Gordon's La Jolla manse (purchased in November 2000 and financed by a $1,095,000 U.C. loan) to a lowly $155,000 condo in Clairemont bought in May 2000 by assistant philosophy professor Rick Grush with a $141,050 mortgage provided by the state. (Grush subsequently purchased a slightly less humble house, also with a UC loan.) In between are such abodes as the Encinitas home purchased last September for $567,500 by noted physics professor Leonid V. Butov -- financed by a $513,350 loan from the university -- and the $372,000 stylish Uptown condo a block from Balboa Park bought last July by sociologist Amy Binder with a $334,800 U.C. mortgage.
Since January 2000, according to county records, the University of California has lent a total of $40 million to 96 buyers who purchased property worth a total of $52 million. The average sale price of each home was $545,900. The average mortgage was $417,489. "These mortgages are not subsidized," says UC's Ruth Assily. "They are made from our short-term investment pool. It's a cash investment fund that is primarily invested in short-term instruments, money market fixed-income instruments, and things like that." She hastens to explain that the 30-year mortgages represent only a small portion of the pool's investments. "Mortgages can only be 30 percent of the fund's unrestricted investments," she says. "They have never exceeded 13 percent."
The rest of the pool money, Assily explains, is placed in various short-term investment instruments. Much of the money put into the investment pool by the university, she says, consists of funds derived from tuition fees, bond proceeds, and other funds that the university will be using soon.
According to Assily, the largest mortgage currently obtainable by university faculty members is $1 million. For loan amounts up to $827,500, she says, the required minimum down payment is 10 percent of the home's purchase price. For loans greater than $827,500, at least a 15 percent down payment is necessary. Records show that some professors have not borrowed the maximum. Assily notes that since market-rate mortgage rates available to the public have dipped so low in recent years, demand for the UC-sponsored loans is not currently as great as it has been in years past. That could change if rates rise in the future, she notes. Loan approval is issued by the university's Office of Loan Programs, Assily says.
Economics professor Roger Gordon, who bought the most expensive of the homes on the list of those purchased by academics using university-sponsored financing, says he's since obtained private refinancing and no longer has a U.C. loan, which originally was in the amount of $1,095,000. "The UC mortgage program provides a minor subsidy, which helps a bit to attract people here," Gordon says. "But it is a small program compared with many other competing schools. Coming from a distance, as I did, the university [financing] made it easier to get a loan. It basically facilitates the paperwork and qualification.
"My understanding is that the amount of the loan is negotiated between the university and the faculty member. I saw one side of the negotiations. The point was that if the amount was too small, then I wouldn't be capable of taking advantage of it. So it had to be large enough to serve as an incentive for me to accept." Gordon purchased the La Jolla house with his wife, Michelle White, who also is a professor in UCSD's Economics Department. "The university did some financial screening," he says. "They knew our joint income and joint assets. Also, they had our salaries as security."
Further down the list of university-financed homebuyers at number 67, sociologist Amy Binder says the experience of obtaining a loan from the university was "not all that pleasant, but the outcome was good for me. I wanted to be in the city, and I was able to get into a studio condo in Hillcrest. I couldn't have afforded it otherwise. In fact, it would have been impossible." Records show that the sale price of Binder's unit was $372,000, financed by a $334,800 loan from the university. She adds that "most professors don't get paid that much, considering their level of education and training."
Below is a list of the top UCSD home buyers since January 2000 ranked by residence price, the top ten first, and followed by a sampling of the remainder. Descriptions of the faculty members and their work were obtained from their respective websites.
Roger H. Gordon
Professor of Economics
Purchase Price: $1,930,000
U.C. Mortgage: $1,095,000
"Roger Gordon graduated from Harvard College in 1972 and received a Ph.D. in Economics from MIT in 1976. He was an Assistant Professor at Princeton from 197680. He then moved to Bell Labs, where he was a Member of the Technical Staff. In 1984, he moved to the University of Michigan, first as an Associate Professor, then Professor, and later as the Reuben Kempf Professor of Economics. Since 2001, he has been a Professor of Economics at UCSD. Over the years, he has also been a visiting professor at a wide variety of universities and institutions throughout the world.
"In addition to his teaching positions, he is currently an Editor of the Journal of Public Economics, a Research Associate of the National Bureau of Economic Research and the Centre for Economic Policy Research, and a Fellow of the Econometric Society. His research has focused on diverse topics in Public Finance and the Economics of Transition."