In an effort to tackle America’s price-income imbalance in relation to housing costs, two Southern California cities have decided to sell city lots for $1 each to help tackle the problem.
The cities of San Diego and Lemon Grove will sell lots for $1 to a non-profit land trust that will build houses reserved for middle-class families.
The San Diego Community Land Trust will build 25 houses with three to four bedrooms across two sites in San Diego all suited to families.
While much effort has been concentrated on lower income housing, usually in the form of units for people on low incomes, there are also moves to make housing more affordable for the middle market.
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“We have made the decision to focus on moderate-income ownership housing. We see that as the real need,” said Jean Diaz, executive director of the Land Trust in a San Diego Union-Tribune article.
“What do you do for people who have a job -- may have two or three jobs to try to make it — and they are trying to build equity?” Diaz said. “Maybe it won’t provide as many roofs, but it’s a part of the market that deserves some effort.”
The land trust will get ownership of the land and build the homes for sale, but it will retain the land ownership. The sales price is pegged to 120 per cent of the area’s median income or less. For a family of five, that’s an income of up to US$102,750.
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Families who qualify will buy the homes but lease the underlying land from the Trust. When they sell, they have to sell to another family who meets the income requirements.
Maximum prices, for the new three- to four-bedroom houses, will be $350,000 in a county where the median home price is $540,000 and median individual salary of $55,000.
Construction costs and fees are estimated at about $212,500 per house. The difference would be used by the Land Trust for future acquisitions.
Whilst there is a restricted price cap on the Land Trust homes which would mean that owners would not be fully able to able to participate in market rises, some commentators have labelled this as a fancy way of renting, but owners would be able to access tax breaks open to homeowners.