Central Falls built 2 houses. Now they're selling them below cost via a lottery.

CENTRAL FALLS − On Saturday, prospective buyers will walk through 12 Hood St. in Central Falls, touring a new, energy-efficient Colonial-style house built by the city and being sold for $389,000 – much less than it cost to build.

Assuming more than one person puts in an offer on the firm $389,000 price, the buyer will be chosen through a weighted lottery, where preference will be determined by few factors, including being a Central Falls resident and being a first-time homebuyer.

With four bedrooms, two and a half bathrooms, nooks, crannies, a deck, a finished basement and a yard, the house, city officials hope, is a dream for a family that wants to own a home.

A house on an adjoining lot, at 229 Washington St., is already under contract after only one eligible offer was put in.

A walkthrough of the available home

Inside the Washington Street house, the kitchen and pantry open into a combination dining room and living room. Go up the stairs and you start encountering some of the four bedrooms in the house. There is a fifth room in the house, large enough to be a primary bedroom, except it has no closet.

There are full bathrooms on the second and third floors, with a half bathroom on the first floor. The walkout basement, with a washer and dryer still in boxes waiting to be hooked up, exits onto a patio underneath the deck.

The houses, both in the Colonial style, fit right into the surrounding neighborhood, Central Falls Planning Director Jim Vandermillen said.

Initial plans had been to put three houses on the two lots, but projected costs came in too high, and so the city switched to two houses, he said.

House will be deed restricted as owner-occupied

The two new homes are part of Mayor Maria Rivera's push to create more housing in Rhode Island's most densely populated city. City officials said Rivera is focused on housing diversity, which means the two single-family homes are part of a larger plan for the city.

In an emailed statement, Rivera wrote that the houses are an "amazing" addition to the city, are part of a plan to add more housing and will make home ownership a reality for more people in the city.

On Broad Street in Central Falls, a former courthouse is slated to be transformed into 17 apartments, while a former Dunkin' and parking lot are to be torn down and replaced by an apartment building.

The two houses are being sold with a deed restriction that they must be owner-occupied for the first five years, although city officials said they hope that families occupy them for much longer.

Houses sold well below cost

Each house is being sold for $389,000, which is well below the construction cost. The acquisition cost of the land was minimal, since the city acquired the parcels through a foreclosure and a tax sale.

The two houses each cost around $600,000 to build, with one slightly more expensive than the other because its heating system burns propane, which requires a tank and more construction to accommodate it.

To compare costs, the median price of a single-family home in Rhode Island in January was $441,750, up nearly 50% over 2019 prices.

Another way of comparing the price is this: the $389,000 selling price is 43% higher than the 2019 median price of around $250,000 but 13% lower than the current median price of $441,750.

The houses present two more home ownership opportunities in a city that has a very low ownership rate because so much of its housing stock is multi-family homes, Vandermillen said.

Construction costs way up since the pandemic

Most of that cost was the construction, both labor and materials, and the house plans were licensed at an affordable rate. They were originally created as part of an efficient house design program, said the city's housing consultant, Frank Spinella, who supervised the homebuilding.

The city used federal stimulus money to pay for the construction. Part of the high cost to build was using very high-quality materials that Spinella hopes will cut down on the cost of future maintenance, like high quality siding and a deck made of high-quality plastic.

Much of the high cost to build is the post-pandemic reality of construction, where both labor and supply costs are up significantly.

Energy efficiency means more materials

The houses are also very energy efficient, with Spinella estimating utilities will be 30% less than a typical house of similar size. That cost savings adds up quickly over the years, but in the near term, it means more material costs.

The architect designed the house to be as "tight" as it could be, he said.

"It's been our goal for the entire design process to make these homes efficient not only to build but to operate, so the residents aren't taxed as they're trying to build a family," Spinella said. "We don't want them to have to live for the home."

Construction apprentice program used for labor

Part of the program to build the two houses was using students in the Building Futures apprenticeship training program. Those students worked under the supervision of the general contractor to help with some of the labor on the two houses.

That pushed up the time to build from a year up to 16 months, but there was no mortgage looming over the project accruing interest, Spinella said.

"It was well worth it," he said, referring to the use of some apprentice labor.

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What happens if the house goes to a lottery?

If there is more than one eligible buyer, everyone is graded on a point system, where each attribute is worth 25 points, and whoever has the most points is chosen as the buyer, up to 100 points.

If there are multiple buyers with the highest number of points, the family that gets to buy the house is chosen from that group by lottery.

Prospective buyers get 25 points each for each of these attributes:

• Being a Central Falls resident

• Having a family history in Central Falls or working in the city

• Being a first-time homebuyer

• Having a history of volunteering to help Central Falls residents

Page 1 of Lottery sheet 1

Contributed to DocumentCloud by Wheeler Cowperthwaite (The Providence Journal) • View document or read text

How to tour the house on Saturday

RE/MAX Innovations real estate agent Carlos Ocampo is handling the marketing and sale of the two houses.

While the Washington Street house is already under contract, the Hood Street house is still for sale. Ocampo will be running an appointment-based open house on Saturday. He speaks Spanish and English.

To view the house on Saturday, reach Ocampo at (401) 663-9625.

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Reach reporter Wheeler Cowperthwaite at wcowperthwaite@providencejournal.com or follow him on Twitter @WheelerReporter.

This article originally appeared on The Providence Journal: Central Falls sells two homes via a lottery system. Here’s how it works.