Despite the growing popularity of urban agriculture, many city farms continue to face the challenge of insecure land tenure and overly restrictive public policies. Some researchers and policy makers have identified the need for an updated framework for the movement that would support urban farmers as they navigate land use, zoning, and property tax regulations. Community land trusts (CLTs) are contributing to this structure, providing a locally controlled approach to land use that fosters community activism and engagement while responding to evolving market conditions and neighborhood needs.

The State of Urban Agriculture

“Urban agriculture” refers to both commercial and noncommercial activities, within or near a city center, that produce food and non-food items to serve an urban area (Mougeot 2000). While city farms and community gardens are often the public face of urban agriculture, small-scale backyard growing spaces and edible landscapes also yield a significant portion of production.

Urban agriculture has afforded communities diverse environmental, economic, and social benefits, including improved nutrition, heightened food security, ecological restoration, the creation of open spaces, and opportunities for education and job skills training (Bellows, Brown, and Smit 2004; Kaufman and Bailkey 2000; Smit, Ratta, and Nasr 1996). City farming also has the unique ability to bring together diverse populations, build social capital, and promote empowerment through community building (Staeheli et al. 2002). In legacy cities—older industrial centers that have suffered from sustained job and population losses and ensuing financial, social, and political changes—urban agriculture has been extensively used as both an interim and a permanent development tool to strengthen social cohesion and catalyze progress in disinvested neighborhoods. The process of repurposing vacant and abandoned lots into growing spaces can be a relatively quick and inexpensive strategy that yields highly visible impacts and improves public safety.

Given these wide-ranging benefits, urban agriculture has enjoyed a renaissance as a social movement. In recent years, some cities and local governments have updated public policies to make them more supportive of urban agricultural practices. The movement is not without its challenges, however, including environmental safety concerns and insecure land tenure (Brown et al. 2002). Land insecurity in particular is frequently cited as the greatest barrier to the implementation and sustainability of city farming (Lawson 2004; Yuen 2012). A 1998 national survey of more than 6,000 urban agriculture sites found that 99.9 percent of gardeners saw land tenure as both a challenge and a vital element to the future success of the movement (ACGA 1998).

In these instances, land insecurity occurs when the cost of market-rate land exceeds the income generated from agricultural activities. Ultimately, the hidden hand of the market presses for the allocation of land according to its highest and best use. Due to this dominant conceptualization, planners and policy makers have historically viewed urban agriculture as an interim measure to keep a site active until higher and better uses can be developed. Scholars note, however, that urban agriculture sites can produce many positive spillover effects related to public health and community wellness, and these benefits are difficult to monetize (Schmelzkopf 1995). Traditional exchange valuations of land rarely reflect a community garden’s contributions to healthy food education and the physical wellness of residents. This disconnect between social worth and market values has been the impetus for both public and private interventions.

Local governments typically respond by purchasing tracts of urban agricultural land, effectively insulating them from speculative market forces while also holding them off the tax rolls. While this public sector approach has been critical, it sometimes fails to provide long-term security, especially when administrative changes in local governments lead to shifts in priorities and strategies, as when New York Mayor Rudy Giuliani proposed to auction off 850 community gardens across the city in 1999. Therefore, researchers have focused on the need for alternative strategies that can complement public sector efforts to support the security of land for urban agriculture.

CLTs as a Framework for Urban Agriculture

A CLT is a nonprofit, community-based corporation with a place-based membership, a democratically elected board, and a charitable commitment to the use and stewardship of land on behalf of the local population. CLTs typically retain permanent ownership of land and lease it to individuals or organizations that own the improvements upon the land, such as residences, commercial buildings, and agricultural or recreational facilities. The CLT model offers a way to retain ownership of land stewarded by and for the community, so that the highest or best use of property can remain community-defined, community-controlled, and adaptable to changing conditions.

Although CLTs have focused on the development and stewardship of affordable housing in recent decades, the movement originated in response to agricultural land issues in rural Georgia during the 1960s. Even earlier agricultural influences included the kibbutzim in Israel, the Gramdan villages in India, and the Garden Cities of Ebenezer Howard (Davis 2010). The strength of the CLT model lies in its ability to balance local land control and long-term, stewarded development that addresses changing community needs. Thus, CLTs are well positioned to tackle a diversity of land uses through comprehensive development strategies. Legacy cities may be especially ripe for CLT engagement, as the widespread availability of vacant land has spawned a flourishing urban agriculture movement, but with less emphasis on long-term land security.

Our research found that CLTs have supported urban agriculture projects in three distinct ways: by securing access to agricultural land, providing programmatic support, and engaging directly in food production.

Box 1: 2012 Survey of U.S. CLTs

In the fall of 2012, the National Community Land Trust Network (NCLTN), in partnership with the Lincoln Institute of Land Policy, commissioned a study of urban agricultural and commercial projects conducted by U.S. CLTs (Rosenberg and Yuen 2012). The inquiry examined the role of CLTs in implementing nonresidential projects and assessed the benefits and challenges of such ventures. Researchers distributed a web-based survey to the 224 organizations in the NCLTN database; 56 CLTs (25 percent) completed the questionnaire, and 37 CLTs reported agriculture activities. Twelve CLTs were selected for in-depth data collection, which captured a diversity of projects with varying levels of success in different locations. A case study approach was used for data collection, which included gathering organizational documents and secondary sources as well as interviewing CLT staff. The final working paper is supported by an additional project directory resource that highlights the projects and organizations in the study (Yuen and Rosenberg 2012).

This article draws on that research to examine the benefits, challenges, and considerations for urban agriculture activities by CLTs. It also explores how such interventions can support comprehensive community development efforts, particularly in legacy cities.

Securing Access to Agricultural Land

The core competencies of CLTs best lend themselves to the task of securing growing space. A central mission of CLTs is to secure land for community development opportunities. To carry out this role, CLTs have utilized diverse tenure arrangements, including fee-simple ownership, ground leases, easements, and deed restrictions (table 1). These arrangements are not mutually exclusive; organizations can employ multiple techniques to secure land both within and across agricultural projects.

Fee-Simple Ownership

Fee-simple ownership allows a CLT to hold the greatest number of sticks in the bundle of ownership rights and provides a high level of land security, as long as it meets all mortgage payments and tax obligations. For example, Dudley Neighbors Incorporated (DNI), a CLT in Roxbury, Massachusetts, redeveloped the contaminated site of a former auto garage into the 10,000-square-foot Dudley Greenhouse, which functions both as a commercial farm and a community growing space. DNI secured the land through fee-simple ownership and leases the greenhouse structure at a nominal charge to a food-based nonprofit that handles all agricultural programming and maintenance. Harry Smith, Director of Sustainability and Economic Development at DNI, notes, “Growing food is a whole different thing, and we are not looking to take that role.”

