Community Land Trusts

Leasing Land for Affordable Housing

High land costs are an obstacle to developing and securing affordable housing for lower-income families. One way to address this issue is to purchase a house without the land, and a community land trust is one mechanism that allows this arrangement. This article reports on a roundtable attended by researchers, policy analysts, technical assistance providers, funders, and community land trust staff members to discuss the community land trust model and related research needs.

The community land trust model is an extremely attractive mechanism for maintaining and expanding the stock of affordable housing. Currently there are approximately 160 community land trusts operating in every region of the country. These community land trusts are nonprofit, community-based organizations whose mission is to provide affordable housing in perpetuity by owning land and leasing it to those who live in houses built on that land. In the classic community land trust model, membership is comprised of those who live in the leased housing (leaseholders); those who live in the targeted area (community members); and local representatives from government, funding agencies and the nonprofit sector (public interest) (Burlington Associates 2003).

A lease within a community land trust also includes a resale formula intended to balance the interests of present homeowners with the long-term goals of the community land trust—balancing the interest of homeowners and the interest of the community land trust to provide affordable housing for future homeowners.

This article addresses some of the questions surrounding the community land trust model;

  • Do community land trusts provide long-term affordable housing?
  • Do community land trusts contribute to individual asset building?
  • How effective are public and nonprofit sector funds when used to produce community land trust housing?
  • Do community land trusts provide access to urban services and/or regional opportunities for leaseholders?
  • Do community land trusts contribute to community building?
  • Why have some community land trusts excelled and others failed?

This article also examine the Sawmill Community Land Trust, located near downtown Albuquerque, New Mexico. In partnership with the City of Albuquerque, Sawmill Community Land Trust's has created a permanent stock of affordable housing in the neighborhood with housing units as well as a plaza, park, community center, commercial space and open space connected with trails. The plan calls for expanding the Sawmill Community Land Trust model to other neighborhoods to ensure a permanent stock of affordable housing and a mixed-income community for the long term.

 


 

For many households experiencing lagging wages or underemployment, the purchase and financing of a house is increasingly difficult. High land costs are another obstacle to developing and securing affordable housing for lower-income families in some markets. One way to address this second issue is to purchase a house without the land, and a community land trust (CLT) is one mechanism that allows this arrangement. This article reports on a roundtable attended by approximately 25 researchers, policy analysts, technical assistance providers, funders and CLT staff members to discuss the CLT model and related research needs. The December 2004 program was sponsored by the Lincoln Institute in partnership with the Institute for Community Economics (ICE), based in Springfield, Massachusetts.

What are community land trusts and How Do They Function?

The community land trust model has evolved in the United States over the last 40 years (ICE 1991). Currently there are approximately 160 CLTs operating in every region of the country and in 38 out of the 50 states and the District of Columbia. These CLTs are nonprofit, community-based organizations whose mission is to provide affordable housing in perpetuity by owning land and leasing it to those who live in houses built on that land. Complementing their status as nonprofit corporations, as defined in the U.S. tax code, and their formal rights and responsibilities codified in the ground lease, CLTs are governed by a board of directors with membership from the community. In the classic CLT model, membership is comprised of adults who live in the leased housing (leaseholders); adults who live in the targeted area (community members); and local representatives from government, funding agencies and the nonprofit sector (public interest) (Burlington Associates 2003).

The community land trust and the homeowner agree to a long-term ground lease agreement (typically 99 years) that spells out the rights and responsibilities of both parties. Among the homeowner’s rights are the rights to privacy, the exclusive use of the property, and the right to bequeath the property and the lease. The CLT has the right to purchase the house when and if the owner wants to sell.

The community land trust’s abiding interest, as the landowner, as the party with the option to purchase the improvement, and as a community-based organization, is to maintain a stake in the relationship long after the original house purchase and lease signing. For example, if buildings become deteriorated, the CLT can force repairs; if the homeowners are at risk for default the CLT can and does act to forestall the default.

