Attorney: Former 710 Route Bargain Home Sales Not the Windfall Dream They Appear to Be

Renters offered chance to buy and own their homes at bargain prices -- but not really, not forever

Published : Monday, June 11, 2018 | 5:35 AM

The 42 homes along the former 710 Freeway extension route recently made available for sale by Caltrans to longtime Pasadena and South Pasadena renters will not be “sold” in the traditional sense after all, according to a local attorney who has been working with some of the families involved in the longtime issue.

Following media reports that the Caltrans homes would be offered to renters at bargain prices not seen in Southern California since the ‘70s, a local attorney close to the matter explained that the homes would not actually be “owned” by the purchasers, and would not stay in their families upon their deaths.

In addition,  according to Pasadena attorney Christopher Sutton, the new “owners” would have no real equity in the traditional sense, either based on the longtime rents or the new lump-sum purchase price.

These owners could never “cash in” his or her newly purchased home by selling it to reap a windfall profit, Sutton said.

Instead, said Sutton, “On the current system, each house will be given a fair market value, and then, whatever the tenant pays below that will be a lien held by the California Housing Finance Agency, not Caltrans,” Sutton told Pasadena Now Friday.

As Sutton explained, “If the tenant sells in the first year, the only amount that the tenant would get back would be the amount they paid. In the second year, the tenant would receive 20% of whatever appreciation there is on the whole value of the property. They wouldn’t get the big difference in equity.”

“And then after 5 years,” Sutton continued, “if the tenant sells at market value, the tenant would get 100% of the appreciation, but not the major part of equity. So the example would be that if a property’s worth $800,000 and the tenant pays $100,000 and then they wait 5 years, then the property sells for $850,000. The tenant would then receive back $150,000 and the California Housing Finance Agency would receive the $700,000 difference.”

According to Lauren Wonder, chief of the Office of Public Affairs and Media Relations Caltrans District 7, Los Angeles, “(Caltrans used) an adjusted basis based on inflation. The affordable homes were adjusted by the consumer price index. So it was an adjusted acquisition price and that was a determination that was made at a higher level.”

Wonder said she assumed that prices were adjusted by Caltrans  “to be fair to the public funds that we use to buy the homes.”

Wonder added that prices were also adjusted based on the income of the longtime renters. One 1,174 square-foot home with a market value of $814,000, reportedly sold for $150,660.

Attorney Sutton said some of the tenants just wanted to get on with their lives after decades of difficulty.

“The reason why eight of the 13 tenants agreed to pay the (adjusted) higher price was they were able to, and they basically quite frankly said, ‘We will do anything that we can to get this abusive agency, Caltrans out of our lives forever,’” he said.

The homes sat on properties that were originally destined to be eliminated with the extension of the 710 Freeway, a project which was killed off by Caltrans and Metro last year. Thirteen former renters have already accepted offers from Caltrans. The total number of homes would stretch from La Canada-Flintridge to Pasadena and South Pasadena, and Alhambra, as well as the El Sereno neighborhood of Los Angeles.

The first six properties approved for sale by the California Transportation Commission on May 17, according to records, were 2011 Cambridge Place, South Pasadena; 910 Bonita Drive, South Pasadena; 852 Monterey Rd., South Pasadena; 265 Waverly Drive, Pasadena; 532 Meridian Ave., South Pasadena; and 385 Havendale Drive, Pasadena.

While at least one homebuyer told the Pasadena Star-News that it “felt like she had won the lottery,” none of the homebuyers contacted by Pasadena Now would comment.

Mayor Terry Tornek, a longtime critic of Caltrans’ handling of the properties, minced no words Friday, saying, “The Caltrans ownership of these historic homes in this 710 corridor has been an unmitigated disaster, and it’s an agency that really is not equipped to be long-term property owners and managers, and is now trying to extricate itself from a task that it had never really wanted to begin with.”

Concluded Tornek, “This is a very labor-intensive enterprise that has to be managed very skillfully, and it’s going to be a real challenge for Caltrans to carry this on.”