Developer Breaks New Ground

Affordable Housing Finance
August 2006
by Donna Kimura

Oakland, CA – Oakland Community Housing, Inc. (OCHI), has found a way to create homeownership opportunities on small urban infill sites that are often tough to develop with affordable housing.

The E Street Project in downtown Oakland is the first multi-unit development built by the nonprofit organization under its Infill Homeownership Initiative, which uses manufactured housing to fill empty lots.

"We were able to identify parcels and get them built without front-end construction subsidy," said Dwight Dickerson, executive director of OCHI.

The four single-story houses stand on what was once a vacant, city-owned lot that people were using as a place to dump their trash. The site had sat empty for years, a sign of how difficult it was to build there using traditional approaches.

With a site identified, the issue for OCHI became building at a time when construction costs have been rising and subsidies shrinking.

One of the group's boldest moves was its decision to use manufactured housing. "It's a technology that's come a long way," Dickerson said. "These houses are state of the art."

That decision allowed OCHI to reduce construction costs by approximately 20 percent.

In general, manufactured housing means that sections of the home are constructed in a factory environment rather that built on site. Because these homes are built in a factory, there's more quality control and materials stay out of the rain, reducing mold and other problems. The pre-built sections are transported to a building site and then assembled, reducing the construction time.

Manufactured houses are not to be mistaken for trailers. They are built to Department of Housing and Urban Development standards and are installed on permanent foundations. The three-bedroom, two-bathroom E Street homes are difficult to distinguish from traditional stick-built houses. The craftsmans-style houses are helping dispel any negative stereotypes about manufactured housing. "These are real homes," Dickerson said. "They're not going anywhere."

OCHI also spurced up the neighborhood by building a new street and adding landscaping.

Most important, E Street is home to families that might not otherwise have been able to afford to buy a place of their own. The project is targeted to first-time homebuyers. Three houses were sold to families with incomes no more than 80 percent of the area median income (AMI), and two of them were below 50 percent of AMI. The fourth was sold to a family at 90 percent of AMI. The houses sold for approximately $390,000 each, well below the county's median home price of $575,000.

No site acquisition or constuction subsidies were used for the $1.5 million project. During the acquisition and predevelopment phase, OCHI used a $270,000 loan from the Nehemiah Community Reinvestment Fund and $57,000 through a line of credit from Washington Mutual. Wells Fargo provided an $864,000 construction loan as well as a line of credit.

To make the homes affordable, subsidies were provided directly to homebuyers in the form of deferred loans from the California Housing Finance Agency (CalHFA) and the city of Oakland Mortgage Assistance Program. Two buyers were Sec. 8 tenants who, through the Sec. 8 homeownership program, are applying their voucher subsidy to their monthly mortgage payments.

CalHFA mortgages have below-market interset rates, which allow buyers with low or moderate incomes to afford monthly payments. When combined with the Sec. 8 program, there is a deep level of affordablility for the houses.

OCHI has repeated the model to build more homes in Oakland. Since the E street project's completion, the group has sold eight other homes and has another eight under construction.

<-- Return to News menu