It is no accident that Kenyon College, in Gambier, Ohio, appears on so many lists of America’s most beautiful campuses. Since Bishop Philander Chase founded the college on a wooded hilltop in 1824, he envisioned a serene rural environment that would promote serious thought and good conduct. For 189 years, the college and those who have found their way to it have valued this setting. Timeless rhythms in the landscape afford views that please the eye and nourish the spirit in every season, and students and faculty members use the rural acres adjacent to the campus for fieldwork in a variety of disciplines ranging from sociology to biology and chemistry. Long after graduation, alumni remember the campus, the surrounding fields and forests, and the twists and turns of the Kokosing State Scenic River. Integral to the Kenyon experience, it is this environment that captures the interest of prospective students and their parents. More than beautiful natural assets, they represent the past, present, and future for Kenyon.

In the 1820s, Chase originally purchased 4,000 acres for the college and the village of Gambier plus an additional 4,000 acres as an investment for a total of $18,000. Within five years of its founding, however, Kenyon began selling the investment acreage in response to financial difficulties. By the early 1970s, the college’s land holdings had dwindled to fewer than 750 acres.

By the final decade of the 20th century, it was clear that the college could not take its charmed setting for granted. First, the owner of a property on the Kokosing River and directly across from the entrance to Kenyon announced plans to establish a recreational-vehicle park. The college purchased the property for a substantial premium and soon thereafter bought an additional 225 acres in order to quash proposals for a business district along the state highway that leads to Gambier. Concurrently, growth and development were changing the landscape in broad swaths of Knox County’s rural countryside. As farm auctions, land sales, pell-mell subdivisions, and commercial developments accelerated, it became clear that action was required.

Philander Chase Corporation to the Rescue

In 1995, the college was in the early stage of a five-year capital campaign that included a $1 million goal for “land acquisition to preserve the surroundings [the college] so cherishes.” The first preservation gift came from an alumnus visiting one sunny spring weekend in 1997. After walking to a hilltop overlooking the Kokosing River valley, to see what Kenyon needed to protect, he wired $1 million to the college. By the end of the campaign, in 2000, the college had raised more than $3 million—three times the goal for open space preservation.

The campaign showed that alumni and other donors ranked land conservation high on their charitable giving list, and the protection of land around the college would continue to enlist the loyalty and charity of Kenyon alumni. At the same time, state and federal programs were beginning to provide meaningful funding for land conservation. Because the college was ineligible to receive such assistance, the establishment of a special entity was crucial.

In 2000, the school formed the Philander Chase Corporation (PCC) as a separately incorporated nonprofit entity with a simple mission: “To preserve and maintain the farmland, open spaces, scenic views, and characteristic landscapes surrounding Kenyon College and Gambier, Ohio.” With its own 15-member board of directors, PCC’s organizational structure is unique among land trusts. It is a membership 501(c)3 organization, and Kenyon College is the sole member under provisions of Ohio nonprofit law. Even though the corporation is a separate entity operating under the direction of its board, Kenyon College is the controlling organization and ratifies the election of the corporation’s directors. The president of Kenyon and chair of PCC are ex officio members of one another’s boards.

PCC also serves to prevent future boards from selling off acreage and to improve town-gown relations. While interactions between Kenyon and the surrounding community were not a major problem, there was some friction; although PCC functioned under the college’s auspices, local residents generally perceived it as a separate entity with a clean slate.

Aid from Local Partners

As suggested above, PCC was lucky to have been founded at an especially opportune time, when its concerns coincided and overlapped with similar initiatives taking shape in the state of Ohio and in Knox County, providing the framework and strategies that would later help PCC carry out its work.

In 1996, then-Governor George Voinovich commissioned a bi-partisan Ohio Farmland Preservation Task Force consisting of representatives from government, business, academia, and agricultural interests. In June 1997, the task force reported that in the previous 45 years, more than seven million acres (33 percent of Ohio farmland) had been lost to nonagricultural uses. Two specific recommendations set the stage for broader conservation efforts: the creation of an Office of Farmland Preservation within the Ohio Department of Agriculture and a policy statement declaring the state’s commitment to protect its productive agricultural land from irretrievable conversion to nonagricultural uses.

The state also announced a $10,000 Community Development Block Grant program to support local “farmland preservation” plans, which led to the formation of the Knox County Farmland Preservation Task Force in 1998. I served on the local task force, charged with “evaluating the state of agricultural production in the county, exploring alternatives to unplanned development, and making recommendations for the preservation of the farmlands in Knox County.”

