The Sitka Community Land Trust has completed three homes, and is working on building two more, in its new cottage neighborhood on Halibut Point Road (the S’us’ Héeni Sháak Community).
The goal is to construct a total of seven cottages on the land trust’s current property, and develop seven more on an adjacent parcel recently conveyed by the Sitka Assembly.
The homes were sold for about $260,000 — far below the market value for a new home in Sitka. In a presentation to the Sitka Chamber of Commerce on Wednesday (11-17-21), land trust co-executive director Randy Hughey said that the organization’s formula for affordability included keeping the houses small, selling only the houses and not the land, and using grants to subsidize site preparation and utilities.
Home buyers will take 25-percent of the equity (based on appraised value) when they move out of their homes, which will allow them to make a downpayment on another property on the open market, and allow the Land Trust to sell to a subsequent buyer at close to the original cost — creating perpetual affordability.
“Which is very different than most affordable housing models, whereby the first owner gets an affordable house, and then they capture all of the increase in equity over time,” Hughey said. “And pretty soon it no longer is able to be purchased by a person that let’s say 80% of the area median income.”
Hughey and fellow co-director Mim McConnell discussed some of the hurdles that the land trust had overcome to get this far, including winning people over to the idea of sharing the equity on a $260,000 investment.
Hughey said buying a home from the land trust was a “rung on the ladder out of renting.” He thinks the math works, especially given the condition of many homes on the open market in Sitka.
“If you can buy a house on the open market, then you probably should,” said Hughey. “If there’s some hesitation in my answer there, it’s because some of the homes that people can buy needs so much work, and are such energy sinks compared to a six-star rating, all electric home, with no maintenance to be done. But there’s a lot to be said about that in terms of quality of life, in terms of do want to work on a home? If you have the desire, then maybe getting out and buying that fixerupper is absolutely a thing. If that’s not your thing, this pretty good deal. Just in terms of your lifestyle, as well as I believe your economics, certainly as it relates to rental.”
Hughey described additional plans for the project, including storage sheds, a common workshop, an outdoor play area and shelter, and a gravel path following the Mills Street easement up to Edgecumbe Drive. Grant funding would help cover the costs of the shared amenities, again to keep down the purchase price of the houses. The land trust is trying to keep their prices in a sweet spot: Not low-income, but somewhere in the middle.
“Who qualifies, who can buy one of our houses? We allow people up to 120% of the area median income to buy our houses,” said Hughey. “Well, that gets into an area where perhaps those people could buy a house on the open market, and perhaps not. None of our buyers approach that level yet at this time. And then so at the bottom in how much money does it take to buy one of our houses? Ballpark something on the order of $50,000 annual income, annual household income. That would be about the maximum the monthly payments to buy the houses. We’re currently producing these three bedroom houses about $50,000 income is going to be needed to get there, which is $25/hour total household income.”
Anyone interested in applying for a home from the Sitka Community Land Trust has to take an eight-hour online home choice class from the Alaska Housing Finance Corporation. SCLT co-executive director Mim McConnell said that land trusts had a “stewardship approach to homeowners,” and was willing to work with them through financial difficulties. Nationwide, McConnell said the default rate for land trust homes was only 4-percent.