That little eyesore could just be the next big thing

Though big builders are masters at finding space in highly developed areas to squeeze in urban villages and mixed-use complexes of 100-plus units, they generally avoid smaller lots that could hold two to 20 units.

Dubbed “orphan parcels,” these so-called infill sites lack the potential for high profits. Consequently, most of these sites in Los Angeles County fall to nonprofit builders if they are to be developed, says Joe Carreras, regional housing planner for the Southern California Assn. of Governments. Nonprofit developers, in turn, tend to put up multifamily dwellings rather than single-family homes.

But some for-profit developers, such as Pasadena-based Trademark Development and Edgar Bourne Construction in Monrovia, are finding ways to use these orphan parcels to create small, single-family homes -- some qualifying as price-reduced housing for buyers earning 80% to 120% of the median income.

Such projects can enrich a community by softening hard urban edges with single-family homes. Rather than neighborhood eyesores -- vacant lots or dilapidated stores -- the parcels become desirable spots.

Trademark Development partners Dan Akins and Joel Bryant have been friends since they met on a Pop Warner football field in middle school. Now with master’s degrees in real estate development from USC, they’ve found a niche developing small houses on infill sites.

Trademark’s houses average 1,600 square feet, about 800 square feet less than the national average for new homes. The firm has developed two orphan parcels in northwestern Pasadena -- two-home and four-home Craftsman-style developments -- and is about to break ground for six units on the site of a former liquor store.

Two of the six homes, ranging from 1,450 to 1,790 square feet, will be available to qualifying first-time buyers as affordable housing, selling in the mid-$200,000s. The rest, priced in the high $400,000s, are designed to meet the needs of workforce housing, the “niche between affordable and market rate,” Akins says.

Ten years ago, Pasadena created extensive guidelines to ensure that small parcel infill developments fit the scale and density of their neighborhoods, with particular attention paid to concerns about increased density when one house is replaced with multiple units.

These days, such developers are having a more difficult time in Pasadena because there are few vacant or underdeveloped lots, says Richard Bruckner, director of planning and development for the city.

That has left builders such as Trademark Development and Bourne Construction looking east of Pasadena for more opportunity.

A year and a half ago, Trademark completed four Craftsman-style units in Glendora on a lot that formerly held a single, dilapidated house. The homes, ranging from 1,640 to 1,750 square feet, sold for $460,000 and $469,000.

And Trademark will break ground soon on a larger development in Azusa. Fourteen Spanish-style single-family homes will take the place of a car dealership and several rundown rental units. The homes, ranging from 1,650 to 1,720 square feet and selling in the mid- to high $400,000s, will provide reduced-price workforce housing.

Edgar Bourne, a contractor and developer in the area since 1986, has also found a niche developing orphan parcels.

“The large developers do thousands of units a year, medium-sized businesses will pump out 200, but I do about 20 houses a year,” Bourne said.

Like Trademark, Bourne’s company builds single-family homes of less than 2,000 square feet and frequently works with cities to provide affordable-rate housing.

He has concentrated on projects of two to six single-family homes in Monrovia, his hometown, but will break ground July 15 on a 14-home development in what he called a “formerly drug-infested area” of the city. The project includes three affordable-rate units; the remaining market-rate homes will sell in the low $500,000s.

How can some developers build single-family homes on orphan parcels, meet community needs for reduced-price housing and still profit?

Taking advantage of federal and state housing tax credits and other incentives offered to builders who incorporate price-reduced homes in their projects, such as easing the zoning rules or expediting the permit process, can help.

Developers, said Raphael Bostic, director of the master’s real estate development program at USC, “have to understand how it fits into the broader community.”

In addition to working with redevelopment agencies, Bryant of Trademark said that low overhead and close proximity to the projects help make them financially feasible.

Added Nicolas Retsinas, director of Harvard University’s Joint Center for Housing Studies: “If you can find a parcel in which the community underwrites part of those costs, then the economics can work.”