In 2000, state voters approved The Clean Ohio Fund, a $400 million bond program to preserve natural areas and farmland, protect streams, create outdoor recreational opportunities, and revitalize urban areas by returning contaminated brownfields to productive use. The fund (renewed by voters in 2008) dedicated $25 million, to be spent over a four-year period, to the Ohio Agricultural Easement Purchase Program administered through the Ohio Department of Agriculture.

Another key county-level development at that time was the establishment of the Owl Creek Conservancy. A nonprofit private land trust, the conservancy works with landowners to conserve farmlands, stream corridors, aquifer- and watershed-protection areas, wildlife habitats, woodlands, and other ecologically sensitive areas of central Ohio including Knox County.

From the beginning, PCC determined that good working partnerships would be essential for success, and so it forged ties with policy makers at the village, township, county, and state levels. From the Knox County Commissioners to the Regional Planning Commission to the Soil and Water Conservation District, PCC established and continued to nurture productive relationships. It was also critical that, as the managing director of PCC, I was an active participant in many of these organizations.

Box 1: Conservation Catalysts

The story of Kenyon College’s protection of the farms and fields near its campus is an exemplary case of an academic institution catalyzing large landscape conservation. As such, it is one of more than a dozen narratives being compiled by the Lincoln Institute in a forthcoming book, Conservation Catalysts, edited by Lincoln Institute fellow James Levitt. He reports that “the volume will give us a picture of the practice of universities, colleges, and independent research organizations around the globe that are going beyond their research and teaching missions and applying land conservation expertise, in many cases quite literally, ‘on the ground.’”

What is remarkable about these cases is not only their impact, but also the span of organizational and geographic diversity they represent. Academic and research organizations are catalyzing these initiatives well beyond Kenyon’s base in Gambier, Ohio, to places as widespread as Australia, the Caribbean islands of Trinidad and Tobago, and the Canadian boreal forest. The initiatives often encompass a broad range of interests representing the public, private, nonprofit, and academic/research sectors and involve a wide variety of disciplines in the natural sciences, social sciences, professional studies, and the humanities. The study and sharing of best practices in large landscape conservation is the focus of two ongoing efforts of the Lincoln Institute and its joint venture partners, the Practitioner’s Network for Large Landscape Conservation (www.largelandscapenetwork.org) and the Conservation Catalysts Network (www.conservationcatalysts.net).

PCC’s Preservation Strategies

Amid this dynamic environment, PCC began its operations. Before its establishment, there were reports and numerous recommendations at the local level, but PCC was an early catalyst for countywide action. In keeping with PCC’s philosophy of helping others, the newly established Ohio Agricultural Easement Purchase Program provided the local farming community to help them protect their land from adverse development.

Under the Ohio Agriculture Easement Purchase Program, landowners could not directly apply for easements; a county, township, municipality, or land trust had to apply on their behalf. Shortly after the guidelines were published in 2001, two local farmers asked PCC to act as their local sponsor. The state rewarded applicants who formed larger blocks with nearby properties, so the farmers recruited their neighbors and rallied many of them to attend workshops hosted by PCC with help from the Office of Farmland Preservation. In the program’s first year, PCC was the third largest source of applications statewide. Only 24 applications were funded; PCC received one of the coveted easements.

The following year, PCC ingeniously helped raise local farmers’ scores on the essay portion of the application. PCC’s applicants scored highly on the objective questions, but most scored lower than other applicants statewide on the five essays. So I asked the chair of Kenyon’s English department, renowned as one of the nation’s best, to enlist about 20 students to assist farmers in writing their essays. Students met with the farmers in their homes, interviewed them, and helped them craft compelling essays. The effort was a rousing success. The farmers enjoyed getting to know Kenyon students, the students loved visiting the farms and talking with the farmers, and in following years their applications earned top essay scores.

Permanently protected property in close proximity to an applicant’s farm garnered additional points, so PCC secured a conservation easement from the college on the 380-acre Brown Family Environmental Center. In a similar manner, PCC asked the Owl Creek Conservancy to apply for Clean Ohio Funds to purchase an easement on PCC-owned land. The result was a threefold win: PCC received cash for selling the easement and continued to own the land, the Owl Creek Conservancy held the easement, and agricultural easement applicants received additional points.

PCC boosted local applicants’ scores by increasing its local match of state subsidies as well. Ohio funds only 75 percent of an easement’s total value; the remaining 25 percent must come from the landowner or another source. If applicants volunteer to pay more than 25 percent, lowering the state’s obligation, the state awards “bonus” points to the applicant. By using its own money and persuading the Knox County Commissioners to contribute nearly $300,000 to support the program, PCC ensured more successful applications.

