The cities of San Diego and Lemon Grove are poised to sell lots for $1 each to a nonprofit land trust that will build houses reserved for middle-class families.

• Maximum prices, for new 3-4 bedroom houses, will be $350,000.
  
• One project is 16 lots on vacant land in Nestor, near a trolley line and the Mexican border. The other is nine lots next to state Highway 94.
  
• The sales price will be pegged to 120% of the area median income or less. For a family of five, that’s an income of up to $102,750.
  
• Qualified families buy the homes but only lease land underneath. When owners want to sell, they can only sell to another family who meets the income requirements.

What does it take for a middle-class family to be able to buy a house in San Diego, with the county median home price at $540,000 and the median individual salary at just $55,500?

In the case of the San Diego Community Land Trust, it means the city selling home lots for $1.

The nonprofit Land Trust is poised to build 16 three and four bedroom homes on an elbow of vacant land near the Mexican border.

The houses, with yards and garages, will sell for $350,000 or less — a far cry from what similar new homes go for on the open market. Construction cost would be roughly $212,500 per house.

The city of San Diego has committed to sell the 3.3 acres to the young nonprofit group, in the name of affordable housing.

The Land Trust is working on a similar $1-a-lot deal with Lemon Grove to build nine row homes on an abandoned subdivision there.

This program is unique in one major way: It’s trying to help working families who otherwise couldn’t buy a first home here. Most affordable-housing efforts in the region concentrate on apartments for people with low incomes.

Here’s why a city would give away land

In Southern California, where the home-building business is hot, it’s a rare move for cities to virtually give away land for single-family houses.

But city officials said they can make the case based on the current price-income imbalance.

“Affordable housing is one of the city’s top priorities,” San Diego spokeswoman Katie Keach said. “Because of the urgent need, this was an appropriate deal for the city and the community.”

In Lemon Grove, city officials see the nine extra homes helping a downtown revitalization push, said David De Vries, Lemon Grove development services director.

Also, both of the properties have troubled histories.

In Nestor, the city of San Diego was forced to pay $9 million in 1989 for the 16 former homes there after a city water retention basin overflowed and sent up to 6 feet of water rushing into living rooms. The land is still in a flood plain.

The city appraised the land at $35,000 for the Land Trust deal, taking into account the flood issues and lack of commercial interest in the lots.

In Lemon Grove, the city already had redevelopment money tied up in the land. A developer got a city loan in 2006 to build townhouses there, then defaulted.

Removing land price from the equation

Here’s how the model would work: The San Diego land trust gets ownership of the land and builds homes for sale — but keeps the land.

The sales price is pegged to 120 percent of the area median income or less. For a family of five, that’s an income of up to $102,750.

Qualified families buy the homes but only lease land underneath from the Land Trust. When owners want to sell, they can only sell to another family who meets the income requirements.

If there’s appreciation of the house’s value, the seller’s profit can only mirror the increase in the area median income over the same amount of time.

Some economists praise the land trust concept as having good intentions. But, they say it’s just a drop in the bucket for San Diego’s market, which is considered one of the least affordable in the nation.

“We need big. We need giant efforts,” said Gary London, a longtime San Diego real estate analyst. “The only way out of this hole is to build lots and lots of housing.”

Also, the restricted price cap on the Land Trust homes means the owners won’t be able to fully participate in real estate market rises. “Essentially, it’s just a fancy way of renting,” London said. However, they would still be able to take advantage of tax breaks open to homeowners.

Source: SDuniontribune by Jeanette Steele