Four years ago, Helen Michelson died and gave three houses near Monument Valley Park to the City of Colorado Springs, but the bequest came with some unusual conditions.
Michelson’s will required that the city move the cottages and add the land to Monument Valley Park.
In retrospect, the city might have looked this particular gift horse in the mouth.
In exchange for adding less than one-third of an acre to a park which includes more than 159 acres, the city lost three downtown housing units, and has thus far spent $355,881 to move and renovate two of the three cottages. Most of the money was provided by federal urban redevelopment grants.
Meanwhile, the lots from which the cottages were moved remain vacant and unkempt.
The process of moving, renovating and selling the cottages has been a lengthy one.
The Housing and Community Development Division purchased a 10,800-square-foot lot near the corner of 21st Street and Platte Avenue for two of the cottages for $65,867 during January 2005. The cottages were moved on March 23, 2006. Seven months later, renovation began. Work on the first cottage was completed on May 21, 2007; work on the other on Aug. 10, 2007.
City Councilman Scott Hente, who is a homebuilder, said that new construction usually takes about six months.
“But renovations can take a lot longer — you’ve got old construction, code issues,” he said. “We actually did a renovation on a house that had been moved, and it took longer than building new.”
Told that moving and renovating the cottages would eventually cost the city more than $500,000, Hente smiled and shook his head.
“Maybe we should have turned down (the bequest),” he said. “But hindsight is always 100 percent.”
Park and Recreation director Paul Butcher remembers the Michelson bequest well.
“I called up (redevelopment director) Valorie Jordan, and asked her if she could use the houses,” Butcher said. “She said yes, so we just turned over the project to her.”
That’s not exactly the way Jordan remembers it. In her recollection, the houses were handed over to her department, and she arranged for them to be moved and renovated.
“But Paul might be right,” she said, “it was a while ago, and I wasn’t the department head then.”
The cottages are now being offered for sale, but with a catch.
Only first-time home buyers who make less than 80 percent of the area median income ($43,000 for a family of four) are eligible.
One of the cottages is 2,500 square feet and has four bedrooms and two baths. Its asking price is $225,000. The other is 2,000 square feet and has three bedrooms and two baths. Its asking price is $203,000.
The Rocky Mountain Community Land Trust (RMCLT) is subsidizing $94,500 of the cost of the larger cottage. The smaller cottage has similar terms. That means, Tankersley said, that the effective price of either to a qualified buyer is about $120,000, with a monthly payment, including taxes and insurance, of about $1,000.
“The Trust contributes a financial investment (provided by the city and other public entities) that lowers the financial burden for the low-income household,” Jordan wrote in an e-mail. “The Trust and the homebuyer share ownership and equity in the property over time. At the next sale, the Land Trust applies its share of earned equity and initial investment toward assisting another low-income household in the purchase of the property.”
The RMCLT was created for the purpose of assisting low-income families to own homes. Its activities are supported almost entirely by federal affordable housing programs.
Given the amount invested in the two properties, it seems unlikely that the land trust will see any “earned equity” for many years. Judging by comparable homes for sale on the west side, the cottages are more than fully priced.
Realtor.com listed 64 single-family residences for sale in the 80904 ZIP code with asking prices of less than $200,000.
Houses that appeared to be comparable in size and location, if not in condition, were available for between $114,900 and $150,000.
For $181,900, a potential buyer could acquire a renovated, landscaped three-bedroom, two-bath house on a 7,800 square foot lot, situated on a cul-de-sac which backs up to open space, with an attached garage and a finished basement.
With 2,580 finished square feet, the house is larger than either of the cottages, neither of which has a garage, and there is not enough space to add one.
RMCLT’s programs are designed to enable low-income families enter home ownership, and obtain equity. To create equity, program homes must be fairly priced in a rising market.
But what happens in a stagnant market, especially if the homes are overpriced, as the cottages appear to be?
Bob Koenig at RMLCT believes that the prices are fair and appropriate.
“All I can tell you is that we had the houses appraised, and then re-appraised, and that’s what the appraiser told us.”
The cottages can only be re-sold to a buyer who qualifies for the same affordable housing program. Sellers who remain in the house for five years are entitled to 37.5 percent of the net gain upon sale. If there’s no gain, the seller gets nothing.
If the cottages are overpriced, especially in a flat market, program participants might end up paying significantly more in mortgage payments than they would in rent and, even considering tax benefits, lose from their participation in the program.
If the ultimate goal was to provide affordable housing to as many families as possible, as well as strengthening lower-income neighborhoods, would the community have been better served by investing $50,000 in each of 10 properties, rather than investing $500,000 in three properties?
None of the participants was willing to comment about that option on the record.
But one senior city official, who asked not to named, said that once the city accepted the bequest, it had no choice.
“Sometimes reasonable people executing reasonable plans can’t see that things aren’t going to work out, and so they just keep going, even though it doesn’t make much sense,” he said. “But what were they going to do — move the houses, and not renovate them, or just leave them there to rot?”