City Tries to Provide More ‘Affordable’ Housing : Development: Lottery winners paid about $150,000 to live in Rancho Palos Verdes. But only 10 moderately priced homes have been built on the peninsula in the last five years. Officials make plans to offer eight rental units.

For four years, the Von Glahn family has enjoyed quintessential Rancho Palos Verdes living: an ocean view, pool, sauna, and peace and quiet.

But unlike most other new homes in the city, their three-bedroom digs are considered affordable: $151,000. That may not sound low-cost, but it’s dirt-cheap compared to the townhouses a block away selling for $300,000-plus.

“The location was the No. 1 priority,” said Sherryl Von Glahn, 50, who lives in the townhouse with her husband, Christopher, and their two children. “But let’s face it, not everyone can afford this.”

The Von Glahns live in one of only 10 moderately priced units built on the Palos Verdes Peninsula in the last five years.

All of the units are in Rancho Palos Verdes’ hillside Villa Capri, a 49-unit development of salmon-colored townhouses overlooking the Pacific Ocean.

The Von Glahns and the other people residing in the development’s lower-priced units won the right to live there through a lottery conducted by the city when it was faced with an onslaught of applications for the moderately priced housing.

The lack of low-cost housing on the peninsula was underscored this week when the city, acting to satisfy a court order, submitted to a judge plans designed to include eight moderately priced rental units in the proposed 79-unit Ocean Trails luxury-home project and golf course.

“People are worried about affordable housing,” said Councilwoman Jacki Bacharach, who pushed the council to reserve the units in Ocean Trails for those with an annual income of $38,650 or less for a family of four. “They don’t know what it means.”

The confusion, Bacharach said, comes from not knowing that “people who move in don’t have any less pride in their homes than anyone else.”

As a condition of approval from the city, Villa Capri developer E.S. Development of Redondo Beach agreed to include the units and limit their sale to people with incomes that do not exceed $60,000 a year.

But the state leaves it up to cities to determine the kind of housing provided, the number of units that are sold, and who they are sold to.

Faced with 3,900 applications for the units, the city held a lottery to determine the occupants. More than half of the entrants were disqualified after the city gave first shot only to city residents. The lottery winners included renters who otherwise couldn’t afford to buy in the city.

The Von Glahns fit the bill. They had been renting a three-bedroom house in the city for themselves and their two children, ages 12 and 14.

“The owner of our rental house asked if we were interested in buying it,” said Christopher Von Glahn, 50, who is the only employee of his own law practice in Manhattan Beach. “It was $625,000. We almost died laughing.”

To their surprise and relief, they were the first names picked in the lottery.

The residents of the moderately priced housing tend to be low-key; several declined to be interviewed. Most of the those living in the units are professionals like the Von Glahns.

“We are a fairly close-knit group of homeowners,” said John Douglass, president of the neighborhood homeowners association. “I really don’t recall any problems with anyone ever distinguishing one type of homeowner from another.”

But Sherryl Von Glahn said that some living in the lower-priced units at first received a cool reception from other residents, although everyone has since warmed to one another.

“There was a little bit of an undercurrent of ‘What are you doing here and how did you do it?’ ” she said. “But there is nothing like that now.”

From the outside, the Von Glahn’s townhome is barely distinguishable from others in the development. On the inside, though, it’s a bit cramped.

At 1,250 square feet, the affordable units are the smallest in Villa Capri. Most other units are about 2,200 square feet. In their living room, the Von Glahns cram two love-seat sofas, a TV set and stereo. It’s difficult to sit at the kitchen counter because the dining room table gets in the way.

When they moved in, it was much worse. There was no hall closet, or much storage space to speak of. They had the kitchen redone to increase cabinet space. They also converted a loft--just an open space at the top of the stairs--into two bedrooms for their children.

“The quality of everything was really terrible,” Sherryl Von Glahn said. “The builder did everything as cheaply as he could.”

In a lawsuit filed last year, all of the Villa Capri homeowners accused the developer of shoddy construction that has left cracks in walls, patios and balconies. The suit is still pending. E.S. Development officials could not be reached for comment, but company president Eugene Schiappa has said the problems were minor and that the company stands by its work.

Another wrinkle that the lower-income buyers have encountered is the limits on their investment. They can sell their homes, but resale prices are limited only to the purchase price plus improvements and cost-of-living expenses.

Nevertheless, the Von Glahns said they do not have regrets.

“Given the circumstances of the cost, it seemed well worth doing,” Christopher Von Glahn said. “There are benefits. The tax write-offs, plus the amenities. There’s a great school system, the views. And with the market as it is today, what price appreciation is there?”

“We’ve learned to live in a submarine,” said Sherryl Von Glahn, standing on the patio overlooking the Pacific. “It’s tight, it’s cozy, but we’ve just gotten used to it.”