Ground Leases

While fee-simple ownership is an uncomplicated, highly secure tool, it is often prohibitively expensive for CLTs to purchase urban land outright for food production. Given this challenge, some CLTs have utilized ground leases to secure growing land. The Southside CLT (SCLT), for instance, has a 10-year ground lease with the State of Rhode Island on a 20-acre farm in Cranston. In turn, the Southside CLT manages the farm as the master tenant and subleases plots to seven start-up farmers at nominal rates. The affordability and security of the ground lease creates opportunities for young farmers to incubate new businesses and participate in the local food system. A strong ground lease, with rigorous standards for performance and conditions for renewal, can provide comparable or greater security than fee-simple ownership. However, longer-term ground leases can be challenging to draft and implement, especially when the title-holding entity desires long-term flexibility.

Conservation Easements

CLTs have also secured access to land through conservation easements, or voluntary restrictions that permanently limit the uses of the land. Most commonly, the CLT holds an easement donated by a private owner. The private owner retains title and can even sell the grounds to another party without compromising land security, as the conservation easement ensures long-term access to the agricultural space. Easements can also reduce the management burden on the titleholder, as the recipient of the easement often provides land stewardship services as part of the exchange. This strategy can financially benefit titleholders, who receive local and federal tax benefits for donating conservation easements. While easements can effectively sustain access to growing space, the relatively high legal cost may be expensive, especially for smaller tracts.

Deed Restrictions

Deed restrictions can effectively place limitations on the uses of land and are often tied to specific funding sources. While a deed restriction can ensure that land is reserved for a specific use, it does not necessarily offer secure tenure for a specific grower or farmer. Further, deed restrictions are effective only when all parties and external agents choose to enforce the contract. Each tenure arrangement has relative strengths and weaknesses and is best utilized when tailored to a project-specific context. In Wisconsin, for instance, the Madison Area CLT was required to grant a deed restriction to the City of Madison as a condition for funding the Troy Gardens mixed-use development site. A deed restriction was placed over a portion of the site, limiting uses to agricultural and conservation projects. The CLT’s failure to abide by the terms of the deed restriction, however, would trigger immediate repayment of all subsidy funds provided by the city.

Programmatic Support

As the task of securing agricultural land can be very challenging, it may not be a suitable undertaking for every organization or community. Some CLTs have supported urban agricultural efforts through other means, such as program management, technical assistance, and other agricultural services. In Georgia, for example, the Athens Land Trust is a dual-mission housing and open space land trust that has engaged in urban agriculture exclusively through program assistance. Athens Land Trust chose to take on this role because of the high holding costs associated with property taxation policies in Georgia, which assesses CLT land at the unrestricted market value. The Athens Land Trust partners with public- and private-sector landowners to provide support for local agricultural projects. For instance, the Athens Land Trust staff worked with the Hill Chapel Baptist Church congregation to design a community garden on church-owned land and provided support services, such as testing and tilling of the soil, organizing workdays, and providing plant materials and instructional gardening workshops.

Agricultural Production

Finally, some CLTs have participated in agricultural production, directly and actively farming land. For example, the Southside CLT operates a three-quarter-acre commercial farm in Providence, Rhode Island, growing greens and selling produce directly to local restaurants. Many CLTs support agricultural production indirectly as well, by providing residential properties where the residents themselves grow food in backyard gardens. Hence, many CLTs have unknowingly supported urban agriculture for years, simply by offering affordable and secure access to tillable land in cities. Some groups, such as DNI, specifically design larger home ownership lots to enable opportunities for backyard urban gardening. Harry Smith of DNI explained, “As we did our community planning, people were very clear that they wanted to see open spaces and attention paid to the residents’ quality of life. We are trying to build [agriculture] into the housing itself.” In this way, the scope of CLT agricultural production can also include innovative design features, such as edible landscapes, food forests, and other permaculture concepts that are intentionally and systematically incorporated into a development plan.

Benefits of CLT-Supported Urban Agriculture

Ultimately, the study found mutual benefits between urban agriculture and CLTs. City farms enhance the value of CLTs by helping organizations expand their development vision to include a more comprehensive set of neighborhood needs and priorities. All communities have a variety of needs beyond affordable housing, and agricultural projects can create linkages to other key issues, including food security, health education, vacant land remediation, and neighborhood safety. Agricultural projects can even be seen as neighborhood amenities, potentially increasing demand for nearby CLT properties or residences in the conventional market. For example, the Church Community Housing Corporation (CCHC) developed the Sandywoods Farm project in Tiverton, Rhode Island, to include a mix of residential, agricultural, and arts-related programming. The CCHC initially marketed the development solely as an arts community, but prospective residents expressed strong interest in the community garden and in farmland preservation. Consequently, CCHC rebranded the project as an “art and agriculture” development. Brigid Ryan, senior project manager of CCHC, explained, “The agriculture has taken off much more than we ever thought it would. The garden is actually drawing some people [to the rental housing units]. They never thought their kids would be able to grow their own food.”

Beneficial connections between agriculture and housing were also present at DNI’s Dudley Greenhouse. Harry Smith of DNI notes, “The project certainly helps the marketability of our homes. People are not just getting a house, they are getting a community, and it’s based on fresh, locally grown food.”

Challenges for CLT-Supported Urban Agriculture

Despite the benefits, CLTs implementing agricultural projects still face many challenges. In particular, financial profitability continues to be a major struggle across the entire urban agriculture sector, as revenues generated from produce sales are relatively modest, even in commercial operations. The Southside CLT covers only 8 percent of its operating expenses through commercial produce sales to local restaurants. Additional revenue sources, such as membership fees and seedling sales, bring the CLT’s earned income to only 20 percent of its expenses. CLTs continue to rely heavily on grant funding to make up the difference.

A second potential challenge is that some projects require a high level of agricultural knowledge and may test the capacity and experience of CLT staff. Even Athens Land Trust, which has staff experienced in agricultural land preservation and growing techniques, acknowledged the initial difficulties in learning the nuances of local zoning codes related to commercial agriculture. As a result, some of the CLT’s pipeline projects were delayed until workable zoning solutions could be found. The risk is compounded for commercial agricultural projects that require significant understanding of processing and distribution systems and local market conditions. At Sandywoods Farm, for example, the CCHC initially planned to use preserved farmland for livestock and cattle grazing, only to discover that the sole Rhode Island butchering facility had closed. The nearest facility was across the state line in Massachusetts, making it prohibitively expensive to process meat. Brigid Ryan, senior project manager at CCHC, noted, “When you end up having to learn these specialty niches, it becomes so important to find partners who know what they are talking about.” Given the challenges and potential pitfalls, CLTs need to consider the following issues to improve the feasibility and sustainability of agricultural projects.

