A community land trust CLT is a nonprofit corporation that acquires land and

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A community land trust CLT is a nonprofit corporation that acquires land and Powered By Docstoc
					                     Community Land Trusts:

A Mechanism for Preserving Community Land and Housing Affordability




                             Authors:

                           Tessa Greegor
                          Christian Rusby
                            Joel Sisolak
                            Liz Stenning




                         February 26, 2007
        A community land trust (CLT) is a nonprofit corporation that acquires land and holds it

in trust for future generations. CLTs build community wealth while providing opportunities for

affordable homeownership by households normally priced out of the housing market. This paper

will discuss the development of the community land trust model within the context of more

traditional housing subsidy programs, examine its purported benefits for communities and low-

income homebuyers, and analyze a critique of the social justice of the model. Several case

studies will provide real world examples of how this tool is being used in urban and rural

communities.

                                               ***

        According to the White House, American home ownership reached a record 69.2 percent

in the second quarter of 2004. The number of homeowners in the United States surpassed 73

million, and for the first time, the majority of minority Americans owned their own homes.i

        Post World War II growth in homeownership has stemmed largely from housing finance

innovations to lower home purchase costs through a range of guarantees, instruments and

incentives, and by increasing the supply of credit through the secondary mortgage market. The

beneficiaries of homeownership programs have historically been working- and middle-class

White households, rather than poor households and households of color. In recent years, this has

changed. Low-income homeownership is now a policy goal for government at the local, state

and federal levels.ii

        A central Bush Administration strategy for stimulating home ownership, especially

among minority populations, has been downpayment and closing cost assistance via the

American Dream Downpayment Initiative (ADDI). Qualifying first time homebuyers receive an




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average subsidy of $7,500 to be used for a downpayment, closing costs, and other fees associated

with the home buying transaction.

        Though popular with subsidy recipients, funding from the ADDI program was recently

reduced from $79.4 million in 2003 to $49.6 million in 2004.iii The program’s long-term

viability is in question. It also is questionable whether this and other similar subsidy programs

ultimately benefit target communities.

        In most programs to assist first-time homebuyers, there is no provision preventing the

new homeowners from quickly selling and benefiting from market-rate appreciation in the value

of their homes. Homeownership subsidy programs like ADDI use public money to build private

wealth. A problem with this model is that none of the appreciated value is available to help other

families in the future. The subsidy is lost, and the public sector must invest new money for each

additional family assisted into homeownership.

        Due to a growing “affordability gap” between income levels and housing prices, the cost

of subsidization grows with each new family assisted, even as funding for housing subsidy

programs declines.iv This is especially true in gentrifying neighborhoods where the appreciated

value and market rate resale of subsidy-assisted homes actually may contribute to declining

affordability.

        With federal and state funding in increasingly short supply, local governments are

seeking ways to recapture or retain the value of limited subsidy dollars. Community land trusts

provide a mechanism for preserving the value of subsidy funding while offering substantial

community benefits, as well as some equity building potential for individuals who otherwise

might be unable to afford to buy a home.




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The Community Land Trust Model

        Forty years ago, Robert Swann and Ralph Borsodi developed the community land trust

(CLT) model. Drawing from the Indian gramdan (“village gift”) land reform movement, land

trusts were conceived as democratically controlled institutions that balanced community and

individual resident benefits. New Communities in southwest Georgia was the first such

institution. Founded by southern civil rights leaders in 1968, New Communities sought to

protect the security and opportunities of rural African Americans, especially those afraid of

risking their tenure on white lands by participating in the civil rights movement. Since the

1960s, more than 140 community land trusts have been established to benefit a diversity of rural,

suburban and urban communities across the country.v

        A community land trust is a quasi-public legal entity chartered to hold land in

stewardship for a community’s present and future residents, while protecting the legitimate use-

rights of its residents.vi Vacant or partially developed land is donated to the trust or purchased in

the open market through the support of tax-exempt investments in the form of private or public

donations, grants, or subsidies. The land is then developed (or redeveloped) to meet a

community demand, most frequently for affordable housing.vii

        Once land is acquired, the community land trust maintains permanent ownership of the

title to the land. If the land is developed prior to its acquisition, the buildings are sold to

members in the trust. Vacant land is developed to suit the needs and desires of the community,

ensuring that the cost of land for individual owners is reduced or eliminated in the overall price.

