The 3-bedroom home will sell for around $250,000, far below the average sale price for homes in Sitka. (KCAW photo/Robert Woolsey)

It may be the cheapest route into a brand new family home in Sitka. But interest so far has been slow.

The Sitka Community Land Trust is ready to break ground on a new house in a quiet neighborhood. It will have two-stories, three bedrooms, a yard, and off–street parking. It will be among the most energy-efficient buildings in Sitka.

It has just about everything, in fact, except a long list of people eager to buy it.

Downloadable audio.

Randy Hughey at the building site, which was previously platted as a “pocket park.” (KCAW photo/Robert Woolsey)

It’s a cold, wet day in late February and I’m standing in a vacant lot on Lillian Drive with Randy Hughey, a board member of the Sitka Community Development Corporation, and an evangelist for the Sitka Community Land Trust, which now owns this site.
I asked Hughey for a tour of the site, but the rain chases us inside the cab of his pickup truck.

Truck door slamming, engine starting.

A community land trust has been in the works in Sitka for several years. The assembly donated the lot last May, and the blueprints have been drawn up. But even though there’s the political will to move ahead with the project, there’s a problem.

“We need a buyer qualified to buy this house before we can proceed. We don’t have the means to finance this. We’re a little shoestring nonprofit.”

That buyer may have turned up finally. It’s a family of four — and we’ll go into how that family qualified in a minute. But this deal has been available literally for months. The sale price is $250,000 — that’s $165,000 below the average sale price for existing homes in Sitka last year — a discount of 40-percent.

But there’s a catch: You’re only buying the house — not the land. And you won’t be cashing in on the slow-but-steady growth in Sitka’s real estate market.

“When you sell the house, you don’t get to keep all the money. In order to preserve affordability across time, since land-home ownership tends to escalate in value far higher than incomes, when you sell this house you get to keep 25-percent of the difference between appraisals.”

The working idea behind a community land trust is that this 25-percent share of the equity in the home — if you live in it for a few years — should be enough to springboard you into the regular housing market. And the selling price of the house you’re leaving behind will be low enough for a family earning the Area Median Income — which currently stands at $78,000 — to buy its way in.

Simple, eh? But it’s not really taking root yet.

“It’s a mystery to us, frankly. We thought by the time we had a house like this — at a price like this — we’d have people lined up, and we just don’t.”

The SCDC’s requirements are not particularly strict: It wants a Sitka buyer — someone who already lives here, or is moving back to Sitka, or is moving here and plans to stay. And there’s also a financial threshold. A Community Land Trust home is not low-income housing in the traditional sense, and it’s not for the super rich. A family of four can’t have an income greater than $94,000.

Putting these pieces together — plus bank financing — took a while. But Hughey says this is perfect for professionals — like nurses or teachers — who might otherwise be stuck in Sitka’s pricey rental market.

“This is a way out of that. It doesn’t take federal funding and programs, or state housing or programs. It’s a totally local and simple model.”

And a model that the Sitka Community Land Trust would like to grow into a portfolio of affordable properties. Hughey envisions a neighborhood of small houses on the old city shops land along Halibut Point Road, with a common parking area, and a community building where residents can store bikes or clean fish. The Rasmuson Foundation has backed the idea with a planning grant. Once the SCDC has plans, they’ll ask the assembly to donate this site also.

But much like the vacant lot on Lillian Drive, that vision will only become reality if Hughey finds buyers who believe in this version of affordability as much as he does.

Randy Hughey and Michael LaGuire are board members with the Sitka Community Development Corporation, which has established a community land trust. The first property in the trust will be available for sale sometime next year. Anyone interested in applying must first take a free Home Choice class from the Alaska Housing Finance Corporation, Sep 10 & 11, 6-10 PM. To register visit the AHFC online, or call 1-800-459-2921.

The board of directors of SCDC would like to thank City and Borough of Sitka Assembly for their support of the donation of the small pocket park lot on Lillian Drive to the Sitka Community Land Trust program.