Community Engagement

As community-based organizations, CLTs should always be driven by neighborhood needs and concerns. However, strong community planning processes are particularly vital to the success of urban agriculture, where CLTs often rely on local residents and partners to carry out agricultural production. Harry Smith of DNI emphasizes this point: “I would say the work of a CLT is not just to manage the properties and get more land into the trust, but to really engage the community in what they want besides housing—whether that’s commercial operations, or a greenhouse, or agricultural land.” Further, CLT engagement around agricultural projects can catalyze broader community organizing efforts and help residents push for more supportive public policies.

Organizational Assessment

CLTs can support nonresidential projects in a variety of ways, and organizations should systematically assess internal capacities as well as local stakeholders who could serve as potential partners on projects. In this way, CLTs can develop complementary collaborations and build on existing assets and capacities in the community. A CLT that lacks growing experience can support urban agriculture in alternate ways to better align with local partners, by securing land, helping to develop urban agriculture zoning codes, or serving as a fiscal agent for grant funding.

Managing Risk

CLTs should minimize their financial risk in agricultural projects, especially given the modest revenues and future uncertainties associated with food-related grant funding. In response, some CLTs have front-loaded anticipated capital expenses owing to agriculture projects. Similarly, CLTs can manage risk exposure by avoiding debt financing on agricultural projects. Several CLTs have found debt service to be extremely challenging, given the modest revenues from produce sales and the nominal lease fees that CLTs typically charge for agricultural land. For instance, DNI was able to acquire land and construct the Dudley Greenhouse without incurring long-term debt, while its local property tax–exempt status allowed for minimal holding costs. The resulting low-risk financial structure became critically important when DNI was unable to secure its initial greenhouse tenant. Even though the greenhouse was subsequently vacant for nearly five years, DNI was well positioned to absorb the unexpected vacancy loss.

Conclusion

While the urban agriculture movement has gained much momentum in recent years, it still needs coherent, long-term strategies to protect growing spaces against speculative market forces. The fundamental relationship between land and community is at stake. Within the urban agriculture movement, land insecurity highlights the pressing need for a reconceptualization of land as a finite, shared resource that should be held in stewardship to meet the requirements of present and future communities. Further, the notion of the highest and best use needs to be expanded to include nonfinancial outcomes and avenues for substantive community engagement. CLTs are ideally suited to tackle these critical issues and, in doing so, can help community development processes become more inclusive, equitable, and responsive to changing local conditions.

About the Author

Jeffrey Yuen, M.S., is a CLT researcher, practitioner, and enthusiast who serves on the board of the Essex Community Land Trust. He works as the Impact Assessment Manager at New Jersey Community Capital, in New Brunswick, New Jersey.

Resources

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Bellows, A., K. Brown, and J. Smit. 2004. “Health Benefits of Urban Agriculture.” Community Food Security Coalition’s North American Initiative on Urban Agriculture. http://community-wealth.org/content/health-benefits-urban-agriculture

Brown, K., M. Bailkey, A. Meares-Cohen, J. Nasr, and P. Mann (eds.). 2002. “Urban Agriculture and Community Food Security in the United States: Farming from the City Center to the Urban Fringe.” Urban Agriculture Committee of the Community Food Security Coalition.

Davis, J. E. 2010. “Origins and Evolution of the Community Land Trust in the United States.” In The Community Land Trust Reader, edited by J. E. Davis, 3–47. Cambridge, MA: Lincoln Institute of Land Policy.

Kaufman, J., and M. Bailkey. 2000. “Farming Inside Cities: Entrepreneurial Urban Agriculture in the United States.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.

Lawson, L. 2004. “The Planner in the Garden: A Historical View of the Relationship of Planning to Community Garden Programs.” Journal of Planning History 3(2): 151–176.

Mougeot, L. 2000. “Urban Agriculture: Definition, Presence, Potentials and Risks.” In Growing Cities, Growing Food, Urban Agriculture on the Policy Agenda, edited by N. Bakker, M. Dubbeling, S. Guendel, U. Sabel Koschella, and H. de Zeeuw. DSE, Feldafing.

Rosenberg, G., and J. Yuen. 2012. “Beyond Housing: Urban Agriculture and Commercial Development by Community Land Trusts.” Working paper. Cambridge, MA: Lincoln Institute of Land Policy.

Schmelzkopf, K. 1995. “Urban Community Gardens as Contested Space.” Geographical Review 85(3): 364–381.

Smit, J., A. Ratta, and J. Nasr. 1996. Urban Agriculture: Food, Jobs and Sustainable Cities. New York: United Nations Development Programme. http://jacsmit.com/book.html

Staeheli, L., D. Mitchell, and K. Gibson. 2002. “Conflicting Rights to the City in New York’s Community Gardens.” Geojournal 58(2–3): 197–205.

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Yuen, J., and G. Rosenberg. 2012. National Community Land Trust Network. Non-Residential Project Directory. National Community Land Trust Network http://www.cltnetwork.org/doc_library/FINAL%20Non-residential%20project%20directory%204-26-13.pdf

The Great Recession of 2007–2009 and the sluggish recovery since then have produced extraordinarily large state budget gaps. Even as the fiscal condition of most state governments is slowly improving, many central cities have only recently begun to feel the full impacts of the economic slowdown and the disruptions to the housing market.

A number of indicators have been flashing signs of local government fiscal distress. From its peak in 2008 through May 2012, local government employment has fallen by 528,000, or 3.6 percent (U.S. Bureau of Labor Statistics 2012). The media has also been reporting large cuts in public services in some cities. Newark, New Jersey, has been forced to make substantial cuts in municipal employment, as well as imposing significant increases in taxes and fees. Stockton, California, is reportedly on the verge of bankruptcy. A number of counties in New York State are either in or close to fiscal receivership, and the school district of Providence, Rhode Island, which comprises half the city’s total budget, is facing a nearly $40 million shortfall for the coming academic year.

The most recent comprehensive data on central city finances are from the U.S. Census Bureau for the year 2009. In the absence of more recent data, we have developed a forecasting model of the revenues of the nation’s largest central cities, based on a specially constructed multiyear database. We focus on large cities not only for their sheer size, but also because they are crucial to the economic success of their surrounding regions.

The prosperity of cities depends on effective public services, provided at competitive tax rates. The deep recession, reinforced by the decline in housing prices and extensive housing foreclosures, has put pressure on local tax revenues and local public services. Deep cuts in state aid to many local governments have only added to the fiscal pain. Given the ongoing sluggishness of the U.S. economy, the prospects for a robust recovery in revenues over the next few years are highly uncertain.

The Difficulty of Comparing City Revenues

The U.S. Census Bureau provides the only comprehensive source of fiscal data for cities. Information is collected separately for each type of governmental unit–general-purpose municipal governments, which include cities and towns; independent school districts; county governments; and special districts. Because the delivery of public services is organized in very different ways in different cities, direct comparisons of revenues across cities by source can be highly misleading.

