The SPPF Proposal for Caltrans Surplus Homes

The South Pasadena Preservation Foundation (SPPF), founded in 1972, is a 501(c)(3) nonprofit organization with an all-volunteer, elected board of directors and membership open to everyone, believes that the goals of historic preservation and the creation of affordable housing to address pressing housing needs can work together in support of each other.

Our stance on Caltrans homes from day one has been that proceeds from their sale be used to fund affordable housing within the City. Our plan, outlined below, shows the sale of Caltrans surplus properties represents the best opportunity to turn what has been a blighting influence on the community into decent, safe, and sanitary housing throughout the city across all income levels.

How We Got Here: The 710 Freeway Fight

Some 75 years ago, the state had a plan to divide South Pasadena with a freeway. Homes were bought by Caltrans to clear the way for the seemingly inevitable 710 freeway extension. But committed residents, City government, SPPF, and many other groups fought to save the homes, the character, the trees, and charm of our City, Pasadena, and El Sereno from being lost to a river of concrete and cars. A 1973 injunction stopped Caltrans from buying any more homes or demolishing any they had already purchased. Ultimately, the freeway plans were dropped.

The Situation Today: The Last of the Freeway Legacy

The 66 Caltrans surplus homes and multi-family structures that have endured are a mix of vacant and rented properties within the City of South Pasadena that are the legacy of that fight. Homes that once belonged to South Pasadenans are now owned by the state, which pays no property tax on them. This represents the final chapter in our collective decades-long preservation battle to help ensure those homes are returned equitably, efficiently, and in a cost-effective way to our neighbors—not developers or outside investors. Many homes are occupied by families who have lived there for decades. Others are vacant, dilapidated and need significant repair.

The Future: What SPPF Proposes Should Be Done Next

SPPF has a clear, straightforward plan to return these structures to South Pasadenans In fact, the plan has previously been successfully implemented by the City in 2000 to facilitate the purchase of a dilapidated Caltrans property at an affordable price. The family that purchased and restored the home still lives there today.

We recommend these three steps be part of a negotiated settlement with Caltrans:

1. Vacant houses, multifamily buildings, and lots: For the non-historic vacant single-family houses, vacant multifamily buildings and vacant lots, we propose the same established, straightforward, self-funding partnership and sales and rehabilitation process as was used in 2000 is the fastest, easiest, and least expensive means for selling these properties.

• Caltrans, the City, and the qualified homebuyer enter into an escrow with the homebuyer supplying the funds to purchase (at a price determined by Caltrans and the City) and rehabilitate the property. There are multiple names for this process, including concurrent, double, pass-through, or side-by-side escrows. (As defined by Caltrans, “Double escrow sales involve two contracts of sale for the same property, to two different back-to-back buyers, at the same or two different prices, arranged to close on the same day. At close of escrow, all participants, lenders, sellers, buyers and brokers are informed of all parties involved and all monies that change hands.”)
• Those proceeds from the sale, minus the acquisition price, would go into the existing SR 710 Rehabilitation Account administered by Metro and the California Transportation Commission (CTC) and would go to fund implementation of the City’s housing programs, including increasing the supply of much-needed affordable housing.

2. Tenant-occupied houses and multifamily units purchased by tenants:

• For single-family homes, every effort should be made to encourage tenants to purchase their homes as currently permitted under existing state law
• For multifamily buildings, tenants should be encouraged to form a common-ownership entity to purchase the building
• To support these tenants and improve the odds of a successful outcome, the City, working with local lenders and nonprofits, should provide support services and education to help low-income and first-time home-buyersnavigate the sales process

3. Tenant-occupied houses and multifamily units notpurchased by tenants: For any homes or multifamily units currently being rented for which the current tenants choose not to buy the property,

• The City of South Pasadena should acquire these propertiesthrough the City’s Housing Authority for the tenants to rent, as required by state law

Historic Homes Are Protected in this Process

As required by state law, no sale of a national or state historically significant house can be completed without a preservation covenant. Several of the houses owned by Caltrans are determined to be significant historic properties, eligible for national or state designation programs.

To ensure that the character defining features that make them historic are not lost or inappropriately altered after Caltrans sells them, a preservation covenant, drafted by Caltrans, is recorded on the property to identify those historic features. At the time of sale, the covenant is assigned to SPPF, as approved by Caltrans, to administer going forward.

For this service, SPPF collects a stewardship fee from Caltrans. This fee goes directly into SPPF’s general fund and used in support of SPPF’s mission and programs, such as the South Pasadena Historical Museum. SPPF currently holds seven preservation covenants on properties previously owned by Caltrans. An annual inspection of these properties is done to ensure historic character-defining features are being maintained.

These Vacant Homes Are Full of Opportunity for Everyone

As noted above, Caltrans does not pay any taxes on the 68 properties it owns. Nor would any government or nonprofit entities buying the homes. Private owners would pay taxes, which is why we encourage homeownership.

A recent analysis by SPPF of eight of these vacant addresses (six single family homes and two multifamily buildings; six non-historic and two historic structures) demonstrated they would produce an average first-year property tax revenue to the City of roughly $4,750 per property. Extrapolating this average to all vacant properties results in a windfall of $109,250 for the City in the first year the properties are returned to private ownership.

Furthermore, the same analysis showed that, assuming purchase of these properties at the Caltrans acquisition price, there would be insufficient residual net income left over for the City to accomplish a complete rehabilitation of nearly all the structures, whether for low- or moderate-income housing. This means no money would go into the SR 710 Rehabilitation Account to be returned to the City for affordable housing.

In addition, if the unoccupied historic and non-historic house sales were facilitated by the side-by-side escrow process, their sale would net approximately $20 million in proceeds. Likewise, the sale of the occupied homes to their tenants, which would mostly qualify as affordable housing sales, would yield considerably more in proceeds—proceeds we believe should be directly and specifically allocated to implementing the 17 different housing programs the City intends to carry out in its current housing element. We believe there is a clear and rational nexus between the proceeds realized from the City’s sale of the Caltrans properties and the implementation of the specific programs, including those to increase affordable housing opportunities, contained in its housing plan.

The Bottom Line

The freeway has failed to divide our city for the past 75 years. We see no reason for its ghosts to do so now. There is an equitable way to return these homes to South Pasadenans, including low- and moderate-income residents, and use revenue from the sales to fund the City’s initiatives for affordable housing. We hope the above will dispel some misinformation about our commitment to a South Pasadena that welcomes all and provide a clear statement of our plan forward.