HAYWARD -- Because of lagging interest in commercial construction, developers will be allowed to build homes on land near the Costco on Hesperian Boulevard that was supposed to be untouched until more stores and offices were under way.

The previous agreement with Legacy Partners stated that no residential construction could start until plans and permits were finalized for all the office and commercial space surrounding the Costco site.

The City Council agreed to allow homes to be built on a basis proportionate to commercial development. Because Costco already takes up 58 percent of the 28 acres set for commercial, the same percentage of residentially zoned land can be built on. That amounts to about 8 acres, which translates to around 75 single-family houses, according to a staff report.

Legacy spokesman Steve Dunn said the new homes would in turn make the area more attractive for retailers.

"It all feeds off each other," he said. "We need one to get the other."

He said to make commercial construction feasible, they need tenants vested in at least half the units, and they don't have that level of interest.

He added that 24 Hour Fitness, which was going to be a major tenant on the land, is still interested but "rents are not what they used to be" and Legacy will have to make compromises if a deal is to be reached.

Most of the City Council supported the modification on the grounds that changing economic times mean earlier deals need to be revisited. They were clear that this is not a change in the zoning of the area, but rather the phasing of when elements would be built.

Councilwoman Barbara Halliday, while supporting the contract change, called it "very frustrating."

"We're trying to build neighborhoods where people don't have to drive somewhere to get a quart of milk," she said. "We're not doing what our General Plan says we should strive to do."

Residents of the nearby Eden Shores neighborhood told the council that they routinely drive to Union City for their shopping needs because there are no groceries or drugstores nearby in Hayward.

Mayor Michael Sweeney voted against the change, saying tweaks to development deals already have changed the vision for that part of Hayward. He asked Dunn if he could guarantee this would be the last change to the agreement, but Dunn could not.

"Can you say that under no circumstances will you come back and ask to build homes in a location (that's slated for commercial)?" he asked.

"I don't believe we would need to do that," Dunn said.

"Don't believe?" Sweeney said. "Right."

Eric Kurhi covers Hayward. Contact him at 510-293-2473. Follow him at Twitter.com/hayword. Read our blog at www.ibabuzz.com/hayword.