While some municipal governments are responsible for financing a full array of public services for their residents, others share this responsibility with a variety of overlying governments. For example, Boston, Baltimore, and Nashville have neither independent school districts nor county governments serving local residents. Each of those municipal governments is responsible for providing core municipal services, plus education, public health, and other social services. By contrast, municipal governments in El Paso, Las Vegas, Miami, and Wichita collect only about one-quarter of the revenues that finance the delivery of public services within their boundaries. The remaining three-quarters are the responsibility of one or more independent governments serving city residents, and in some cases people who live beyond the city boundaries as well.

To illustrate the difficulty in making revenue comparisons, census data indicate that in 2009, the City of Tucson, Arizona, which relies heavily on a local sales tax, collected only 14 percent of its total tax revenue from the property tax, while Buffalo, New York, collected 88 percent of its tax revenue from the property tax. However, when we take account of the revenues paid by city residents to their overlying school districts and county governments, the situation is reversed. Property taxes accounted for 68 percent of the total local tax revenue paid by Tucson residents, but only 50 percent of tax revenue paid by the residents of Buffalo. In the latter case, the county government relies heavily on sales tax revenue.

Our approach to dealing with the variation in the organizational structure of local governments across the country is to account for all local government revenues received by governmental entities that provide services to city residents and businesses. The basic idea is to include all revenues collected by a central city municipal government and by that portion of independent school districts and county governments that overlay municipal boundaries. We refer to the result of this calculation as a “constructed city” government.

To create constructed cities we take the following steps. For cities with independent school districts that are coterminous to city boundaries, we combine the school district and municipal values of all revenue variables. For school districts that cover a geographical area larger than the city, and for cities served by multiple school districts, we use data on the spatial distribution of enrollments to allocate a pro-rata share of total school revenues to the constructed city. For each school district serving a portion of the central city, we draw on geographical information system (GIS) analysis of census block group level data from the 1980-2000 decennial censuses to determine the number of students in each school district that live in the central city.

For counties, we allocate the portion of revenues associated with city residents on the basis of the city’s share of county population. Because geographic boundaries are not readily available, and fiscal data is intermittent, our calculations do not take account of special districts. For the country as a whole, special districts are relatively unimportant, and failing to include them should do little to distort fiscal comparisons among central cities.

Constructed city revenues are calculated for the nation’s largest central cities for the years 1988 through 2009. The source for the data is the quinquennial Census of Governments, and, for noncensus years, the Annual Survey of State and Local Government Finances. The sample includes all cities with 2007 populations over 200,000, except those with 1980 populations below 100,000, and all cities with 1980 populations over 150,000 even if their 2007 population was below 200,000. In 2009, the population of the 109 central cities in our sample was 58.9 million, equaling 60.3 percent of the population of all principal cities within U.S. metropolitan statistical areas.

While prior studies have recognized the importance of overlying jurisdictions, they have been less systematic in taking account of the variations in governmental structure. Carroll (2009) ignores overlying jurisdictions, while Inman (1979) and Sjoquist, Walker, and Wallace (2005) use dummy variables as a partial adjustment. Ladd and Yinger (1989) focus on the revenue capacity of municipal governments by adjusting for the capacity “used up” by overlying governments.

Constructed City Revenues

Figure 1 displays the average share of total general revenues that came from each revenue source in the 109 constructed cities in 2009. The most important sources are state aid (34 percent) and property taxes (27 percent). User fees and charges contributed 16 percent, while taxes other than the property tax contributed 13 percent.

Sources of revenue vary enormously among constructed cities. For example, 60 percent or more of general revenue came from state and federal aid in Springfield (Massachusetts), Fresno, and Rochester, while aid contributed less than 20 percent of revenues in Atlanta, Dallas, and Seattle. The reliance on the property tax also varies across cities, with over 90 percent of tax revenue coming from the property tax in Providence, Boston, and Milwaukee, but less than 30 percent in Philadelphia, Birmingham, and Mobile.

Because the importance of counties and independent school districts varies enormously, revenue comparisons that rely only on data from municipal governments are highly misleading. For example, in 2009 per capita general revenue of the city government of Pittsburgh was $1,958, while the per capita revenue for Baltimore was $5,306. However, per capita revenues in the two constructed cities were nearly identical. This pattern is not atypical among cities.

Comparing per capita revenues across central city municipal governments overstates the differences across cities because it forces us to compare city governments that have very different sets of public service responsibilities. Utilizing the concept of constructed cities provides the basis for more accurate intercity comparisons, and allows us to generate comprehensive revenue forecasts for the cities in our sample.

Forecasting Revenues for Constructed Cities

To forecast general revenues for 109 constructed cities for the four years from 2010 to 2013, we sum projections for five separate revenue streams: property taxes; nonproperty tax revenues; nontax own-source revenues; state aid; and federal aid (Chernick, Langley, and Reschovsky 2012). We use econometric models fitted with actual and projected metropolitan area–level data to forecast the three sources of own-raised revenue. We then make a range of projections about intergovernmental revenues based on information from surveys and published revenue estimates.

Property Tax Revenues

Predicting the exact relationship between changes in tax revenues and changes in the size of the tax base is particularly difficult in the case of the property tax. Property tax rates are adjusted much more frequently than sales or income tax rates to reflect changes in assessed values and revenue needs. Predicting the revenue impact is further complicated by the existence in some states of legislatively or constitutionally imposed limits on tax rates, changes in tax levies, or changes in assessed values. Major changes in the fiscal relationships between state and local governments, such as school funding reforms, are often motivated by the goal of reducing reliance on the property tax.

Although property taxes are generally levied on all real property, comprehensive data on property values over time and across states do not exist. Thus, researchers have had to focus on changes in housing prices. Data collected on the Lincoln Institute’s website, Significant Features of the Property Tax (2012), indicate that in the large majority of states where data are available residential property accounts for well over half of total property value.

Figure 2 demonstrates the relationship since 1988 between housing prices in the United States and per capita local government property tax revenues. Inflation-adjusted housing prices rose steadily from 1998 until 2006, but by 2011 they had fallen by 25 percent. Per capita property tax revenues followed a similar pattern, with sharp growth beginning in 2001 and continuing until 2009, three years after housing prices peaked.

The lag between changes in housing prices and changes in property tax revenues occurs because changes in assessed values, on which property taxes are levied, typically lag behind changes in market values. The lag may be as little as a year, in cities with annual reassessments, or longer in cities that reassess less frequently or have explicit policies to phase in changes in market value.

The housing price indices for our 109 constructed cities indicate very different patterns of boom and bust in different parts of the country. Willingness of city residents to support increases in property taxes may reflect both changes in the value of their homes and changes in their income. Furthermore, as property tax rates are often adjusted in response to changes in other revenue sources, changes in state aid are likely to affect changes in property tax rates and revenues. To capture these various factors, we estimated a statistical relationship between annual changes in per capita property tax revenues and lagged changes in housing prices, metropolitan area personal incomes, and per capita state aid. Data on property tax revenues are for the years 1988 through 2009. Our statistical model also accounts for city-specific factors that remain constant over time.

