Homeownership has lost its luster since 2008, and no wonder – as Americans lost trillions in wealth, many have turned to renting. But as Lincoln Institute president George W. McCarthy and Harold Simon, executive director of the National Housing Institute, writes in an op-ed essay, published in The Boston Globe, there is a third way: shared equity housing, in the form of community land trusts.
In a typical approach, a non-profit takes a long-term ground lease and sells the homes, but not the land underneath, a manageable price to families with low or moderate incomes. If they later decide to sell their home, a cap on resale profit keeps the price low to remain affordable to a new family of similar means.
The approach brings stability to the wild swings that can be characteristic in housing markets. Foreclosures are virtually nonexistent at one of the most successful CLTs in the country, right here in Boston – the Dudley Street Neighborhood Initiative in Roxbury, this fall celebrating its 30th anniversary. Our research has shown that conventional loans are eight times more likely to experience foreclosure than CLT mortgages.
Yet, sadly, a legislative technicality is preventing CLTs from scaling up; the FHA says it can’t back mortgages for CLTs, in part because of the cap-on-resale-profit provision. “The third path between renting and homeownership is tantalizingly within reach,” McCarthy and Simon write. “It would be a shame if bureaucratic entanglements stood in the way.”
It’s been a big month for shared equity housing, inclusionary zoning, and CLTs. We were interviewed for this story at Next City magazine, The City Where Real Estate Developers and Housing Activists Agree to Agree, all about a small, dense city neighboring Cambridge, where the Lincoln Institute is located. Somerville, Mass. is confronting sharply increased home prices and speculation, in the face of redevelopment schemes, rezoning, and major new transit infrastructure, including the planned extension of the Green Line. Community activists are rightly concerned about displacement and gentrification.
In the interview with the writer, we talked about two strategies: inclusionary housing, in place in Boston and Cambridge, where developers are required to provide a certain percentage of affordable homes as part of any new market-rate private development; and CLTs.
Senior fellow Armando Carbonell provided more context about CLTs in another piece in Next City that ran a few days later, titled Should Community Land Trusts Rank Higher in the Affordable Housing Toolbox? “One of the things that we think is great about community land trusts is that they are pretty stable even in the face of tough economic conditions,” he said.
CLTs can also act as a bulwark against gentrification, particularly, as our research shows, at transit-oriented development sites. The Role of Community Land Trusts in Fostering Equitable Transit-Oriented Development: Case Studies from Atlanta, Denver, and the Twin Cities, by Robert Hickey, senior research associate at the Center for Housing Policy in Washington, DC., was published as a working paper earlier this year.
Finally, the Guardian published this article, Could community land trusts offer a solution to the UK’s housing crisis?