Alaska’s most populous city is hemmed in by water on one side and mountains on the other, which means Anchorage is running out of land on which to build homes -- putting the squeeze on lower-income families.

Dan Croasman is packing up and tearing down what took his mother three decades to build.

“We're cutting down trees that have been here for 25 years that my mom planted,” he said. “It's really a sad situation.”

Croasman grew up in Riviera Terrace, a mobile home park in East Anchorage. It’s the only home his 5-year-old son, Daniel Jr., has known.

“It's a big loss, definitely, for us,” Croasman said.

In late March, the Croasmans and about 20 other families were told they have a year to move out. The new owners, AMG & Associates, bought the park and plan to build higher-end rental townhouses within the next 10 years.

“They have a dog park planned,” said Dorthy Bates, an employee of Jack White Real Estate, which managed the property for the previous owners and will continue to manage the park for the new owners. “It's going to be a very, very nice community.”

The development will nearly quadruple the number of homes that can fit into the park.

Construction will occur in four phases over the coming decade. Families whose lots are scheduled for redevelopment in later phases will have more time to find new homes. Those in the first phase do have options, Bates said.

“They can pay no rent for 12 months or they can cash out at $5,100 equal to the 12 months' rent, signing over the title to the owner,” Bates said. “I think that's a very generous offer.”

Bates said the same offer will be made to families in all phases.

The Croasmans took the money and found a place in Wasilla.

On the other side of the park, families have at least three years before they have to leave.

Robert Stevens, a Vietnam War veteran, and his wife have lived in the park for about 12 years. Their mobile home is one of the older ones, he said, and can’t be moved.

“We got screwed,” said Stevens. “When we moved in, they told us this was going to be (a) permanent mobile home park.”

Stevens said he’s not sure what they will do. They would like to stay in Alaska but, if necessary, would move to Minnesota to live with family, although that’s not ideal.

“We're both disabled and have very little income,” Stevens said.

They had saved up over the years to improve their home, but Stevens says repairs remain -- like fixing the roof, which leaks in 14 places during heavy rainfall.

“They shouldn't have told us this was going to be a permanent place because people added so much to their trailers,” Stevens said.

Bates said the change was inevitable.

“In 2006, when the previous owners purchased the park, the residents were in fear the owners may develop the park,” she said. “It’s been a good eight years. Now there’s change. There’s always change.”

Bates said that Cameron Johnson, one of the new owners, wants to help the Stevens couple and those who have to leave Riviera Terrace.

“The owner plans to build, I think, it's a 20-acre parcel in Wasilla, a mobile home park there,” Bates said. “And he is willing to move folks out there who are willing to move. He's trying his very best.”

The number of families in the state who need help affording housing is growing, according to the Alaska Housing Finance Corp.

"We roughly have $5.5 million a year for homeless prevention, and we usually get over $7 million in requests a year,” said Mark Romick, AHFC’s director of planning and program development.

Lower-income families are hardest hit when there’s not enough housing, said Cathy Stone, AHFC’s director of public housing.

“The housing gets used up by people who have sources of income, so the people who don't have as much, there's not as much for them to choose from,” Stone said. “So what we've experienced in public housing division is our waiting lists continue to grow. In fact, we actually had to close all our waiting lists in Anchorage.”

Earlier this year, AHFC started a rent reform program, designed to transition people out of public housing by having residents pay increasingly larger portions of the rent -- and eventually into the traditional housing market.

“We’ve got a wait list of thousands, and the general health of housing in Anchorage plays an important role there, too, because we can’t expect people to transition out of our public housing if there are no units to transition into,” said Bryan Butcher, AHFC’s chief executive and executive director.

The Rasmuson Foundation helps to build subsidized housing, including Loussac Place in midtown Anchorage. Before construction was even completed on the complex of homes, every unit had been assigned.

“Rasmuson is the largest foundation in Alaska,” said Diane Kaplan, president and chief executive of the foundation. “We gave $30 million away last year. If we spent every single penny we have on housing, it wouldn't even make a dent in the need we have right now.”

Tomorrow, in the third of Channel 2's three-part series, developers explain why they can’t build more homes more quickly.