The CLT was recently formed through a grant from the Rasmuson Foundation, with the support of their grant administrator Chris Perez, and the hired consultant Michael Brown of Burlington Associates in Community Development. The diligent, tedious work of preparing legal documents and making difficult decisions was admirably performed by the CLT Committee: Maegan Bosak, Cleo Brylinsky, Randy Hughey, James Poulson, Michael LaGuire, and Mim McConnell.

The SCDC board would also like to thank Stephen Courtright for sharing his story at the Assembly meetings, and the following community members who have generously made donations: Daniel & Mae Dunsing, Bonnie Brenner, Will Swagel and to all those who purchased and or donated items at the Building Reuse Center.

Thank you to the following businesses and agencies for their generous donations: Hames Corporation, First Bank, First National Bank, ALPS Federal Credit Union, Wells Fargo, Ludvig’s Bistro, Silver Bay Seafoods, National Community Land Trust Network, State Division of Economic Development, National Philanthropic Trust, US Coast Guard Spouses & Wives Association, ASRC McGraw Construction, Sitka Vision Clinic, Allen Marine Tours, schmolk Mechanical Contractors, and Venneberg Insurance.

Thanks also to the following agencies for their support of the CLT solution to permanently affordable housing: Greater Sitka Chamber of Commerce, USDA Rural Development, Baranof Island Housing Authority, Alaska Housing Finance Corporation, and to the University of Alaska Sitka campus for the use of their classrooms for our many teleconferences and web meetings.

The next steps for SCDC are to approve a house design, select a qualified prospective home owner according to the CLT process, coach the home owner through financing, select a builder for the home on Lillian Drive, oversee the building project, and then choose our next project.

The opinions expressed in commentaries on Raven Radio are those of the author, and are not necessarily shared by the station’s board, staff, or volunteers.

The Sitka Assembly approved the name change on Tuesday night (5-27-14).  Paxton served as Sitka city administrator for nine years, and played a key role in obtaining the site for the city.

Mayor Mim McConnell read off a list of Paxton’s accomplishments before the assembly voted.

McCONNELL:  Whereas, Gary Paxton worked diligently and tirelessly for the City and Borough of Sitka as its municipal administrator from August of 1992 to September 2001 and again in 2003; and

Whereas, he served during turbulent times, where he took a financial structure that was in disarray and assembled a first-rate staff and made both highly accountable, going on to win state and national awards; and

Whereas, “Pax” as he is commonly called, demonstrated a natural leadership ability that projected self-confidence, authority and endless enthusiasm that provided stability during the economic crisis of the Alaska Lumber & Pulp mill closure…

“[It is] probably one of the highest compliments that a community can pay to one of its citizens, is to name something for him in his home town,” said Assembly Member Pete Esquiro. Esquiro said that he wondered, however, if the industrial park was the best choice, given that the city might someday sell the property.

“I got to wishing there was something more permanent than an industrial park to give Gary Paxton’s name to,” Esquiro said.

Member Mike Reif, who sponsored the resolution along with McConnell and member Phyllis Hackett, said that the industrial park had been chosen at the suggestion of Paxton’s wife, Debbie. The resolution passed, 7-0.

***

The Sitka Assembly also voted on Tuesday night to give a small piece of land to the Sitka Community Development Corporation, a nonprofit focused on affordable housing.

The plot of land is an unmaintained pocket park in the Turney Burkhart Subdivision near Lillian Drive, off Sawmill Creek Road. The SCDC plans to build a single house on the lot, as the first step toward creating a community land trust in Sitka.

Land trusts keep housing affordable by holding ownership of the land; homeowners purchase only the building, and agree to restrictions on the amount they can resell their home for, in return for a lower up-front price.

SCDC board president Randy Hughey said the land trust is on its way to becoming a reality.

“We have momentum, we have a good idea, we are being successful, and if you will give us the Lillian Drive lot, we will put a family in an affordable home there this year,” Hughey said. “And we’re just starting.”

The lot is valued at about $78,000, but under the proposal, the city would sell it to the SCDC for just $1. That gave member Pete Esquiro heartburn. “I am really not in favor of giving away city property for $1,” he said.