Commonly, land in the trust is developed as housing for low-income communities, providing a

stock of affordable housing to be maintained in perpetuity, as the initial affordability is locked




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into the unit via a 99-year ground lease. This lease provides residents with long-term exclusive

use of the land and the opportunity to build equity via improvements to the property.viii

       A distinct characteristic of a community land trust is the way in which it is governed. A

tri-partisan, elected board representing residents, neighbors/community members, and public

agency officials controls the trust. A CLT also has a community-based membership comprised

of land trust residents and other community members. The governance and membership

structure of a CLT is intended to ensure representation and provision for its host community.ix

       Another important element of the land trust model is its promise to permanently maintain

affordable housing, enabling the sale or rental of houses to residents below 80 percent of a

community’s median income. Initial tenure costs are reduced through the elimination of land

costs from the purchase price in addition to assistance from government subsidies. The initial

affordability is then maintained for subsequent owners, such that a house can be sold back to the

trust, or to another owner for the initial purchase price plus a portion of its appreciated value.

Because property in a land trust is removed from the market, residents are less vulnerable to

fluctuations in property values.x

   In addition to the benefits to low income homebuyers, CLTs provide a variety of community

benefits. These include retention of the community’s land and natural resource base; community

stability and local stewardship (no absentee ownership); creation of a permanent stock of

affordable housing; ability to encourage quality design standards and enforce repairs to units

when necessary; and retention of initial subsidies within the property.

A critique of the CLT model

       A common critique of the community land trust and similar resale-restricted ownership

models is that they trap those most vulnerable in a cycle of poverty. In order to protect the




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affordability of a CLT home for future residents, CLT leaseholders are prevented from fully

benefiting from the market value appreciation of their homes. Critics suggest that when a CLT

household is ready to move, it is no better financially equipped to enter the regular housing

market than when it first established tenure with the trust.

       This critique is addressed by John Davis and Amy Demetrowitz in a 2003 study of resale

data from the first 97 homes sold by residents of the Burlington Community Land Trust (BCLT).

The study found that when reselling their BCLT homes, most BCLT residents moved away with

more wealth than when they had moved in. “Equity gains were modest when compared to what

they might have realized from the resale of an unrestricted, market-rate home, had they been able

to afford such a home, but BCLT homeowners still earned a respectable return on their initial

investment.” The annualized rate of return, across all 97 cases, averaged 17%. On average,

BCLT homeowners reselling after five years recouped their original downpayment and realized a

net gain in equity of $6,184.xi

Case Studies

       Community land trusts are being embraced as part of a growing “third sector” of private,

nonmarket housing in urban, suburban and rural areas throughout the United States. Also

contained in this sector are nonprofit rentals, mutual housing associations, limited equity (and

zero equity) cooperatives, limited equity condominiums, and deed-restricted single family

houses.xii Community land trusts are most valuable in areas suffering disinvestment or

gentrification due to rapid growth. CLTs can be used in any sized neighborhood, purchasing

either single parcels of land dispersed throughout a community, or contiguous lots. Although

most frequently used to provide and preserve affordable housing, CLTs also can be used for land

preservation and provision of community services.




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   The following three case studies review CLTs of varying size and function. The Burlington

Community Land Trust was the first municipally funded CLT and is the largest in the country.

The Community Land Trust Association of West Marin operates in a rural area, and Homestead

Community Land Trust is a Seattle-based trust.

Case Study 1: Burlington Community Land Trust (BCLT)

       The Burlington Community Land Trust was created in 1984 with $200,000 in seed

money from the Burlington City Council and broad support from neighborhood activists. The

founding goals of the BCLT were to increase the number of affordable homeownership

opportunities for families of modest means, provide access to land and decent housing for low

and moderate-income persons, and promote neighborhood preservation and improvement

through the responsible use and management of land.

   The BCLT was the first municipally funded community land trust and today is the largest in

the United States. With over 2,500 members, it has grown to become a “model of locally-

controlled affordable housing and community revitalization.” BCLT offers a range of housing

opportunities including 640 rental apartments, single-family houses, and condominiums that will

remain perpetually affordable through a resale formula built into the ground lease.

