Several years have gone by and developer Russ Dale has yet to build six affordable apartments as required by the city of Ashland.
In 2003, the city approved Dale's request to have his five-acre property annexed into Ashland. Rather than being able to build one house on the land as allowed under Jackson County rules, the annexation allowed Dale to build 35 houses that could be sold at regular market rates.
The homes, built in a townhouse-style with no space or side yards in between, sold for $358,000 to $389,000, according to Dale. He said nine or 10 of those homes have still not sold.
As a condition of the annexation, Dale was required to build six affordable units as well.
The land remains an empty dirt lot where those affordable units are supposed to go near the intersection of Dollarhide Way and Abbott Avenue.
"The city's affordable housing requirement for annexation does not take into account real economics," Dale said. "It doesn't work. They make an assumption that there is a great deal more profit than there is. It's not based on economics."
He said he has not made any profit on the subdivision.
Without access to Dale's books, Ashland Senior Planner Brandon Goldman said he's not in a position to say whether the developer made any profit on the market-rate homes.
Goldman said Dale should have included the cost of the affordable housing as part of the overall cost of the subdivision, rather than building all the market rate housing and then leaving the affordable units undone.
Twice Dale has teamed with local nonprofits that provide affordable housing to try and get federal housing money to fulfill his obligations.
Each year, the Ashland Housing Commission makes a recommendation to the Ashland City Council for how it should award that federal money that flows to the city.
Twice the Housing Commission and City Council have turned down proposals to give the federal money to nonprofit groups so they could buy the 0.39-acre affordable housing property from Dale. The nonprofit groups would have built the affordable housing themselves.
Goldman said Dale can satisfy the annexation condition by either developing the affordable housing himself, giving the land to a nonprofit group that would build the housing, or selling it to a group that would build the housing.
In 2006, Dale tried to sell the land for $425,000 to the Medford-based housing organization Rogue Valley Community Development Corporation. RVCDC sought $360,800 in federal housing money through the city to help fund the purchase, but was denied by the City Council.
In a 2006 e-mail to RVCDC, Teresa McCants of Peak Realty Group said the value of that size of property would be $460,000 if it could be developed with regular single-family houses. She said the land was even more desirable because land for apartment construction was hard to find in Ashland.
But city staff raised doubts about whether Dale's property was really worth $425,000, given that only affordable housing could be built there.
City staff pointed out that RVCDC had recently bought a 0.35-acre piece of property where six housing units were allowed. That land did not have any restrictions attached that only affordable housing could be built there. RVCDC paid $350,000 for that land.
Speaking this month, Dale acknowledged that he tried to sell his 0.39-acre property to RVCDC in 2006 for the full market rate.
"That was a market rate value if I could have put on market rate homes," he said. "That's what I had in it. I would have liked to get my money back."
Rather than awarding the federal grant money to RVCDC to buy Dale's land, the Ashland Housing Commission recommended different projects and the City Council also agreed to fund other projects than that proposal.
On April 7, Rogue Valley Habitat for Humanity asked the City Council to give it $164,000 in federal housing money to help it buy the land from Dale for $170,000. Again, the council decided not to award the housing money for that use and funded a joint city of Ashland and Jackson County Housing Authority housing project.
Rogue Valley Habitat for Humanity had asked Dale to donate the property to it rather than selling it the land, which Dale had declined to do.
"I can't afford to do that," he said.
Dale said he has more than $350,000 invested in the property, including land and infrastructure costs.
At a March Housing Commission meeting, Commissioner and former City Councilor Alice Hardesty said she believed Dale should have donated the land to a nonprofit because he has an obligation to create affordable housing there.
Rogue Valley Habitat for Humanity estimated the total project cost for it to build the six affordable units at $829,000, including if it had been able to buy the land from Dale for $170,000.
Each affordable unit would have sold for about $100,000, with each family that bought a condominium also contributing 500 hours of labor toward construction.
City Councilor Eric Navickas said he doesn't have an opinion about what specific amount Dale should be asking for the land, but Navickas said he believes it should be below market value because only affordable housing can be built there.
Navickas said he wonders about Dale's assertion that he didn't make any profit on the market rate homes and can't afford to build the affordable housing without help from sources such as federal housing money and nonprofit housing groups.
"I find that hard to believe. He was able to increase the density over the usual standard," Navickas said, referring to the annexation that allowed Dale to build 35 market-rate homes plus six affordable units rather than the one house allowed by county rules. "That should allow for profit, but I'm not looking at his books, either."
The 0.39-acre piece of property where the affordable housing must go is on the market with an asking price of $299,000, according to Konny Knecht of John L. Scott Real Estate. She discloses to potential buyers that the use of the land is restricted to affordable housing.
Closing the loophole
In October 2008, the City Council made changes to its affordable housing rules to prevent another incident like what has happened with Dale from occurring again.
Back in 2003, the city did not require a deadline for when Dale had to build the affordable housing as a condition of him winning the annexation.
Now, a developer can build half of the market-rate homes in a development in order to raise money from sales, but then must build half of the affordable units. All the affordable units have to be built before the market rate portion is finished, Goldman said.
"That change to the ordinance was in fact prompted by this incident," he said.
The city's ordinance is modeled after ordinances in 37 other states, Goldman said.
"It's very common for affordable housing to be built in a metered-in way with market rate housing," he said, noting that when it comes to developers getting financing for their projects, banks are familiar with the practice.
For his part, Dale said he will continue to strive to partner with a nonprofit housing group to try and provide affordable housing on the empty lot.
He said the city's affordable housing ordinance does not take into account how banks really finance projects.
"Affordable housing is created by the market place and it's not a legislative issue. The City Council should stay out of it," Dale said.
Staff writer Vickie Aldous can be reached at 479-8199 or firstname.lastname@example.org.