Esquiro asked if the nonprofit could instead borrow the $78,000 from the city as an economic development loan.

“That way we don’t set the precedent of giving land away for nothing,” he said. “And we also have a way of recovering that loan if the grand experiment doesn’t work just as everybody expects it to work.”

The ordinance passed 5-1, with Esquiro voting no. Mayor Mim McConnell is the Executive Director of the SCDC. She recused herself from the vote, but testified in favor of the proposal from the audience.

The ordinance will come back before the assembly for a second and final reading next month.

***

In other business, the assembly authorized a $4.6-million contract with S&S General Contractors to rebuild Edgecumbe Drive over the next two years. And assembly members authorized the city to spend up to $52,000 on an efficiency study, to come up with recommendations to streamline municipal operations.

You can find more coverage of the Sitka Assembly here.

The Sitka Assembly Tuesday night (2-11-14) awarded $7,500 to the Sitka Community Development Corporation to support the non-profit’s creation of a trust.

The funding will support the salary of the non-profit’s director, Mim McConnell, who is also Sitka’s mayor.

McConnell recused herself from assembly deliberation on the matter, but spoke as a member of the public. She wanted to assure her colleagues on the assembly that she was not in it for the money.

“I will continue to work, even without pay. As I’m doing right now. I’m not getting paid right now. Even though they want to pay me, the money just isn’t there. But I’ve continued to work — and I will continue to work — because I believe in this so much, and I feel so passionately about it.”

The assembly approved the request, with Pete Esquiro dissenting. The funding comes from a $10,000 emergency fund the city sets aside for non-profits.

The Sitka Community Development Corporation has been working with a consultant, Burlington Associates, on establishing a local community land trust. Burlington’s Michael Brown briefed the assembly in a work session before Tuesday’s regular meeting.

Brown, and SCDC chairman Randy Hughey also outlined the program for the Sitka Chamber of Commerce the following day.

Listen to iFriendly audio.

The goal of a community land trust is to create affordable home ownership for people of middle income. CLT’s own the land under the homes in perpetuity, and homeowners buy and sell only the houses themselves.

In a place like Sitka, where scarcity is driving up the price of land, this can lower the purchase price of a home significantly — and make the difference for someone trying to qualify for a mortgage.

It will also lower the potential return when the house is sold, but that’s the deal people make, Brown says, when they buy a home in a community land trust.

“When they choose to leave, if they ever decide to sell, we ask them to leave the affordability that we created for them, so that another family in the same circumstances as the original owners has that same benefit.”

Brown said that most people live in a CLT home for 5-7 years, and then transition to the traditional marketplace.
Community land trusts are owned by a non-profit board — in this case the Sitka Community Development Corporation — and homeowners pay a small monthly fee to the trust to cover management costs.

Homeowners also agree to maintain their properties in a way that retains the value of the property — much like a homeowner’s or neighborhood association in the traditional marketplace.

Randy Hughey helped give the chamber audience some perspective on the problem, as a long-time resident of Sitka.

“The reason that a community land trust makes so much sense — I think — because we know very well that you can’t just step into this as young family and buy a house here. Because of that, in 1992 there were 1,800 and some students in school. Twenty years later, there are 1,300 and some students here. 500 students fewer. That’s a pretty clear demographic. Only people who are our age and who have accumulated some wealth can get into this. That’s a bad idea for a community.”

Hughey said the SCDC would develop a formula based on area median income — or AMI — to qualify prospective buyers. In Sitka, the median income is roughly $75,000 dollars per household. Hughey said the formula would qualify households with incomes 20-percent higher than that — or $90,000.

“$90,000 or $75,000 won’t buy a house in Sitka. This is not low-income housing. This is median-income housing. This is the working professional. Last year I helped a Math teacher with ten years experience and a Masters degree buy a 1970s run down trailer — because that’s what she could afford.”

Hughey said the Sitka Community Development Corporation expected the city to donate land for the first home in the trust. He said the SCDC would like to market its first property this year — in 2014. Members of the chamber audience seemed receptive to the idea. Former mayor Fred Reeder said he thought this was a better idea than putting people into homes which they couldn’t afford. “That nearly wrecked the country,” he said.

