BOSTON - It’s not normal: an overgrown field ringed with thick woodland in the middle of one of the most densely developed cities in the country. This place is one of the largest pieces of land that can be built on in Boston, a city where developers often wait up to seven years for a site.

When work is finished here in 2011, Olmsted Green will nestle 500 townhouses, condominiums, and rental apartments among all these trees. The housing will be targeted to households earning a wide range of incomes and will be mixed with services ranging from a job training center to an urban farm complete with a farmer’s market selling fresh produce.

But for now the future site of Olmsted Green is a 38-acre wilderness. It’s a jewel of a site, located along a famous chain of parks stretching from the Back Bay to Roslindale that were designed by 19th-Century landscape architect Frederick Law Olmsted and are known here as the Emerald Necklace.

Olmsted Green’s immediate neighbors include the gentrifying neighborhood of Mattapan to the south, and the Mass Audubon Boston Nature Center and Wildlife Sanctuary and Olmsted’s Franklin Park, including the William Devine Golf Course, to the north.

But dig beneath the surface of Olmsted Green, and the development begins to sound a little more typically urban. The project is set on part of the old site of the Boston State Hospital, a mental institution that has been going to seed since it closed in 1979.

But even though this state-owned land has been available for years at a price close to zero, the campus of the old mental hospital sat empty for 30 years as the community and various developers argued about how the land should be used. Builders proposed supermarkets, light industry, or offices, but were disappointed in their hunt for tenants and in their negotiations with the neighborhood.

Lena Park Community Development Corp., a local nonprofit, has been working to develop affordable housing on the site since the hospital closed, but it was also unable to close a deal. The hospital buildings eventually collapsed and, one by one, were demolished by the state. Finally, in May 2006, work began on Olmsted Green, led by Lena Park and New Boston Development Partners, LLC.

The high cost of free land

“I’ve gotten a lot of that free land over the years—typically none of it’s free,” said Lisa Davis, a project manager with New Boston. These sites always have strings attached, according to Davis. The site of Olmsted Green, for example, was laced with toxic contamination. The old mental hospital had a network of underground steam pipes that spread heat through the campus. The pipes were wrapped in carcinogenic asbestos and encased in concrete.

Getting these pipes out of the ground required a sealed machine to do the digging, a tent to cover the area, and a team of experts in hazardous materials suits. “They sort of looked like space aliens,” Davis remembered. “Sounds expensive, right?”

The cost of all this cleanup was one of the things that held up the work here for 30 years. The developers have put up $12 million of their own equity to do predevelopment work, including cleaning up asbestos and removing the foundations of several old hospital buildings to make room for new construction.

The development team also had to commit to $2.6 million in community benefit payments. These included $1.4 million to redevelop Lena Park’s offices and the CDC’s job-training center. Constructing a community activity center, a kind of clubhouse for the development, cost $650,000. The developers also wrote a $500,000 check and supplied the land for an 11,000-square-foot building called the Heritage House, which will provide mental health services to the community. To cover the cost of all this work, the developers planned a $160 million project whose four phases will mix 287 for-sale townhomes and condominiums with 153 affordable rental apartments. Another 83 rental apartments will be reserved for seniors. Many of these homes will line the edges of the site, looking across Harvard Street at the triple-deckers across the road.

“We’ve tried to cluster the units in a way that maximizes the open space,” said Kirk Sykes, president of the Urban Strategy America Fund, the equity investment arm of New Boston Development Partners. All these units are designed to be energy efficient and friendly to their environment.

The first phase of for-sale homes is already on sale at Olmsted Green, selling for prices in the high $200,000s. Designed by ICON Architecture, the townhouses range from 1,100 to 1,800 square feet. These prices are comparable to those of the houses in the surrounding market. Since the sales office opened at the beginning of October, 24 units, or about 12 units a month, have pre-sold. That’s about a third of the first phase.

It’s also a little slow, and the developers are considering offering buyers some concessions to bring more traffic through the sales center. However, the pricing is still strong, and meets the project’s pro forma.

All the for-sale housing here will be priced to be affordable to households earning no more than 120 percent of the area median income (AMI), with some units reaching down to 80 percent. But these for-sale units, which will cost a total of $96.5 million to develop, will receive no government subsidy to pay for this affordability, unless you count the almost-free land. Instead, the for-sale units will be financed with a total of $60 million in equity from the Urban Strategy America Fund, along with the equity from home sales.

The 153 rental apartments will be built in three phases and will all be affordable to households earning up to 50 percent of AMI. They will cost a total of $40.1 million to develop, paid with a “typical layer cake” of financing, according to Davis, beginning with $22.2 million in equity from the sale of 9 percent low-income housing tax credits, which are now being marketed to investors. A variety of government agencies will provide $10.7 million in soft financing while MassHousing will provide $7.3 million in permanent financing.

The for-sale townhouses will also help pay for the affordable apartments by covering much of the cost for infrastructure work, according to Davis. Without the planned mix of incomes, work could not have begun on Olmsted Green, and a surprisingly rural neighborhood in the middle of the city would not have been born.