Chip Taylor's three-bedroom cottage in Herald Harbor is cooled by breezes from the Severn River in summer; in winter, when the laurel and gum trees lie bare, he can glimpse the water from his back door.

His homestead, about the size of a basketball court, sits on a lush peninsula less than an hour's drive from Washington, prime real estate by anyone's definition. But back in the summer of 1924, a couple from Mount Rainier picked up the land and the view for $50 and a newspaper subscription.

Herald Harbor, an Anne Arundel community of 725 homes that range from tottering cottages to sprawling mansions, began as a marketing scheme by William Randolph Hearst's Washington Herald to boost circulation at his struggling D.C. newspaper. The paper pitched the development in front-page articles as a segregated summer-home paradise for middle-class whites, offering tiny rectangular lots for $25 apiece inland, $200 on the water, to anyone who would subscribe. Two lots were sufficient for a bungalow.

"We could certainly afford to live in a much larger home," said Taylor, who lives in one of the few original cottages. "But I've put so much blood, sweat and tears into this place, I can't leave."

At a time when waterfront property values are spiraling beyond reach of most people, Herald Harbor, part of the larger Crownsville community, provides a reminder of how things used to be. The Herald bought the land for $260 an acre and surveyed it haphazardly, drawing up lots that lay submerged or up steep grades; property lines, in many cases, were anyone's guess. As recently as the 1970s, waterfront homes could not fetch $50,000.

Last month, one of the original waterfront cottages, a one-bedroom dwelling on two original lots, sold for $600,000.

"It's the most beautiful views anywhere in Anne Arundel County," said Anne Twomey-Wing, who sells real estate in Herald Harbor, just as her mother did for four previous decades.

In the days before air conditioning and the Chesapeake Bay Bridge, city dwellers would retreat to the waterways of Anne Arundel to escape the stifling summer heat. Washingtonians would pitch tents along the western banks of the Severn, Baltimoreans on the east. Some took cars along oyster-shell roads to Herald Harbor. Others road the old Washington, Baltimore & Annapolis Railroad, which followed General's Highway along the river.

The Herald was losing money and battling several other daily newspapers for readers at the time, according to a local history compiled by Gloria Ryan Spence, whose father was a Herald circulation manager. Three men, led by publisher Rhey Snodgrass, looked for a promotional scheme to boost circulation. They found one along the banks of the Severn.

The paper bought 460 acres of farmland and forest flanked by Little Round Bay and Valentine Creek, a jagged piece of shoreline whose overall shape vaguely suggests the head of a panting dog. They paid $120,000.

The land had belonged to Henry Hall, an entrepreneur from Youngstown, Ohio, who purchased it in 1886 for less than a dollar an acre and planted a peach orchard.

"It was too far to go to Annapolis and go to the movies," recalled Fran Price, a great-granddaughter of Henry Hall. "So we were always out on the water. We were sailing or swimming or crabbing. There was always plenty."

In 1924, the vast acreage was partitioned into lots of 25 feet by 100 feet and narrow roads.

"Some of the lots were underwater, and some were on the side of a hill," Price recalled. "There are paper roads all over the place that never went anywhere."

On May 25, 1924, the Herald ran a front-page article with the headline "Herald Harbor Plans Announced." A new subscriber could purchase a lot for $5 down and 50 cents a week; a reader could buy a second lot with a separate Sunday subscription, a third lot by enticing a friend to subscribe, and so on, up to a maximum of four.

But Hearst turned on the project and announced in the paper the next month, "Herald Harbor Company Is Not a Hearst Newspaper Project." The property was spun off into an independent corporation.

"He got his subscriptions, the number he wanted, and he said he wasn't in the real estate business," said Spence, whose house overlooks the old Herald Harbor clubhouse and community beach.

By no means an elite colony, Herald Harbor was marketed to working-class Washingtonians in a series of subtly worded news articles and ads, proposing to keep the community "free from offenses against the taste of refined families." One put it more bluntly: "Herald Harbor Is For White People Only."

Segregation was the rule of the day in the summer resorts of the Chesapeake Bay. The Herald spoke of plans to develop a separate colony for black readers, but it never materialized. A few black families, as well as Hispanics and Asians, live there today.

Women and children would summer at Herald Harbor. Men would join them on weekends, fishing, crabbing and filling the dance floor at night.

"It was fun down here," recalled Ada Walter, 85, whose in-laws bought a cottage in Herald Harbor in 1928.

As novel as it sounds today, Herald Harbor was not the only attempt by a Washington newspaper to offer land as a premium to subscribers.

In 1931, seven years after the dawn of Herald Harbor, The Washington Post promoted its own land-for-readers scheme at Woodland Beach, 11 miles away on the South River. The Post touted the community almost daily that summer: "HUNDREDS PLEASED WITH LOTS ON RIVER," one breathless headline read; "Those Who Delay in Getting Beach Tracts May Be 'Left in Cold.' "

Woodland Beach was partitioned into 20-by-100-foot lots -- which sold for $93 outright, or $9 down, $3.50 a month -- and promoted in articles and ads for three subsequent summers, although the newspaper connection appears to have ended in 1932. The development was not marketed -- at least not in the newspaper -- as exclusive to whites.

Hearst's Washington Herald became the Washington Times-Herald and endured until 1954, when it was purchased by and folded into The Post.

The opening of the Bay Bridge in 1952 doomed Herald Harbor as a summer community; because waterfront property wasn't prized then, the neighborhood fell into neglect.

As recently as the end of the 1990s, a buyer could find property in Herald Harbor for about $100,000. But since then, several factors -- the real estate boom, the influence of spiraling Washington home prices and the scarcity of waterfront property -- have pushed prices into the stratosphere.

"Six hundred thousand, minimum, for a waterfront lot," Twomey-Wing said.

Buyers are gutting the old cottages or bulldozing them and building anew, hiring surveyors to establish every last inch of their property lines. Most remaining cottages sit on 50-by-100-foot lots that would be too small to permit a home under current law. But owners are largely free to renovate and expand on the lots, provided they preserve the boundaries and some of the walls of the original structure and gain county approval. There's nowhere to go but up, so the trademark Herald Harbor home reaches to the sky like a treehouse.

With lots so small and prices so high, Herald Harbor homeowners have become increasingly concerned, and increasingly litigious, over property lines. The community was mapped so poorly, with angles that don't add up and roads that go nowhere, that neighbors sometimes squabble over the exact spot to put the fence.

Ada Walter, who bought property on Valentine Creek 50 years ago, had it surveyed and came to find that the neighbor's porch was on her land.

Janet Clauson, president of the Herald Harbor Citizens' Association, recalls a similar case: "They thought the house was too close to the road. But it turned out that the lot went to the middle of the road, and the road was in the wrong place."

Chip and Anita Taylor bought one of the original cottages of Herald Harbor in 1988. Like many owners there, they have seen the value skyrocket.Chip and Anita Taylor's cottage has undergone a near-total renovation. Because most of the lots are tiny, sometimes there's nowhere to go but up.