The results of our analysis indicate a statistically significant relationship between changes in property tax revenues and changes in housing prices, lagged three years. Our results also indicate that changes in personal income two years ago lead to current year changes in property taxes revenues. This suggests that the impact of the decline in housing prices from 2006 to 2012 and reductions in personal income during the recession will exert negative pressure on property tax revenues from 2009 until at least 2015. Changes in state aid were found to be statistically insignificant.

We estimate that, on average, a 10 percent change in housing prices in our constructed cities results in a 2.5 percent change in tax revenues. This implies that the average city will offset about three-quarters of the revenue effect of falling market values by raising effective tax rates.

To forecast changes in per capita property tax revenues, our coefficient estimates are combined with actual and projected values of metropolitan housing prices, personal income, and state aid, which are then added to actual 2009 property tax revenues to calculate annual per capita revenue for each year between 2010 and 2013. Adjusting for inflation we find that per capita property tax revenue in the average constructed city will decline by $40 or 3.1 percent over the period from 2009 through 2013. Predicted changes range from increases of about 14 percent in the Texas cities of Lubbock and San Antonio to declines of 20 percent in some cities in California, Arizona, and Michigan, where the bursting of the housing bubble was most severe.

Other Locally Raised Revenues

As demonstrated in figure 1, revenue raised from local sources other than the property tax in the average constructed city accounts for a little over one-third of total revenues. These revenues come from local government sales taxes, income taxes, user charges, fees, licenses, and other miscellaneous sources. The importance of these revenue sources varies tremendously across cities, ranging from 6 percent of general revenues in Springfield (Massachusetts) to 60 percent in Colorado Springs.

As we did in forecasting property tax revenues, we started by estimating the statistical relationship between annual changes in revenues and changes in metropolitan area personal income, lagged one year. We estimate separate equations for tax revenue from taxes other than the property tax and for local-source revenue from nontax sources. Using the coefficients from our estimated equations and actual and forecast data on metropolitan area per capita personal income, we forecast a $20 per capita (2.1 percent) increase in tax revenue from sources other than the property tax and a $29 (1.2 percent) increase in nontax locally raised revenues over the four-year period between 2009 and 2013.

State Aid to Cities

Over the past few years, most state governments have faced large budget shortfalls. Budget adjustments have occurred mainly on the spending side, and in many states there have been large reductions in state aid to local governments. To forecast reductions in state aid through 2013, we draw on a survey of changes in state education aid between 2008 and 2012 by the Center on Budget and Policy Priorities (Oliff and Leachman 2011). We assume that the reported percentage change in each state’s education aid applies to the school districts in every constructed city in that state, and that the same percentage change in aid applies to noneducation aid as well.

Given the uncertainty over future legislative actions, we make three alternative predictions. The base case assumes that state aid stays constant in real terms from 2012 to 2013. Our best case assumption is that state aid increases in each city by 3 percent in that period, while our worst case is that state aid changes by the same amount in real terms as in 2011–2012, i.e., an average reduction of about 6 percent. Under our base case, per capita state aid is forecast to decline by $153 (9.5 percent) between 2009 and 2013.

Federal Aid to Cities

Cites receive federal grants through a myriad of different programs. In the past few years, fiscal pressure at the federal level has led to a number of proposals to sharply reduce such spending. President Obama’s FY2013 budget calls for large cuts in a wide range of programs that provide revenue to cities. Based on alternative assumptions about Congressional actions, we take as a base case assumption a 15 percent reduction in federal aid between 2009 and 2013, a worst case of a 37.7 percent reduction in federal grants between 2009 and 2013 (the current budget proposal), and a best case of a 9.5 percent cut.

Total General Revenues

General revenues are defined as the sum of the five sources of revenues discussed above. Adding up the forecasts, we predict that on average inflation-adjusted per capita general revenues will decline between 2009 and 2013 by 3.5 percent ($169). Though the variation in revenue forecasts across the nation is substantial, nearly three-quarters of central cities face some level of reductions (figure 3). The largest projected revenue declines are in California and Arizona, where 11 cities have declines of greater than 10 percent. There is no particular regional pattern to the cities where we forecast growth in revenues. For example, per capita revenue growth in excess of 3 percent is predicted for such diverse cities as Atlanta, Cincinnati, and Lubbock.

Figure 4 groups constructed cities by their census division. Above-average revenue declines are forecast in the Pacific, Mountain, and South Atlantic divisions. Revenues are declining in the central cities in these regions because they are facing a combination of reduced property tax revenues and sharp reductions in state aid. By contrast, in the East and West South Central divisions, real general revenues remain largely unchanged because declines in state aid are offset by increases in property taxes. The opposite is true in New England, where property tax reductions are offset by state aid increases.

Forecasting future levels of state and federal aid to central cities is extraordinarily difficult. Our approach is to choose a range of estimates for 2012–2013 changes in intergovernmental aid. From the cities’ perspective, our worst case calls for steep cuts in both state and federal aid, while our best case calls for smaller cuts in federal aid and modest increases in state aid. When combined with cities’ own sources of revenue, under the worst case scenario, real general revenues will decline by $295 per capita (6.1 percent) between 2009 and 2013. This decline is $126 per capita more than our base case forecast. Even under our best case, we forecast that on average general revenues will decline by $116 per capita or 2.4 percent over the four-year period.

Conclusions

These predicted reductions in revenue place many of the nation’s largest central cities in uncharted territory. While these revenue declines may appear modest, they contrast quite sharply with the resiliency of city revenues following the previous three recessions. For example, real per capita revenues grew by a robust 17 percent in our 109 constructed cities during the four years following the recession of 1981–1982. Given the severity of that recession, the current revenue declines highlight the unprecedented magnitude and duration of fiscal pressure on cities that has resulted from the housing market collapse and the Great Recession in 2007–2009.

Demographic and economic trends, such as the aging of the population and the persistence of high poverty rates, contribute to the rising costs of providing government services in central cities. In many cities legally binding pension and health care benefits for retirees constitute a large and growing component of total compensation. Facing both rising costs and reduced revenues, many central cities have no choice but to implement substantial cuts in locally provided public services. There is little question that these reductions, when combined with projected cuts in federal and state government programs that provide direct assistance to city residents, such as Food Stamps, Medicaid, and unemployment insurance, will cause substantial harm to central city economies.

While the governments serving central city residents must continue to search for ways to reduce costs without harming service quality and to explore potential new sources of revenue, it is also critically important that the federal government and state governments take an active partnership role in mitigating the adverse impact of the recession on the nation’s central cities.

About the Authors

Howard Chernick is professor of economics at Hunter College and the Graduate Center of the City University of New York. He specializes in the public finances of state and local governments, both in the U.S. and abroad.