Over the years, PCC also raised the scores of applicants whose property qualified for the Ohio Department of Agriculture’s Century Farm designation, honoring families who demonstrated continuous family ownership for at least 100 years. Century Farms received extra points, and, with encouragement and guidance from PCC, five of Knox County’s 18 Century Farms successfully applied for easements and conserved their land.

While helping local farmers protect their properties, PCC helped create a county park at the same time. Using money generated by the college’s fundraising campaign and subsequent gifts, three properties totaling 202 acres were purchased and then resold subject to deed restrictions. One of these properties, the 168-acre Prescott farm between Gambier and Mount Vernon, was especially important to Kenyon as the source of Wolf Run Creek, which flows into the Kokosing River and through the Brown Family Environmental Center. A development company from Pennsylvania had already purchased land across the road from the Prescott farm and planned to build 225 homes there. Before the developer could purchase the farm as well, PCC bought it for $626,000.

A year later, PCC agreed to resell the farm to the Knox County Park District only if the district obtained state subsidies to acquire the property and establish Knox County’s first park. Because state funding required matching grants—money the district did not have—PCC helped persuade the Mount Vernon Community Foundation and the County Commissioners to donate land they owned adjacent to the farm to satisfy the matching fund requirement. The plan worked. The park district got the funding and purchased the property from PCC, Knox County had a new 288-acre Wolf Run Regional Park, and the source of Wolf Run was protected from development.

While some successes happened without funding, many of the accomplishments directly resulted from the availability of money. In addition to donations from alumni and friends during two college campaigns, PCC secured additional funding from state, federal, and county sources in excess of $2.1 million. The original notion that alumni and other donors might be interested in “preserving the nature of the Kenyon experience” proved to be correct again.

Colleges and Universities as Conservation Catalysts

PCC, as it has developed, is a model with the legal structure and tools needed to be an effective conservation catalyst. By 2013, PCC had outright purchased 230 acres that it manages and leases to farmers, facilitated the creation of 35 easements encompassing 4,216 acres, and, with the Owl Creek Conservancy, protected a total of 6,746 acres in Knox County. Of the county’s 339,000 total acres, those remaining 164,666 unprotected acres provide a tremendous opportunity for the local land conservation community.

While large landscape conservation is taking place nationally and internationally, local conservation activities have a valuable role to play and a great deal to contribute to grander-scale activity. According to the Land Trust Alliance 2010 Census, the 1,723 active land trusts operating in the United States had collectively conserved 47 million acres. There are 7,500 post-secondary educational institutions in the United States. If only 10 percent of these institutions engaged in land conservation using a model similar to PCC’s, it could be a major step forward in the conservation movement.

Each institution where the PCC model might be adopted would have its own unique environment. Nevertheless, the model is widely applicable; every element that led to the formation of PCC is eminently replicable at any educational institution in the country.

The Philander Chase Corporation began at a time when there was growing concern about the deal-by-deal erosion of the rural landscape. The goal was local: it related to Kenyon College and its environs. But PCC’s experience and aims were soon shared by overlapping and allied agencies in Knox County and beyond, leading to and suggesting larger possibilities. This experience demonstrates that what happened here can happen elsewhere.

About the Author

Doug Givens was the founding managing director of the Philander Chase Corporation. Givens also served as chair of the Farmland Preservation Committee of the Knox County Regional Planning Commission and member of the State of Ohio Farmland Preservation Advisory Board. He was a founding trustee of the Owl Creek Conservancy and president of the Brown Fund. Mr. Givens is currently the vice president, director, and member of the executive committee of the Scranton-Averell Company (a land holding company); a director of the Bradford & Carter Company (a real estate development company); and a director of the George B. Storer Foundation. For 28 years, he worked in the development office at Kenyon College, retiring from the vice presidency in 2000. He earned his bachelor’s and master’s degrees at Indiana University and received a doctor of laws degree from Kenyon College. 

Resources

A Place with a View for the Future. www.kenyon.edu/x44947.xml

Knox County, Ohio. 1998. Knox County Comprehensive Plan: Focus 2100 Advanced.

———. 1999. Knox County Farmland Preservation Taskforce Report.

———. 2003. Cost of Community Services Study.

Land Lords. https://orgsync.com/35905/chapter

Ohio Farmland Preservation Task Force. 1997. Ohio Farmland Preservation Task Force Findings and Recommendation: Report to Governor George V. Voinovich. Ohio Issue 1. Environmental Bond Act. 2000.

Owl Creek Conservancy. www.owlcreekconservancy.org

Philander Chase Corporation. www.kenyon.edu/philanderchase.xml

Philander Chase Corporation Articles of Incorporation. www2.sos.state.oh.us/reports/rwservlet?imgc&Din=200013300715

Rural Life Center, Kenyon College. http://rurallife.kenyon.edu

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.)