By GARLAND KENNEDY
Sentinel Staff Writer
For years, a small parcel of land not far out on Halibut Point Road was a flat expanse of gravel. Now, it’s the location of a growing community of small, lower-cost houses.
Sitka Community Land Trust houses on Halibut Point Road. (Sentinel Photo)
In a virtual meeting of the Chamber of Commerce Wednesday, the co-executive directors of the Sitka Community Land Trust outlined plans for continued development of affordable housing under a plan that takes the cost of the land out of the price to the homeowner, and limits the profit they can make when they sell.
“One of the most remarkable and beneficial parts of the community land trust model is that we preserve affordability over time,” said Randy Hughey, who shares the executive director position with Mim McConnell. “Ten years from now a person at the same income level should be able to buy this house, and this is done by limiting profit at resale to 25 percent in the increase in the appraisal through the time of ownership.”
At the same time sellers recover their equity from their down payment and monthly payments, he said.
As an example Hughey cited the recent sale of one of the new houses the land trust has built at 1306 Halibut Point Road. It was appraised at $315,000, but the buyer, a teacher, paid $260,000.
He credited the discounted price to factors ranging from a Rasmuson grant to the land trust, to the fact that the buyer pays for the structure but not the land, which stays in land trust ownership. The land trust paid one dollar each for adjoining tracts of the land on Halibut Point Road for construction of affordable housing. The land formerly was the site of the city public works shops and diesel plant.
“The two, three-bedroom homes that are being purchased cost the buyers $260,000, and that is so far below what this market could command for these houses,” Hughey said. “It’s not as low as we’d love to get, but it’s the best we can do at this time. That price is achieved because there is no land cost. The land trust model separates the deed of the land from the deed of the house... The second savings has to do with us building small houses, and the third savings has to do with us getting grants to buy down the cost of that. The grant subsidy on this half of the neighborhood is nearly $30,000 per house through a Rasmuson grant that put in all the utilities.”
Only a handful of houses have been built so far and the surge in the price of building materials earlier this year caused a delay, but McConnell said the current plan involves construction of seven more homes and a rental unit.
She said income from the affordable rental unit “will also be helpful for keeping our organization sustainable.” There was a spike in lumber prices in the spring and prices remain high, but have come down, she said.
Hughey said the Land Trust aims to keep the homes affordable to those who make about $50,000 a year.
One of the reasons for the high cost of housing in Sitka, Hughey said, is the scarcity of available land for building.
“The city owns a lot of land, the state owns a lot of land. In fact, you could argue that government ownership of land is a driving force of why housing is so expensive here,” he said. “We’re surrounded by federal, state, Mental Health (Trust) and city land, and if this was a more typical setting that way there would be a great deal more land in private ownership for development and sale, and the price would be down.”
But the “artificial scarcity” of land is what makes the model of the land trust “pretty ideal,” he said.
“The city can give land to a non-profit to produce affordable housing with less questioning, uproar, and people upset than if they put it in private hands and someone makes a bunch of money. It’s just more fair,” Hughey said.
While an apartment complex could also provide affordable housing options, Hughey said, financing options for such a project are bleak.
“Our current model has us getting a construction loan for a single pre-sold house and then we carry that construction cost and pass it on to the buyer when they close on the house,” he said. “So it’s a pretty simple financial model. If you do a large apartment complex the numbers are enormous, and I don’t think any bank in its right mind would loan us the money to do that. There’s a great need and we’re not averse to that.”
In August the Assembly approved the most recent transfer of the former site of the city shops land at 1410 and 1414 Halibut Point Road to the Land Trust for $1 for developing more affordable housing. The homes already built and sold are situated at 1306 Halibut Point Road.
Hughey said there are plans to build covered spaces for homeowners, as well as chargers for electric cars.
