Cordova weighs a model where you own the house but lease the land

You own the house. Somebody else owns the ground under it, and you pay them $50 a month for it. The Sitka Community Land Trust says that arrangement takes about $100,000 off what a home costs, and it brought the idea to Cordova last week.

Randy Hughey, the trust's executive director, laid it out for Cordova's Housing Supply Accelerator Committee on Aug. 25. The city donates the land. A Rasmuson Foundation subsidy covers site work and utilities. What's left — the contractor's bill, construction financing, a development fee — comes to $280,000 for an 1,150-square-foot house. The buyer leases the ground for 99 years and has to earn under 120 percent of the area median income, a test repeated every time the house changes hands.

The part worth arguing about is what happens when you sell. The owner keeps whatever equity they've built plus a quarter of the rise in appraised value. The other three quarters stay with the house, which is the mechanism that keeps it affordable for whoever comes next. Sitka's only resale so far handed about $37,000 to an owner who had been there two years. The house went back on the market at $305,000.

Ken Jones, a committee member who rehabilitates derelict Cordova properties, said the formula was built for cheaper money. "If you have somebody who gets it now at 6% or 7%," he said — and these are nontraditional loans that don't get conventional rates — an owner holding past four or five years could end up with negative equity. He suggested letting sellers keep half instead of a quarter.

Hughey said land trusts have worked around the country since the 1970s and that one resale in Sitka cannot settle the question. A larger seller share, he said, pushes up the next sale price and narrows the pool of people who can buy. He acknowledged some banks decline these mortgages because the lender does not hold first claim on the land, though First Bank in Sitka writes them.

Sitka has built 14 homes this way. At the Halibut Point Road neighborhood, five are occupied, one is going up and two more are planned.

Cordova's committee decides nothing. It advises, with members the mayor nominates and the council confirms. Mayor Kristin Smith mentioned a narrow tract above the cemetery on Lake Avenue that has neither road access nor utilities. Another member raised the Davis Avenue hillside. The committee meets again Oct. 6.