The old PJs strip club at the corner of 36th Avenue and Spenard Road isn't much now -- just a fading, flat, frumpy beige building -- but Cook Inlet Housing Authority hopes to turn it into something new.
Cook Inlet Housing bought the PJs corner and is negotiating to buy property across Spenard Road, where an auto repair shop sits, and behind it, Fish Creek flows.
The housing agency intends to transform the area into a gateway to Spenard. Two buildings with commercial space on the ground floor and affordable living units above would replace what's there.
Cook Inlet Housing would leave in place a thriving strip mall on the northeast corner, and Cook Inlet Housing's own offices, which are on the northwest corner.
The agency is considering building more houses -- duplexes or single family -- on lots they own off 36th east of Spenard Road.
Both the PJs property and Alpina Auto Repair site across the road are contaminated with petroleum products from an old gas station, say Cook Inlet Housing officials.
"The private market is not going to tackle those sorts of things," said Carol Gore, president and CEO of Cook Inlet Housing. "Often the cost of cleanup is more than what the land will ever be worth."
Cook Inlet Housing is a nonprofit agency that primarily builds and owns affordable housing for lower income residents.
The agency can tap different funding sources than are available to most private developers, and is willing to reclaim contaminated areas, Gore said.
The project at Spenard and 36th took a leap forward this year when the Legislature approved a $1.9 million grant to pay for the environmental clean-up.
Developing both corners is estimated to cost about $26 million, including the $1.9 million state grant. The agency will have to raise the rest of the money. Typically, Cook Inlet raises money from a program that gives companies tax credits for investing in affordable housing, from federal and state loans, private foundations and other sources.
Between 30 and 40 housing units might fit on the two Spenard corners, said Jeff Judd, the agency's executive vice president.
But the details of what will be built, along with city building permits, parking requirements and the like, are a couple of years off.
Environmental clean-up will likely be completed in 2013. In 2014, they hope to ready to build.
It's the kind of project that will "kickstart the revitalization of that area of Spenard," said Anchorage Assemblyman Ernie Hall, who represents the area.
Spenard Road, from about Benson Boulevard north, has steadily attracted popular shops, restaurants and entertainment such as REI and the Bear Tooth Theatre Pub & Grill.
But the trendy appeal of Spenard has largely bypassed the section between Benson to Minnesota Boulevard, including the intersection at 36th.
Gore thinks replacing the blighted and contaminated property at that intersection with housing and some commercial space can serve as a catalyst for redevelopment of the area.
Spenard Community Council president Jim Bowers said the council is in favor of the general idea, and there's a need for more housing.
"A development like that I hope would go along with fixing Spenard Road," Bowers said. A proposal to reconstruct the road has been stalled for year over controversy about whether it should be three lanes or four.
"It's getting to the point where maintenance isn't going to fix it," Bowers said.
Hall, the assemblyman, said he expects a decision from City Hall soon on reconstruction of the road.
PJs strip club was taken over by the federal government in 2010 after the conviction of its owner on a drug charge, and the next year, Cook Inlet Housing bought it. The PJs property is across 36th from Cook Inlet Housing's offices.
Cook Inlet knew the groundwater beneath PJs was contaminated, Judd said.
The Alpina property across the street has been identified by the state Department of Environmental Conservation as contaminated from underground tanks at the Olson's Gas Service station that was there until the mid- 1990s.
The same groundwater flows southwestward under Spenard Road and under PJs, said Judd.
For years, Cook Inlet Housing has been concentrating its efforts in Mountain View, another part of town that had many old, substandard houses.
The timing was right to move onto a new neighborhood, Gore said.
Two of Cook Inlet's projects on Mountain View Drive at North Park Street are similar to what the agency is thinking about for Spenard and 36th, Gore said. On each side of Mountain View's main street is a building with apartments and retail space on the ground floor.
One of the Mountain View buildings is also on a site contaminated by a gas station.
Reach Rosemary Shinohara at rshinohara@adn.com or 257-4340.
By ROSEMARY SHINOHARA