       The BCLT follows the ‘classic’ land trust model. It is a publicly funded nonprofit with

tripartite governance. All of its housing is priced to serve households earning no more than 80

percent of area median income. (The majority of the BCLT’s homeowners and renters earn less

than 80 percent.) BCLT retains the option to buy back homes should its owners decide to sell,

and it offers a fair return on their investment or improvements. Likewise, future home owners

are given access to permanently affordable housing.




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   Since its inception, the BCLT has become a national model of revitalization and locally

controlled affordable housing. Political and economic conditions favored the BCLT ’s growth.

Throughout the 1980s, 90s, and into the 2000s, BCLT enjoyed steady support from Burlington’s

municipal leaders whose housing policy emphasized nonprofit production of affordable housing

and ensuring the perpetual affordability of any publicly subsidized housing. A similar activist

policy existed at the state level. In 1987, the state of Vermont created the Vermont Housing and

Conservation Board (VHCB), a quasi-governmental funding body with a statutory priority for

projects that “prevent the loss of subsidized housing and will be of perpetual duration.” VHCB

became a major source of project grants and operating support for the BCLT and for other

housing and conservation land trusts throughout the state.

       The rising cost of land and housing in Burlington’s real estate market has not made it

easy for the BCLT to provide homes that low-income households can afford. Nevertheless, using

grants provided by the City, grants provided by VHCB, and units acquired at below-market

prices through inclusionary zoning, the BCLT managed to offer 259 modestly-priced houses

and condominiums for sale between 1984 and 2002, all of them selling for less than comparable

units available through the open market. Declining rates for residential mortgages and favorable

financing from the Vermont Housing Finance Agency (and local banks) helped to ensure that

low-income households could actually afford the lower-priced units that the BCLT offered.

   By the end of 2002, the BCLT was managing a diverse portfolio of more than 500 residential

units, including single-family houses, duplexes, condominiums, cooperatives, rentals, transitional

housing, and several residential facilities for persons with special needs. It had total assets of $22

million, a staff of 28, and an annual operating budget of $1.5 million.xiii

Case Study 2: Community Land Trust Association of West Marin (CLAM)




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       The Community Land Trust Association of West Marin (CLAM) was formed in 2001 to

provide affordable housing “for people of low and moderate income, working or retired.” As in

many communities across the country, the rural town of West Marin, California was becoming

unaffordable for its workforce residents, including carpenters, teachers, store clerks and organic

farmers. Escalating land prices were forcing out long time residents of low to moderate incomes

and retired people.

       CLAM provides affordable housing for rent or purchase by acquiring properties through

donation or purchase. Its goal is to protect affordability by “weaving affordable homes into the

fabric of the community.” CLAM believes that healthy communities are culturally and

economically diverse, and environmentally responsible. It uses government formulas to evaluate

economic needs and asserts that residents should not pay more than one third of their household

incomes for housing.xiv

Case Study 3: Homestead Community Land Trust

       Seattle, Washington is facing a growing housing affordability crisis. In 2005, more than

a third of King County households paid more than 30 percent of their incomes on housing, up

from 33 percent in 2000.xv To create permanently affordable housing in Seattle, Homestead

Community Land Trust (HCLT) was formed in 1992 and started acquiring properties in 2000.

This membership-based nonprofit consists of eleven single-family homes with an additional

nineteen targeted for acquisition in 2007.xvi

       Homestead’s program is available to first-time homebuyers making less than 80 percent

of the area’s median income ($40,250 for single family, $62,100 for a family of five). A

prospective buyer must attend a homebuyer education class, buy a home in Seattle, provide a two

percent downpayment, and qualify for a loan.xvii During the closing period, the homebuyer




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finalizes the mortgage with the lender while HCLT provides funds up to $90,000. HCLT

acquires title to the land and the homebuyer attains a 99-year lease.xviii

       Homestead homebuyers are diverse: 50 percent are White, 25 percent Black, 12 to 15

percent Asian, 5 percent Hispanic, and 5 percent Native American. Single households comprise

the largest portion of homebuyers at 40 percent.

