We have spent many years and resources on a nebulous term known as “Affordable Housing.” Affordable to who? Let’s face it: Housing in Juneau and basically the whole west coast is expensive. Of course, Juneau stands out as we live in the middle of a national forest, land is scarce to build on, materials cost a fortune to be transported here and labor costs are high.
Now the City and Borough of Juneau Assembly is being asked to approve a sale of property in the Pederson Hill area. The lots are limited in size to 5,000 square feet to keep the price down and the goal seems to be to build housing below market cost and “assist” families in the dream of owning their own home. However, the report states that these lots are for sale to the general public without any mention of the cost to Juneau tax payers.
The projected cost for infrastructure and permitting per lot is approximately $110,00, the lots are being proposed for sale for $105,000 to $115,000. Where is the land cost? If we are subsidizing this then why subterfuge?
The report goes on to say that house here will sell in the $250,000 to $300,000 range. We must be talking cottages, not houses. Take the price of the lot off and you are left with $150,000 to $200,000 for construction at a conservative $200 per square foot and we are talking less than a 1,000 square foot house. This price with the city basically carrying the burden of land cost.
How is this good for Juneau?
Selling CBJ land is always good as it puts more land into public hands and property taxes into CBJ revenue. However, selling property for less than market value is unfair to current homeowners. This means you and I are subsidizing a development project. Making 89 lots available is great news; however, if I have to pay for some of them through my taxes I want to know what the end game is. Is CBJ competing with private industry? Or did we just forget to announce that another low income “Affordable Housing” project was about to be attempted? I understand that local governments often support housing projects by donating land or lowering property taxes for a set amount of time. There are many federal programs that also assist with housing costs. But what are we attempting here? There is no mention of subsidy or grant funds. Just a “here are some lots at below market cost, have fun.”
The city will compete not only with larger land owners trying to move forward with projects, but also with private individuals who have a lot or two as part of their retirement plan and may not be able to sell them in a down market if the city is competing with them. Is this the best use of our taxes in a tough revenue environment? Subsidized building lots being sold unrestricted in the open market will impact the value of all vacant land in Juneau. Developers will not seek to buy land for development from current owners. Rather, the private sector will take a cautious stance to wait-and-see how the city’s new involvement in the market will play out.
If the city spends $8.8 million developing Pederson Hill, it should be sure to account for the time-value of the money invested. Items include lost interest, no taxes collected as lots remain unsold, and the cost of snow removal and street maintenance.
Why not just call it what it is and let the Assembly decide if we should invest here. Why are we hiding the facts? If we are building small houses on expensive property, then just say so.
Historically, the private sector has tolerated government-subsidized housing since it does not compete head-on with the free-market. It seems, with Pederson Hill, the city will be subsidizing a project with the intent of competing unfairly in the free-market. If the city subsidizes housing it should be income restricted. Local homeowners, as well as developers and builders, can tolerate the city subsidizing the Pederson Hill project only if it is restricted to lower-income buyers.
• Chuck Collins is a Juneau resident of 28 years, former business owner and still-involved citizen. He works as a business consultant and HR coach.
