Six units of affordable housing that were supposed to be constructed in a subdivision of market-rate townhouses finally will be built — years after the subdivision was approved.

Six units of affordable housing that were supposed to be constructed in a subdivision of market-rate townhouses finally will be built — years after the subdivision was approved.

On Tuesday, an Ashland City Council majority voted to pass $163,142 in federal grant dollars to ACCESS Inc. to buy 0.39 acres of land and pay predevelopment costs for the six affordable housing units. The purchase price of the land is $135,900, including closing costs.

ACCESS is seeking other funding, such as state grants, for the actual construction of the units in Ashland.

In 2003, the city of Ashland approved developer Russ Dale's request to have a 5-acre property near Dollarhide Way and Abbott Avenue annexed into the city, on the condition that he provide six units of affordable housing. Instead of being able to build one home on the 5 acres as allowed under Jackson County rules, he was able to build 35 market-rate homes inside the newly expanded city limits.

Dale built the market-rate townhouses, which were priced at up to $389,000, but didn't build the affordable units.

In response, Ashland changed its annexation rules in 2008 so that a developer must build affordable homes in concert with market-rate homes, rather than leaving the affordable housing construction for last.

Dale said this week that only two-thirds of the market-rate homes had sold when the housing market collapsed. Would-be home buyers were unable to get financing.

Dale said the property has gone to PremierWest Bank.

In the past, Dale tried to team with local nonprofits to get federal housing grant money via the city of Ashland to build the affordable housing in the subdivision.

However, the Ashland Housing Commission and City Council twice rejected his plans because he wanted to sell the 0.39 acres for $425,000 the first time, and for $170,000 the second time to nonprofit groups.

On Tuesday, City Councilors David Chapman and Michael Morris said they thought that ACCESS could still be paying too much by giving $135,900 in federal funds to the bank that owns the land, given that only affordable housing can be built there.

ACCESS Housing Director Cindy Dyer said on Wednesday that her organization will have an appraisal done on the land now that the federal funding is available to buy the property. ACCESS is not legally able to pay more than the appraised amount.

If an appraiser decides the land is not worth the asking price, the bank has the option of selling the land for a reduced amount, or not selling the land to ACCESS, Dyer said.

Given the current real estate market, Dyer said she is hopeful the bank will be motivated to sell the land even if the price has to be reduced.

Dale said Ashland's requirement to provide affordable housing when land is annexed is a bad idea because it raises the cost of market-rate homes for buyers.

Dale said the city should not be in the business of providing affordable housing, especially now, when the housing downturn and foreclosure crisis have created a glut of low-cost homes.

"The valley is swamped with houses that sit vacant," he said. "It's exacerbating an already challenging market."

Dale said the empty 0.39 acres in the subdivision should be turned into a wetland.

The median home sales price in Ashland was above $400,000 five years ago, but has since plummeted to $230,000 for an existing home. Sales of new homes are practically nonexistent these days, according to the Southern Oregon Multiple Listing Service.

Throughout Jackson County, homes in foreclosure or in pre-foreclosure made up 59 percent of sales in the first quarter of this year, but only 14 percent of the sales in Ashland, said Roy Wright of Roy Wright's Appraisal Service, Inc. in Medford.

City Housing Program Specialist Linda Reid said the cost of buying a home in Ashland is still high in comparison to wages. She said rents are not excessively high.

"I think people who have been displaced by foreclosure still need housing that is affordable. If we want to address homelessness, most research shows that affordable housing is the long-term solution," Reid said.

Also on Tuesday night, the City Council awarded $30,000 in federal grant dollars to St. Vincent de Paul for a program that helps keep people from becoming homeless in the first place by offering rent and utility assistance.

Staff reporter Vickie Aldous can be reached at 541-479-8199 or vlaldous@yahoo.com.