Under policy set by the U.S. bishops' conference, the Diocese of San Jose is responsible for paying the bishop's housing and upkeep when he retires.
McGrath said the home was purchased using a fund dedicated to housing retired bishops and using proceeds from the sale of a Menlo Park condominium where his predecessor, Bishop Pierre DuMaine, had lived before he moved into assisted living.
"The fund is a fund that can be used for nothing else," the bishop said. "When I'm not around anymore, the house can be sold. It's a good investment in that sense. It probably makes more money this way than if it were in the bank."
One McGrath critic said that the house purchase "seems very inappropriate."
"Our diocese is greatly underfunded as it is," said the parishioner, who asked the Mercury News not to be identified to avoid harming relationships with other Catholics.
The Mercury News' report cited Bishop McGrath's own advocacy for affordable housing, such as a 2016 commentary piece backing a $950 million bond measure for affordable housing.
In his initial remarks, McGrath said he had looked at places "way out in the East Bay," but he liked the valley.
"I thought it would be nice to be here, to be of assistance if I can," he said.
The bishop has not announced a retirement date, though he has asked the Holy See permission to retire before the required retirement date of 75 years to allow a younger man to become bishop.
Bishop Oscar Cantú, 51, was named Coadjutor Bishop of San Jose in July; as such, he will succeed as Bishop of San Jose upon Bishop McGrath's retirement.
The retiring bishop had looked forward to a house with a yard.
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"I like to putter around in the garden," McGrath said. "So I think it would be good for me."
McGrath acknowledged to the Mercury News that many retired clerics live in retirement communities, in rectories, or in other accommodations.
"But I'd like to live in a house so I would have the freedom to help the diocese but not disturb the priests in the rectories," he said.