Sitka tackles affordable housing crunch: are high-priced homes keeping people from moving to Sitka? If so, are there solutions?

• Author: Swagel, Will

When prospective police officers, schoolteachers and nurses-even a candidate for executive director of the local conservation society-all turned down jobs in Sitka because of the lack of adequate affordable housing, city leaders turned their attention to what has been a long-brewing problem.

A decade earlier, Sitka landlords and homeowners feared that property values and rents would plummet when the town's largest private employer, the Alaska Pulp Corp. mill, shut its doors for good. There were shifts in population as a goodly number of former mill workers packed up and left Sitka, but the real estate market never sank as low as feared.

Sitka refocused its economy on seafood and became a center of both health care and education. Tourism exploded and there was a huge growth in the number of cruise ship passengers and charter sportfishing customers. Instead of falling, property values shot up.

Today, "people come in and say, 'I want to buy a house, I qualify for $250,000' and I have to tell them I have nothing for $250,000," says Nancy Davis, a Sitka broker and owner of Davis Realty. "They say, 'Okay, I love Sitka, what do you have in a rental?' And there's only a few out there."

INEVITABLE DEVELOPMENT

For the last 10 years, scores of complimentary magazine articles and television shows have put Sitka on the tourism map. As salmon fishing crashed off Washington and Oregon coasts, sport anglers looked north for better chances. Up and down the West Coast, coastal properties have soared in popularity as second and vacation homes, and in that market Sitka prices seemed moderate. Californians found they could buy a large, modern home on a private, wooded island for much less than a waterfront fixer-upper in Malibu or Carmel.

At Sitka's low six mil levy in property taxes ($1,800 annually for a $300,000 house) and with interest rates at all-time lows, expensive houses became an excellent investment and that's what Sitka builders erected. Building lots in Sitka are scarce and costly, which priced many potential homeowners out of the market and further encouraged the building of "executive" homes, priced at $500,000 and up.

Other forces affected the rental market. Tourism grew quickly throughout the 1990s, but hotel capacity didn't keep up. Scores of Sitka families responded to the opportunity by establishing bed & breakfast establishments in their homes-sometimes building multi-unit additions for just that purpose. And they discovered that apartments...