       Homestead’s long-term goal is to add 100 houses per year, dramatic growth from the

2007 total of just thirty properties. The organization is lobbying for inclusionary zoning policies

that would increase the availability of homes (mostly condominiums) available to the program.xix

Conclusions

       Community land trusts have philosophical roots in an “old” notion that land isn’t a

commodity but a sacred trust, a commons to be shared by every community member. Abraham

Lincoln wrote: “The land, the earth God gave man for his home, sustenance, and support, should

never be the possession of any man, corporation, society, or unfriendly government, any more

than the air or water.” A similar sentiment is common with many indigenous peoples worldwide

who believe that land should be held collectively and leaseholders possess only usufruct rights.

       Community land trusts offer a mechanism for protecting the wealth and character of at-

risk communities, while providing lower income households with an opportunity to access the

American Dream of homeownership. By agreeing to resale restrictions, CLT households do not

benefit from the wealth generating potential of regular market rate homes. However, the benefits

accrued by leasing land trust property greatly outweigh the common alternative of renting from

an absentee owner. Basically, the development of some equity is better than the development of

no equity. And by retaining community ownership of the land, community land trusts are able to




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help a virtually unlimited succession of homebuyers who have historically been locked out of

homeownership.




i
      White House website. Accessed 2/22/07. http://www.whitehouse.gov/infocus/homeownership/
ii
      Shlay, Anne, “Low-income Homeownership: American Dream or Delusion?” Urban Studies, v43 (3), March 2006.
iii
      HUD website. Accessed 2/23/07. http://www.hud.gov/offices/cpd/affordable housing/programs/home/addi/
iv
 Jacobus, Rick and Cohen, Amy, “Creating Permanently Affordable Homeownership through Community Land
Trusts,” In California Affordable Housing Deskbook, Rob Weiner and Neal Richman (eds.). (Point Arena, CA:
Solano Press), forthcoming.
v
      Cirillo, Marie et. al, The Community Land Trust Handbook (Emmaus, PA: Rodale Press), 1982.
vi
 Swann, Robert, “Land Trusts as Part of a Threefold Economic Strategy for Regional Integration,” (Great
Barrington, MA: E.F. Schumacher Society), 1972.
vii
 Greenstein, Rosalind and Sungu-Eryilmaz, Yesim, “Community Land Trusts: Leasing Land for Affordable
Housing,” Land Lines, Newsletter of the Lincoln Institute of Land Policy 17 (2), 2005.
viii
       Peterson, Tom, “Community Land Trusts: An Introduction,” Planning Commissioners Journal, 1996.
ix
 Burlington Associates in Community Development, “Frequently Asked Questions About Community Land
Trusts,” Http://www.burlingtonassociates.com/resources/.
x
 Newport, Gus, “The CLT Model: A Tool for Permanently Affordable Housing and Wealth Generation,” Poverty
and Race (January/February), 2005.
xi
 Davis, John Emmeus and Demetrowitz, Amy, Permanently Affordable Homeownership: Does the Community
Land Trust Deliver on its Promises? (Burlington, VT: Burlington Community Land Trust), 2003.
xii
  Davis, John Emmeus “Beyond the Market and the State: The Diverse Domain of Social Housing,” in J.E. Davis
(ed.), The Affordable City: Toward a Third Sector Housing Policy (Philadelphia, PA: Temple University Press),
1994.
xiii
       Davis, Johm Emmeus and Demetrowitz, Amy, Op cit.
xiv
       Community Land Trust Association of West Marin website. Accessed 2/22/07. http://www.clam-petreyes.org.
xv
  Cohen, Audrey, “Housing Takes a Bigger Bite out of People’s Budgets,” Seattle Post-Intelligencer, 1 February
2007.
xvi
       HCLT, “Homestead Community Land Trust Organizational Resume,” 2007.
xvii
        Langston, Jennifer, “Program can lop $70,000 off cost of home,” Seattle Post-Intelligencer, 22 January 2007.
xviii
        Homestead Community Land trust website. Accessed 2/22/07. http://www.homesteadclt.org.




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xix
  Stenning, Liz, Interview with Sheldon Cooper, Executive Director of Homestead Community Land Trust, 22
February 2007.




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