Here's what happened to those 100 lots Newark gave away last Valentine's Day

By Dan Ivers | NJ Advance Media for NJ.com
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on February 15, 2016

The lots at 477, 479 and 481 15th Avenue in Newark. For $1,000 a couple can buy one of 100 vacant lots in Newark from the city. The Valentines Day deal is as long as they build on the property and live in it for 5 years

 

NEWARK — This time last year, John Errico and Shannon Guy took what they believed would be the first step toward their shared dream.

Newly engaged, the two attorneys spotted news clippings detailing vacant lots in Newark being offered for just $1,000 each as part of a couples-only Valentine's Day sale. They were among the first to arrive at City Hall that morning, and jumped at the chance to build on a small plot on Garside Street in the city's North Ward.

"It was an emotional decision," Errico said. "We wanted our forever home."

A year later, the purchase that seemed too good to be true has been just that.

Not long after claiming the property, Errico's father was diagnosed with cancer, raising the possibility he and Guy might need to relocate to Florida. They soldiered on, but by December, it had become clear that building on the lot made little financial sense.

While construction for the three-family home they envisioned would have required a loan of at least $250,000, properties just up the road from their tract were selling in the high five figures.

"We didn't really drill down into what are the actual financials of it (at first)," Errico said. "It was kind of hard to swallow spending $300,000 or even $350,000 to build a new home, when you can get an older home for $90,000."

Errico and Guy's story is not unique.

They are among 21 couples (or former couples) who have walked away from the Valentine's Day properties. Dozens of others have found their own hopes delayed by difficulties securing construction loans.

As of Sunday, only five couples who forked over an initial $500 last Feb. 14 have officially closed, though city officials say another seven are in the pipeline. Eleven others have received approvals to begin construction, but are still pursuing loans.

Allowing for two other properties that had to be pulled back after city officials realized they were zoned for commercial use, that leaves 54 lots.

The owners of those 54 total lots have struggled, officials say, to navigate the financial and governmental channels needed to start building.

The city did not require proof of financing until home designs and site plans were approved, and despite the immediate equity gained through the cheap purchase, most buyers found themselves unable to secure financing to put shovels in the ground.

"We're still in an economy that's post-recession, and it's really hard for the average Joe to get a construction loan," said Baye Adofo-Wilson, Newark's deputy mayor for housing and economic development.

The city, however, is not prepared to cut bait on what it considers a vital part of its plan to attract new residents and encourage growth outside of downtown.

On Sunday, officials announced a second phase of the sale, which will enlist the Newark Community Economic Development Corporation to guide many buyers as they look to obtain architectural renderings, construction documents and approvals from city boards.

In many cases, the lots will be sold to a handful of developers, who will build one and two-family homes for sale back to owners at $179,000-$249,000. The 21 lots already returned to the city will also be sold to a local developer for sale back to the public.

Initial agreements signed with buyers require construction to begin within 18 months of closing on the vacant lots, and owners must live in the property for a minimum of five years once the home is built. Adofo-Wilson said that while a handful of lots are on track to meet the requirements, the city has shifted its focus to encourage construction regardless of pace.

"Our goal is to sell all the city-owned lots that we can sell. We believe that's true economic development. It doesn't really make sense for the city to hold these lots," he said. "We learned from the experience."

Some experts, however, say whatever lessons were learned in the past year were there all along.

Alan Mallach, a senior fellow at the Washington, D.C.-based Center for Community Progress and one of the country's most prominent experts on blight, said it came as little surprise that couples attracted to a one-time shot at a cheap vacant lot might lack the resources or wherewithal to navigate the complex process of building a home from scratch.

"That requires a fair amount of time and a fair amount of expertise, and if you don't have the expertise yourself, you have to go out and buy it," he said.

Mallach added that banks were likely to be skeptical about providing large loans to build homes in Newark, where the median price of a home stood at about $115,000 in 2014.

"Why would they want to go through all this trouble when they can take that money and buy a house that already exists?" he said.

"The city really comes out okay. The question is a lot of the people who got sort of drawn into this, may not be coming out that well."

The city, however, maintained that the sale was a success, and would not rule out holding similar events in the future. The offering attracted coverage from media outlets around the country, and Adofo-Wilson said the newest phase served as proof that interest in revitalizing long-neglected Newark neighborhoods is running high.

"We have banks that are lined up," he said. "We've really been able to enhance interest in the market."

While officials admit the process has not gone precisely as planned, they are able to point to a number of success stories they hope will ultimately grow as the months pass.

On a long-barren patch of land on 18th Street, a pair of Kean University students are building a home they hope to donate to a homeless family.

On North 13th Street, Leonardo Gomez stops by regularly to help build the foundation to a two-family home he believes he'll one day share with his wife and two children. The co-owner of a development company, 3 Brothers Construction, he is currently working without a loan, though he said he does not believe any of it would be possible without the opportunity to acquire the land at such a low price.

"It's good for us, to get it for this price. For closing, you need to spend a lot of money," he said. "We hope to have our own property. Our own house."

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