Michael Brown said it was a matter of political will.

“Ultimately it’s going to be up to you as the business community, you as the citizenry of this community to say, We’d like to have some housing that’s going to be affordable for folks who are otherwise priced out of the market, because we’d like them to be able to continue to live here.”

Randy Hughey was more blunt. He said Sitka was desperate for housing. The effects on the community were becoming hard to ignore.

“We’ve been talking about affordable housing for a decade here folks. What’s the other idea?”

Twenty-five years ago, it could be done on one income. Nowadays, buying a home is out of reach for a lot of two-income families.

Randy Hughey would like to change that. The recently-retired high school shop teacher wants his grown children to have the same opportunity to build a life in Sitka that he did.

In the fourth and final part of our interview series on Community Land Trusts, KCAW’s Robert Woolsey spoke with Hughey about his passion for changing the paradigm of Sitka’s housing market.

Listen to iFriendly audio.

SCDC board member Randy Hughey wants to change the economics of home ownership for young families. (KCAW photo/Robert Woolsey)

Around the end of the school year, the high school wood shop is stacked with projects of all kinds — 40 night stands made by the Wood I students here, spectacular gun cases and entertainment centers made by more advanced kids there.

Randy Hughey has an amazing capacity for getting projects across the goal line.

“Everyone agrees affordable housing’s a problem. Let’s do something.”

Hughey thinks houses have just grown too large. Too much square-footage per occupant.

When he was growing up, his family of six lived in an 800-square foot house. By the time he was in high school, they had moved to an 1,100-square foot house.

“It was affordable. My parents weren’t financially stressed. We lived on one blue-collar income, and we didn’t know that it was a problem. In hindsight you look back and say, How did we ever do that? — we were pretty packed in there! But it was entirely doable.”

The national average house now is 2,300 square feet.

Hughey is on the board of the Sitka Community Development Corporation, which is exploring the idea of establishing a Community Land Trust as a way to create affordable housing.

Take a brief survey about Community Land Trusts from the Sitka Community Development Corporation.

CLT’s reduce the cost of a home by about one-third, by selling only the structure to a buyer, and holding the land in trust.

According to data compiled by the Sitka Community Development Corporation, a typical house in town costs around $350,000. To buy it conventionally, someone would have to come up with a cash downpayment of 20-percent, or $70,000. Even at today’s low mortgage interest rates, it would mean payments of over $3,000 per month with a 15-year term, including utilities, taxes, and insurance.

View the SCDC’s Affordability Calculator online.

Some families have the cash to pull this off, and…

“Well, there are lots of families that do not. And no just-around-the-corner opportunities for that to change significantly.”

Hughey believes a Community Land Trust is another form of opportunity. Building smaller homes in the trust is a further way to pare down costs, and broaden opportunity.

The small houses he was raised in were not demeaning; modern designs are flourishing online and make smaller houses downright attractive.

Hughey thinks all the pieces are here to solve the affordability puzzle.

“I want to change the economics of a family here. I want to make it so that not everybody has to work all of the time, and that there’s always pressure on mom and dad financially to have a house to live in. I want to get out of rentals, and I want to get out of much of the substandard housing that’s being lived in here. And I do not want giveaway programs. I want there to be something where people have to invest, to bring something to the table. They then have ownership — they are vested in it — and they have a benefit in doing maintenance and upkeep of the home. And they can get the nest egg that they need to get out on the open market.”

The Sitka Community Development Corporation has spent the past two months running articles in the local paper — and appearing on radio — to make the case for Community Land Trusts. Because CLTs involve ownership, allow buyers to build equity, yet limit profit on resale, they’re seen as a kind of hybrid between the open market and more tightly-controlled housing projects.

Still, you have to start somewhere with a Community Land Trust. It can often involve the donation of municipal property. The SCDC thinks education ahead of time will build the necessary political will.

