Land Trust Gets Grant To Help Home Buyers

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Category: News

Created on Friday, 13 September 2024 15:46

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By SHANNON HAUGLAND
Sentinel Staff Writer
Sitka Community Land Trust announced today it has received a grant that will cut $20,000 from the price a new home buyer pays for a house built by the land trust.
The nonprofit organization received a Denali Commission grant for $300,000, which will allow the housing trust to establish a working capital construction fund, which is a permanent endowment, said land trust director Randy Hughey.
“With that fund we’ll build a house, sell it, put money back in and build another house, thus saving the cost of a construction loan – which is about $20,000 per house,” Hughey said. “It’s a simple idea that will keep saving money for Sitka homeowners.”
For example, if a home were built today on trust property using a construction loan it would cost $310,000. The Denali grant will eliminate the $20,000 construction loan, resulting in a buyer paying a construction cost of $290,000 instead.
“That definitely makes a big difference,” Hughey said. “It’s very helpful. We’re working steadily to bring other subsidies to bear through other grant writing efforts to make these houses affordable.”
Hughey heard about the grant last week and was eager share the news with the public. The trust has so far completed nine houses on the land it owns at 1300 and 1400 Halibut Point Road. The cost to a buyer is reduced because the purchase price is for the house only, not the land, which is retained in trust ownership.
There are also limitations on profit-taking on the resale of homes, so they remain permanently affordable, Hughey said.
The houses completed so far on the former city shops property are three- and two- bedroom homes.
Prices are now $310,000 for a three-bedroom house, and $260,000 for a two-bedroom model. As with all housing in Sitka, their appraised value increases over time.
The trust recently saw the resale of a house built on the land trust site, giving Hughey and other land trust officials the chance to see how the resale formula, which limits the profit on a resale, works to keep the housing permanently affordable.
He said they were pleased to see that it worked.
When the original homeowner sold her house, it had gone up in its appraised value by $100,000. As a trust property owner, she was allowed to keep 25 percent of the increase in appraised value ($25,000), plus the equity they built through their down payment and interest.
“That’s nice that they could keep the increase, but the increase is not sustainable in the overall housing market (outside the trust),” Hughey said.
The homeowner purchased the house in 2022 for $275,000. It was appraised at the time for $340,000 and has increased in appraised value to $440,000. (The appraisals include the value of the land.) The land trust has a waiting list of eager home buyers, and offered the house to the next person on the list, for $300,000.
“The idea is that we have a resale formula: the price to the new buyer is the initial sale price, plus the ‘profit’’ – 25 percent of the increase in the appraised value,” Hughey said. “In this case the original homeowner – when they sold the house –  took out their allowed $25,000 in ‘profit.’ So we put the house back on the market at $300,000 plus closing fees. This is the real magic of the community land trust model, that it remains permanently affordable.”
The Denali Commission grant applies to construction of new homes, not resales.
By the middle of 2027, there will be 14 homes owned by people on the land trust property, plus six apartment rentals, for a total of 20 dwellings.

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