Phoenix To Developers Buying City-Owned Lots: Build, Don't Flip

By Christina Estes
Published: Monday, May 21, 2018 - 5:00am
Updated: Monday, May 21, 2018 - 8:43am

Christina Estes/KJZZ
Phoenix sold two vacant lots at the corner of Garfield and 11th Street to a developer planning to build houses.

As Phoenix continues selling city-owned properties to developers, leaders are paying more attention to the deals.

Before the latest vote to sell three vacant lots, Councilman Sal DiCiccio suggested a no flipping provision. It essentially says if you buy city-owned property to build a certain project, you need to follow through, not flip the land at a profit.

“This type of language just gives long-term protection to taxpayers, making sure that the city doesn’t get ripped off,” he said. “We’ve seen in the past where people have purchased properties from the city of Phoenix for a certain price and then they turn around and flip them.”

The council approved the language in a deal that calls for new houses to be built in the Garfield Neighborhood. Councilwoman Kate Gallego said the community has confidence in the developer, Diana James Community Partners.

“The community has had extensive meetings on this and has very high standards,” she said. “We’re excited that the proposer that won is very familiar with the community’s goals.”

The "no flipping" provision was approved by the council and is expected to be included in future deals.

Christina Estes/KJZZ
Houses are expected to be built by a private developer on these lots formerly owned by the city of Phoenix.

Mayor Greg Stanton said he agreed in principle and added, “I do believe that it will be difficult to enforce because of changes in ownership, new personnel comes in, and so, defining what is a flip and what not may prove to be difficult, but conceptually I think it’s a step in the right direction.”

City Attorney Brad Holm told council members, “We believe that we can negotiate the language out that would make this provision enforceable and we can also take into account that if the developer becomes under capitalized and wants to transfer it — provided there’s no flip profit — we can figure out some way to negotiate that out I think with the developer as well.”

The most recent deal involves three combined city-owned lots that sit in Gallego’s district.

“I think in this particular case the goal is that the developer profits by completing the project and not because of changes in land value,” Gallego said.

According to a city report, the project proposed by Diana James Community Partners involves redeveloping the lots into six single-family, owner-occupied houses, each with an accessory rental studio. It is estimated to generate approximately $1.7 million in investment, and $216,000 in taxes and other revenue.

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