The ground lease also includes a resale formula intended to balance the interests of present homeowners with the long-term goals of the community land trust. The intent of affordability in perpetuity is in conflict with the desire of most owner-occupants in the U.S. to reap real estate gains. Thus, the resale formula is designed to balance the interest of individual homeowners to benefit from the use of their home as a real estate investment and the interest of the CLT to provide affordable housing for future homeowners.

Research Agenda

The community land trust model is an extremely attractive mechanism for maintaining and expanding the stock of affordable housing. While the stories one hears from and about CLTs are encouraging and inspiring, little research exists regarding their effectiveness. Furthermore, despite their many attractive attributes, CLTs are neither well known nor extensively used in the U.S. During roundtable discussions, the participants exchanged perspectives and identified six clusters of questions that would constitute a short-term CLT research agenda to help inform future action.

Do community land trusts provide long-term affordable housing?

The separation of ownership of land and buildings is the mechanism by which long-term affordability is achieved. Much of the value in structures comes from their functionality, the materials used and the level of maintenance. These are the contributions of the builder and owner. Much of the value in land comes from its location with respect to natural elements, urban services such as transportation and public schools, and disamenities such as solid waste dumps or prisons. Many of the factors that contribute to land value increases are due to the economic expansion that occurs in metropolitan areas. In strong markets the pace of value increases in land exceeds that of structures. Thus, if the land is excluded from the price of housing, affordability ought to be assured over time. Research is needed to evaluate the effectiveness of the CLT tool in providing long-term housing affordability and to evaluate CLTs as compared to other affordable housing programs.

Do community land trusts contribute to individual asset building?

community land trust housing provides residents with shelter, security of tenure, access to credit and access to urban services, among other benefits. However, individual real estate profits are limited by the design of the resale formula, which varies among CLTs. Outcomes also will vary with real estate cycles in particular cities and regions. A second question, then, has to do with the degree to which the limitation on real estate profits limits individual asset building. It is possible, for example, that the security of tenure and the predictability in housing costs provided by the CLT allow individuals to pursue other, non-real estate strategies for asset accumulation.

How effective are public and nonprofit sector funds when used to produce community land trust housing?

In most cases, community land trust housing requires subsidies for the purchase of land and/or house construction. Grants typically come from government sources or private foundations. One of the premises of the CLT model is that these subsidies are recycled later to reclaim the value of the subsidies and to benefit future homebuyers. Public subsidies are no longer needed when a CLT house is sold under the resale formula. However, it is not known how efficient subsidies are when used to develop CLT housing and how the subsidy capture mechanisms work.

Do community land trusts provide access to urban services and/or regional opportunities for leaseholders?

Quality of housing in the U.S. is closely related to residential location. However, location influences more than simply house quality; it also affects the existence and quality of job opportunities and urban services such as access to transportation, health care, libraries and public schools, all of which have direct and indirect effects on quality of life and life chances.

Researchers looking at regional policy solutions are particularly interested in whether and how community land trusts influence this access to urban services. Economists use the term “spatial mismatch” to refer to the imbalance between the location of many employment opportunities in the suburbs and the location of unemployed jobseekers in the city centers. Many participants at the roundtable were interested in exploring the degree to which CLTs facilitate bridging this mismatch because of their specific location within a region, their connections to other organizations in the neighborhood and region, or employment and training programs offered to support CLT residents.

Do community land trusts contribute to community building?

Community land trusts are unique among U.S. community-based organizations in that their concerns are geographically focused and include economic relationships, the governance structure of the organization, and the provision of direct services. In some communities CLTs are connected to other organizations serving the same community or the same constituency. Much of the literature on neighborhood development and revitalization focuses on the importance of “social capital” to people and their community. Do CLTs contribute to this connective tissue of neighborhoods? How and why? Some CLTs operate across a number of communities and thus have a more regional focus. This difference among CLTs will lead us to consider questions of scale and community definition.