Adam H. Langley is a research analyst in the Department of Valuation and Taxation at the Lincoln Institute of Land Policy, where he has coauthored papers on property tax incentives and relief programs, nonprofit payments in lieu of taxes, and state-local government fiscal relationships.

Andrew Reschovsky is a professor of public affairs and applied economics in the Robert M. La Follette School of Public Affairs of the University of Wisconsin-Madison and a visiting fellow at the Lincoln Institute of Land Policy. He conducts research on property taxation and other aspects of state and local public finance.

Note: This article is a condensed and updated version of the article published in Publius in 2012.

References

Carroll, Deborah A. 2009. Diversifying municipal government revenue structures: Fiscal illusion or instability? Public Budgeting & Finance 29(1) (Spring): 27-48.

Chernick, Howard, Adam Langley, and Andrew Reschovsky. 2012. Predicting the impact of the U.S. housing crisis and “Great Recession” on central city revenues. Publius: The Journal of Federalism 42(3).

Inman, Robert. 1979. Subsidies, regulation, and taxation of property in large U.S. cities. National Tax Journal. June.

Ladd, Helen F., and John Yinger. 1989. America’s ailing cities: Fiscal health and the design of urban policy. Baltimore: The Johns Hopkins University Press.

Oliff, Phil, and Michael Leachman, 2011. New school year brings steep cuts in state funding for schools. Washington, DC: Center on Budget and Policy Priorities (October 7).

Significant Features of the Property Tax. 2012. Cambridge, MA: Lincoln Institute of Land Policy. http://www.lincolninst.edu/subcenters/significantfeatures-property-tax

Sjoquist, David L., Mary Beth Walker, and Sally Wallace. 2005. Estimating differential responses to local fiscal conditions: A mixture model analysis. Public Finance Review 33(1) (January): 36-61.

U.S. Bureau of Labor Statistics. 2012. Current employment statistics survey. Seasonally adjusted employment. http://www.bls.gov/data

The foreclosure crisis and its impact on the U.S. economy seem far from abating as mortgage delinquencies and foreclosure filings continue to climb. According to RealtyTrac, a total of 2.8 million properties had foreclosure filings during 2009, or one out of every 45 residences. That foreclosure rate was 21 percent higher than in 2008 and 120 percent higher than in 2007. Maintaining home ownership has proven to be a tenuous, if not impossible, proposition for many homeowners.

Some researchers, policy makers, and advocates are questioning whether conventional, market-oriented home ownership is the best form of housing for low-income households and communities. While others continue to extol the many benefits of home ownership, they question the way it is structured and suggest that alternative models of resale-restricted, owner-occupied housing may help low-income homeowners keep their homes more successfully.

Research on one of these alternative models, the community land trust (CLT), found delinquencies and foreclosures to be far lower among the owners of CLT homes than the owners of unrestricted, market-rate homes during the market downturn of 2007–2009. This article presents these findings and examines aspects of CLTs that may help to explain the sustainability and success of CLT home ownership.

Community Land Trusts

CLTs are nonprofit organizations that utilize public and private funds to provide affordable home ownership opportunities for low-income households (usually those with gross incomes less than 80 percent of the area median income). Traditionally, CLTs purchase and retain title to the land under detached houses, attached townhouses, or multi-unit condominiums. The land is leased to residents who hold a deed to their individual homes. Some CLTs use other legal mechanisms, including deed covenants, second mortgages, or cooperative housing models, to convey ownership and subsidize properties.

CLTs provide homeowners with pre-purchase and post-purchase stewardship services to protect them from high-cost or predatory mortgage lending. CLTs also intervene to cure delinquencies and prevent foreclosures. In exchange, homeowners accept limitations on the resale price and the equity they may remove from their homes. Through this arrangement, households unable to afford market-rate homes are able to realize most of the financial and social benefits of home ownership, while CLTs are able to maintain affordability of their homes for future buyers.

Reevaluating Low-Income and Minority Home Ownership

Cross-sectional investigations have found that home ownership is the most robust explanatory factor of wealth in low-income and minority households. Home equity made up 56 percent of the wealth in households within the bottom quintile on income in 2000 relative to 32 percent for all households (Herbert and Belsky 2008). Before the housing market crisis, home equity accounted for approximately 62 percent of wealth for African-Americans and 51 percent for Hispanics, but only 44 percent for whites (McCarthy, Van Zandt, and Rohe 2001).

The financial benefits of home ownership may only be realized if low-income households are able to enter and sustain it. Longer durations of tenure greatly increase the likelihood of financial returns. When studies have examined home ownership over time, they find that low-income households take longer to enter owner-occupied housing and are more likely to return to renting; indeed, roughly half of low-income households exit home ownership within five years of purchase (e.g., Reid 2005).

Risk factors associated with losing one’s home are more common among low-income and minority homeowners. They are more likely to obtain high-risk loans for purchase and refinance, and they are more vulnerable to trigger events, such as unemployment or health issues, which are associated with higher incidents of delinquencies and foreclosures (Immergluck 2009). Almost half of low-income households are severely cost-burdened by their housing expenses (Joint Center for Housing Studies 2008). Length of tenure, loan terms, affordability, and trigger events may impact sustaining home ownership and affect the likelihood that low-income and minority homeowners will accumulate wealth or debt.

Costs of Foreclosure to Communities

The costs of foreclosure extend well beyond the households that lose their homes, impacting the immediate neighborhood and surrounding municipality. Studies in Columbus (Ohio), Chicago, and New York City have shown that foreclosed properties significantly diminished nearby housing values, and that rates of depreciation were greater for lower-income than higher-income neighborhoods. Depreciation leaves remaining homeowners vulnerable to negative equity, default, and foreclosure. Foreclosures, which are associated with rises in vacant properties and crime, tend to cluster in low-income and minority neighborhoods (Immergluck 2009).

Foreclosures also impose costs on municipalities due to vacant property demolition, administrative fees, and outstanding or declining property taxes. Apgar and Duda (2005) modeled the costs of a foreclosure in Chicago and found that more than a dozen agencies could be involved in over two dozen activities, which were estimated to cost the city up to $34,199 per foreclosure. Moreno (1995) estimated the cost to Minneapolis and St. Paul for the foreclosure of houses with FHA mortgages and found that municipal losses were approximately $27,000 per foreclosure. Higher rates of delinquencies and foreclosure filings during 2009 portend continued losses for households, neighborhoods, and municipalities.

Overview of the CLT Study

In March 2010, the National Community Land Trust Network (the Network) designed and conducted the 2009 CLT Delinquency & Foreclosure Survey (Thaden 2010). All 229 CLTs in the Network’s database were invited to participate in the online survey, and 53 CLTs (23 percent) completed it. Eleven respondents did not have CLT homes with outstanding mortgages at the end of 2009, so they were not included in the final analysis. The remaining 42 CLTs in 22 states had 2,279 resale-restricted, owner-occupied homes in their portfolios, 2,173 of which had outstanding residential mortgages as of December 31, 2009. The median number of mortgaged homes for these CLTs was 30.