“We’re talking about the allocation of publicly-owned resources toward a particular problem. We’re going to need people’s support for that. Not just on the assembly. I think there needs to be a broad agreement that this is an affordable housing model that should be tried. Then, we just try.”

Hughey is adamant that a CLT is not a charity. He doesn’t see Habitat for Humanity, or a high school vocational program, putting up one or two houses a year. He thinks the situation is far too acute. A CLT, he believes, is going to put carpenters to work. Political boundaries can be changed to make land available; the existing development and construction industry can be called in to help accurately forecast costs.

Hughey says it’s time for all hands on deck.

“It’s a problem that is worthy of our best efforts, because it’s our children. I want to create a community where my children could come back and live in. Or your children — or all of the people my age in town who have kids: I want them to be able to come to Sitka and raise their families here. Bring my grandchildren home. That’s why I’m working on it.”

Sitka Community Development Corporation board president Paul Rioux. (KCAW photo/Robert Woolsey)

In the first of a four-part series of interviews with board and committee members of the Sitka Community Development Corporation, KCAW’s Robert spoke with board president Paul Rioux (REE-oo) about the housing gap, and the problem it presents for communities like Sitka.

Listen to iFriendly audio.

It was not without controversy, but it was the closest Sitka ever came to developing a modern, high-density affordable housing complex.

The Dana Bay homes project would have been built on Halibut Point Road, on the former site of the city shops.

A private developer, Trapline LLC, who specialized in affordable housing projects, had all the pieces in place but one – federal tax credits. Tax credits are what allow a for-profit developer to offer housing at below-market rates.

The credits did not come through.

“It literally left the people that were interested in affordable housing reeling in town,” says Paul Rioux, board president for the Sitka Community Development Corporation. The SCDC emerged shortly after the failure of Dana Bay in 2009.

Listen to an extended interview with SCDC president Paul Rioux.

In some respects, Dana Bay was the result of a professional push to solve the housing gap. Sitka at the time actually had an Office for Affordable Housing staffed by a planning specialist.

The SCDC, on the other hand, is comprised of lay people. They’re not producing any lengthy reports, but they know Sitka’s housing problem is more acute than ever.

“Interestingly enough, I was getting my hair cut a couple of weeks ago and I was talking to my barber about the subject. His comment was, If I could just get the Assembly to sit in here for a week and hear how many people say I’ve been coming here for years, this is my last haircut, we’re moving out of town and trying to go someplace more affordable. To me, that’s the classic, colloquial reflection: the writing’s on the wall.”

Creating affordable housing was a top priority of the Sitka Economic Summit in 2012. Rioux says if someone’s spending more than a third of their wages on housing, it’s not affordable. Without people to earn wages, you don’t just have a housing problem, you’ve got an economic problem.

“The fact of the matter is that if you’re losing good workers, they’re going out of town, especially entry-level workers or mid-range management workers, and you’re having a hard time filling those positions, it’s hard to run an efficient business.”

The SCDC is now putting its chips on Community Land Trusts. CLT’s create affordability because property buyers purchase only their homes – the land is held in trust. He says CLT’s are a solution for places like Sitka, which don’t have room to grow.

“We have a lot of properties that are very expensive. We don’t have a proportional amount of properties that are affordable. Making that mix work is difficult when you don’t have bedroom communities.”

Rioux says that in the lower 48 it’s common for people in service industry jobs and the trades to live in more affordable neighborhoods than the more affluent areas they may work in. That’s not necessarily the case in Sitka. CLT’s, however, help create economic middle ground.

“You’re not lowering a rung or raising a rung. You’re creating a rung in between the two that already exist. It actually strengthens the housing market because it creates more buyers quicker. For a lot of people these would be a starter home. Maybe a young couple. So they can buy a house on a land trust, build some equity in it, build some credit by being involved in the program and owning their own home, and it puts them in a position to buy a house on the open market much quicker than if they were renting.

Rioux says Community Land Trusts by no means are limited to young people. He says there are trust neighborhoods around the country that serve diverse populations – particularly retirees.

In part two of this series next week, we’ll hear about how Community Land Trusts are put together.