Why have some community land trusts excelled and others failed?

There is great variation in community land trusts across the country. The largest, Burlington Community Land Trust in Vermont, has 370 single-family homes and condominiums and 270 rental apartment leases; other CLTs may have just a handful of units available for lease. Some CLTs have been able to grow significantly while others have not, and some have ceased peration altogether. There are many possible reasons for this variation in success, including staff resources and skills; differences in mission; financing arrangements; ability to receive donations of land; and the strength or weakness of the local land and housing market.

Future Activities Regarding community land trusts

The Lincoln Institute is interested in community land trusts because they provide a window that encourages a deeper understanding of the significant role that land plays in social and economic development and the mechanisms by which it occurs. The roundtable participants hope that investigation into this research agenda would accomplish a number of objectives.

First, new research would spread knowledge of community land trusts to practitioners in fields ranging from urban development to housing policy, neighborhood planning, community organizing, regional sustainability and equity. Second, among policy analysts this research will improve our understanding of the strengths and weaknesses of the CLT model and the contexts in which it is most useful and successful. For CLT members, leaseholders, staff and board members, the findings will provide an understanding of their locally based work within a national context. For funders and lenders the investigations will provide an empirical base from which to make future funding decisions.

This work will be conducted by the Lincoln Institute, the Institute for Community Economics, representatives of organizations who attended the roundtable and others who become engaged in these issues. For example, the National Housing Institute already has begun a study of shared equity home ownership. We expect that documenting, investigating and analyzing the history of CLTs and individual experiences will provide a better understanding of the role of land in housing affordability.

Sawmill Community Land Trust

Sawmill Community Land Trust (SCLT) is located near downtown Albuquerque, New Mexico, adjacent to Historic Old Town, which has become a leading tourist attraction. Gentrification has increased the housing prices in the Sawmill neighborhood, and vacant industrial land has increased from $1.05 per square foot in 1996 to its current high of $4.10 per square foot. A home that sold for $26,500 in 1981 cost $125,000 in 2000 and $175,000 in 2004. From 2000 to 2004, real increases in a single-family home (land and housing) in the neighborhood increased by 31 percent.

Founded in 1996, SCLT evolved from existing community organizations that had been working for years to protect the character of the ethnically diverse Sawmill community and address environmental and pollution problems caused by a particleboard factory on the site. SCLT's main focus has been to create a permanent stock of affordable housing in the neighborhood.

In partnership with the City of Albuquerque, which acquired the 27-acre former industrial site, SCLT developed plans for 196 housing units of various types (live-work lofts, single-family detached houses, townhouses, duplexes, senior apartments and condos) as well as a plaza, park, community center, commercial space and open space connected with trails. All of the 26 homes built in the first phase of development have been sold, and construction of a second housing phase will begin soon. SCLT has led a cooperative effort to develop a metropolitan redevelopment plan for the surrounding 510-acre Sawmill/Wells Park area. The plan calls for expanding the SCLT model to other neighborhoods to ensure a permanent stock of affordable housing and a mixed-income community for the long term.

 

Rosalind Greenstein is senior fellow and co-chair of the Lincoln Institute’s Department of Planning and Development. Yesim Sungu-Eryilmaz is a research assistant in the Lincoln Institute’s Department of Planning and Development.

 


 

References

Burlington Associates in Community Development, LLC. 2003. Key features of the “classic” community land trust. Burlington, VT: Burlington Associates.

Institute for Community Economics (ICE) 1991. The community land trust legal manual. Springfield, MA: ICE.

 

Resources

Burlington Community Land Trust

Fannie Mae Corporation (search for the link to CLTs)

Institute for Community Economics (ICE)

Policy Link. See Equitable Development Toolkit and link to CLT case studies.

National Housing Institute (NHI)

Community Development, Community Land Trusts, Development, Economics, Environmental Management, Homeowners Associations, Housing, Land Trusts, Regionalism
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