The primary purpose of the survey was to examine how many residential mortgages held by CLT homeowners (referred to as CLT loans) had been seriously delinquent, entered the foreclosure process, or completed the foreclosure process in 2009. Survey items were designed for comparison with results from the Network’s 2008 survey, as well as results from the 2008 and 2009 National Delinquency Surveys conducted by the Mortgage Bankers Association (MBA).

The Network’s survey replicated the definitions used by the MBA for loans that were (1) “In the Foreclosure Process,” which includes loans in the process of foreclosure regardless of the date the foreclosure procedure was initiated; and (2) “Seriously Delinquent,” which includes loans that were at least 90 days delinquent or in the process of foreclosure. The secondary purpose of the Network’s survey was to explore the practices and policies of CLTs that may help to explain the primary results.

Delinquencies, Foreclosures, and Cures

When comparing the performance of CLT loans to that of conventional mortgages for market-rate homes, it is important to emphasize that CLT loans are held by low-income households. MBA and Residential Mortgage-Backed Security (RMBS) loan samples are not limited to low-income borrowers. Considering that low-income homeowners in the market are more prone to delinquencies and foreclosures, the differential outcomes reported below may have been even greater if loans held by low-income borrowers could have been isolated for comparison in MBA and RMBS samples.

Serious Delinquencies and Foreclosure Filings in 2009

Figure 1 presents the percentages of CLT loans and MBA prime and subprime loans that were seriously delinquent or in the foreclosure process at the end of the fourth quarter of 2009. Only 0.56 percent of CLT mortgages were being foreclosed (12 out of 2,151 loans; CLT median = 0, range = 0–2), whereas the percentage of MBA loans in the foreclosure process was 3.31 percent for prime loans, 15.58 percent for subprime loans, 3.57 percent for FHA loans, and 2.46 percent for VA loans (MBA 2010). When all types of MBA loans were combined, the overall MBA percentage was 4.58 percent. Overall, MBA loans were 8.2 times more likely to be in the process of foreclosure than CLT mortgages.

On December 31, 2009, 1.62 percent of CLT mortgages were seriously delinquent (34 out of 2,099 loans; CLT median = 0, range = 0–6), while the MBA loan percentage was 7.01 percent for prime loans, 30.56 percent for subprime loans, 9.42 percent for FHA loans, and 5.42 percent for VA loans. A prime loan within the MBA sample was 4.3 times more likely to be seriously delinquent at the end of 2009 than a CLT mortgage.

2008 and 2009 Comparisons

The percentage of CLT mortgages in the foreclosure process at the end of 2008 was 0.52 percent (10 out of 1,930 loans), demonstrating a percentage point change of .04 over one year. For all MBA loans, the percentage in the foreclosure process at the end of 2008 was 3.30 percent, showing a percentage point increase of 1.28 by the end of 2009. The respective percentage point increases were 1.43 for prime loans, 1.87 for subprime loans, 1.14 for FHA loans, and 0.80 for VA loans.

The percentage of CLT mortgages that were seriously delinquent at the end of 2008 was 1.98 percent (36 out of 1,815 loans), demonstrating a percentage point decrease of -0.36 (figure 2). The percentage of MBA prime loans that were seriously delinquent at the end of 2008 was 3.74 percent, a percentage point increase of 3.27. The percentage point increases were 7.45 for subprime loans, 2.44 for FHA loans, and 1.30 for VA loans (MBA 2009).

In sum, the percentage of MBA loans that were in the foreclosure process or seriously delinquent increased from the end of 2008 to the end of 2009, while the percentages for CLT loans remained consistently lower.

The CLT Network’s surveys gathered additional information not collected by the MBA. During 2009, 0.42 percent of CLT loans completed foreclosure (9/2,160) compared to 0.26 percent during 2008 (5/1,928), which illustrates a percentage point change of 0.16. When homeowners are foreclosed upon, CLTs have a vested interest in recovering the property from the lender in order to minimize the loss of the public subsidy and preserve the affordability of the unit. No foreclosed CLT homes were lost from CLT portfolios during 2009.

2009 Cure Rates

The 2009 Network survey also gathered information on the number of serious delinquencies during the year and the total that were resolved. The percentage of CLT loans that had ever been seriously delinquent during 2009 was 2.80 percent (58/2,075). Respondents reported that 29 out of 57 were cured (51 percent).

CLTs have unique contractual rights to implement stewardship activities and intervene with homeowners and lenders in order to make mortgage payments current or preclude foreclosure completion. Respondents were asked to explain how they provided these cures, which included facilitating short-sales, offering financial counseling or referrals to foreclosure prevention programs, providing direct grants or loans to homeowners, arranging sales and purchases of a less expensive unit, and working with homeowners and lenders on permanent loan modifications.

Fitch Ratings, a global rating agency, reports cure rates for RMBS loans. They define cure as the percentage of delinquent loans returning to a current payment each month. The percentage of RMBS delinquent loans in August 2009 that had been cured was 6.6 percent for prime loans and 5.3 percent for subprime loans. Since CLTs define cures as resolving impractical financial situations for their homeowners, rather than solely as making mortgage payments current, RMBS and CLT rates are not comparable. However, these findings indicate that CLTs more often terminate serious delinquencies through a broader range of activities.

Stewardship Activities of CLTs

Intrinsic to the CLT model is a commitment to stewardship, which aims to promote positive outcomes and sustainable home ownership for residents long after they have purchased a CLT home. While stewardship is a core component of every CLT’s programming, its implementation can vary greatly. Therefore, the survey collected data on the prevalence and variety of stewardship activities in an effort to explain the low rates of delinquency and foreclosure among CLT homeowners.

The greater affordability and lower loan-to-value ratio found in CLT homes may explain part of the difference between CLT and MBA loans. However, stewardship is almost certainly a contributing factor. Without the protective shield of the CLT, low-income CLT homeowners would be prey to the same economic pressures and circumstantial factors that threaten home ownership sustainability among their market-rate counterparts. Survey results indicate that CLTs are implementing stewardship policies and practices in the following five areas, which may help to explain why CLT loans have outperformed the market.

Pre-Purchase Education

Homebuyer education enables sound mortgage decisions and prepares individuals for the responsibilities of home ownership. Because owning a CLT home entails unique contractual rights, responsibilities, and resale restrictions, supplemental education is offered frequently. The study found that 85 percent of CLTs required general homebuyer education and 95 percent required CLT-specific education prior to purchase.

Pre- and Post-Purchase Stewardship

Pre-purchase stewardship also included referrals to CLT-trained lawyers and lenders, an activity reported by 83 percent of the respondents. A one-on-one meeting of prospective homebuyers with a financial counselor was required by 71 percent of CLTs. Approximately 50 percent of all CLTs offered such post-purchase stewardship services as ongoing financial literacy training; staff outreach to homeowners; formal communications to remind them of policies; referrals for contractors or repairs; and mandatory meetings with defaulting homeowners.

Prevention of High-Risk Loans

Research finds that subprime and predatory lending have occurred more often during acquisition of refinance and home equity loans than during purchase (Immergluck 2009). Eighty-three percent of CLTs required their homeowners to seek the CLT’s permission to refinance or take out home equity loans, thus ensuring that the loan terms will not compromise affordability or home ownership sustainability and that homeowners comprehend the loan’s impact on their equity.

Detection of Delinquencies

CLTs also adopted policies and practices to monitor and detect homeowners who may be headed toward serious delinquency. Most CLTs charge a monthly ground lease fee (typically $10–50) to offset their costs. According to 90 percent of respondents, late payment of these fees was used as an indicator that a homeowner may be late paying their mortgage. Further, 69 percent of CLTs reported that they detected delinquencies through informal interactions with homeowners, and 55 percent of CLTs reported that 80–100 percent of seriously delinquent homeowners contacted the CLT on their own volition. Close to 50 percent of CLTs reported that lenders were legally obligated to notify the CLT of delinquencies or foreclosure proceedings.

Intervention with Delinquent Homeowners

CLTs reported an array of interventions with homeowners at risk of foreclosure. Two activities that are instrumental components of federally sanctioned foreclosure prevention programs were also implemented by CLTs: 71 percent contacted lenders as soon as they became aware of delinquencies; and 57 percent provided homeowners with direct financial counseling. Over half of CLTs reported other activities that enable residents to keep their homes, such as providing rescue funds for outstanding mortgage payments. For homeowners unable to keep their homes, 49 percent of CLTs reported activities to prevent completed foreclosures, such as facilitating sales to low-income buyers or directly purchasing the homes.

Discussion and Conclusions

The prevalence of stewardship activities among the nation’s CLTs may help to explain why CLT loans are outperforming most market-rate loans in terms of delinquencies and foreclosures. It may also explain the high cure rates among CLT mortgages that become seriously delinquent, as CLTs intervene to arrest the slide toward foreclosure. In this respect, CLT home ownership appears more sustainable than private market options for low-income homeowners, suggesting that CLTs may provide a less speculative and more reliable avenue to wealth accumulation for low-income and minority homeowners.

Low-income households can only enjoy the economic benefits of home ownership if they are able to remain homeowners for a number of years. If they lose their homes to foreclosure—or simply return to renting after discovering that the costs and burdens of home ownership are too difficult—low-income households cannot build wealth. The findings of the Network’s survey make clear, however, that few CLT homeowners are losing their homes to foreclosure. Moreover, other research on CLT homeowners has found that they far exceed the 50 percent home ownership retention rate reported among conventional market, low-income homeowners. Preliminary results from a study by The Urban Institute, which includes three CLTs, found that over 91 percent of low-income households remained homeowners five years after buying a CLT home. They either continued to occupy their CLT home or resold it to purchase a market-rate home (Temkin, Theodos, and Price, forthcoming).

CLT home ownership not only lessens foreclosures and increases the chances of success among the population most at-risk of losing their homes, but it also indirectly prevents costs of foreclosure for neighbors, municipalities, and lenders. Such exemplary performance implies that greater investment in this model, including its stewardship activities, is both warranted and overdue.

Only one-third of CLTs reported receiving any funding for foreclosure prevention activities during 2009, while many reported increasing stewardship activities to buffer homeowners from the economic downturn and foreclosure crisis. The study also found that only one-third of CLTs received funding to create new CLT units from foreclosed and vacant housing stocks during 2009. Hence, CLTs are not adequately resourced to create home ownership opportunities from the crisis, which could help to preclude negative outcomes associated with unsustainable home ownership in the future.

Jacobus and Abromowitz (2010) call for a reevaluation of the ways that the federal government encourages home ownership. They recommend targeting existing resources to purchase-subsidy programs like CLTs in order to more efficiently use public dollars and expand and maintain home ownership opportunities. This study provides further support for that policy recommendation.

About the Authors

Emily Thaden, M.S., is a doctoral candidate in the Community Research and Action Program at Vanderbilt University and is employed as the Shared Equity Development Specialist at The Housing Fund in Nashville, Tennessee.

Greg Rosenberg, J.D., is director of the CLT Academy of the National Community Land Trust Network and the former executive director of the Madison Area Community Land Trust. He was a contributing author to The Community Land Trust Reader (Lincoln Institute, 2010), and is a graduate of the University of Wisconsin Law School.

References

Apgar, W. C., and M. Duda. 2005. Collateral damage: The municipal impact of today’s mortgage foreclosure boom. Minneapolis, MN: Homeownership Preservation Foundation.

Herbert, C.E., and E.S. Belsky. 2008. The homeownership experience of low-income and minority households: A review and synthesis of the literature. Cityscape: A Journal of Policy Development and Research, 10(2): 5–60.

Immergluck, D. 2009. Foreclosed: High-risk lending, deregulation, and the undermining of America’s mortgage market. Ithaca, NY: Cornell University Press.

Jacobus, R., and D.M. Abromowitz. 2010. A path to homeownership: Building a more sustainable strategy for expanding homeownership. Washington, DC: Center for American Progress (February).

Joint Center for Housing Studies. 2008. State of the nation’s housing 2008. Cambridge, MA: Harvard University, Joint Center for Housing Studies.

McCarthy, G.W., S. Van Zandt, and W.M. Rohe. 2001. The economic benefits and costs of homeownership: A critical assessment of the literature (Working Paper No. 01-02). Washington, DC: Research Institute for Housing America.

Moreno, A. 1995. The cost-effectiveness of mortgage foreclosure prevention. Minneapolis, MN: Family Housing Fund.

Mortgage Bankers Association. 2009. Delinquencies continue to climb in latest MBA National Delinquency Survey. Washington, DC (March 5).

–––—. 2010. Delinquencies, foreclosure starts fall in latest MBA National Delinquency Survey. Washington, DC (February 19).

Reid, C.K. 2005. Achieving the American dream? A longitudinal analysis of the homeownership experiences of low-income households (CSD Working Paper 05-20). St. Louis, MO: Washington University, Center for Social Development.

Temkin, K., B. Theodos, and D. Price. Forthcoming. Balancing affordability and opportunity: An evaluation of affordable homeownership programs with long-term affordability controls. Washington, DC: The Urban Institute.

Thaden, E. 2010. Outperforming the market: Making sense of the low rates of delinquencies and foreclosures in community land trusts. Portland, OR: National Community Land Trust Network. (This report is also available as a working paper on the Lincoln Institute Web site.)