Community Land Trusts (CLTs) form a small but important part of the affordable housing mosaic. Preserving Affordable Homeownership: Municipal Partnerships with Community Land Trusts, a Policy Focus Report of the Lincoln Institute for Land Policy, describes the many ways in which state and local governments can assist CLTs and help maintain the affordability of housing units indefinitely. Co-authored by John Emmeus Davis, an experienced city planner, and Kristin King-Reis, a lawyer whose clients include CLTs and other non-profits, the Report offers a comprehensive and readable guide to how CLTs operate and how state and local governments can increase the likelihood they will succeed.
The Report begins with a history of CLTs and ends by offering a series of policy recommendations. These sections bracket a set of chapters examining various facets of the relationship between CLTs and government bodies.
While there is considerable variety among CLTs, a typical structure involves land that is owned by a non-profit CLT, on which it builds homes. Individual units are then ground leased to moderate-income buyers, who own the structures but lease the land.
“Later, if homeowners decide to move, they must resell their subsidized homes for a formula-driven price that other income-qualified homebuyers can afford. By maintaining ownership of the land and capping the resale price of a home across multiple resales, a CLT can usually keep homes affordable for many years without the need for additional infusions of public capital.” (P. 16.)
Thus, what distinguishes CLTs from most other affordable-housing programs is that the unit remains reasonably priced to successive owners over a prolonged period of time. This structure does not provide a subsidy solely to the initial owner, who would then retain the value of any appreciation upon resale at the market price. The CLT oversees the project over time, ensuring that the homes remain affordable and that the units are well maintained, and assisting those owners who suffer financial reverses.
The middle chapters focus on a range of issues that can arise between CLTs and government bodies. Chapter 2, for example, emphasizes the ways in which municipalities increasingly offer support to CLTs and provides a “menu of municipal largesse.” (P. 26.) Governments might, for instance, offer funding for staffing or provide this staffing themselves, at least for the first several years. Alternatively, governments might purchase the land and then donate it to the CLT.
Chapter 4 describes the different methods by which affordable homes that last can be subsidized. Some CLT homes, for instance, are low- or zero-equity co-ops. Here, not only does the CLT own the land, but the building itself is owned by a cooperative corporation that has the ability to secure mortgage financing on the entire project.
Under this cooperative structure, the subsidy can apply to part of the building and not just the land, homeowners can buy in with a smaller downpayment, and lower-income families can have access to homeownership. “As a result, homeownership can be made accessible to households whose income is much lower than that of people who have the wherewithal to purchase a house or condominium.” (P. 42.)
Chapter 4 is of particular interest to readers who are lawyers because it also discusses other types of regulatory support that government bodies can provide. These include regulatory concessions and bonuses, such as density bonuses, reduced impact fees, parking waivers, and expedited permitting. Here, the government is providing a subsidy in-kind rather than, or in addition to, direct financial support.
Chapter 6 turns the focus to local tax issues. In particular, it argues that CLTs should benefit from the fact that local real estate taxes should be set on the basis of an appraised value reflecting the fact that homeowners do not have fee title to the land underlying their houses.
Even without providing extra benefits to owners in CLT projects, then, local government can impose taxes that reflect the true—lower—value of these homes. Actual results, though, turn out to be uneven, in part due to resistance from property assessors in some locations.
Chapter 7 emphasizes the types of CLT-specific legislation that states can adopt to support the development and viability of CLT projects.
The Report’s final chapter, appropriately, lists and describes recommendations for preserving partnerships between CLTs and municipalities. Most significantly, this concluding section argues that states should invest in ongoing stewardship of these long-lasting projects and not just initial development.
In addition, this prescriptive conclusion argues in favor of grant funding rather than loans. And it recommends that these projects should be sustainable ones that recognize how climate change is affecting all types of real estate development, even if this is more costly in the short run.
One topic the authors might have devoted more attention to is the fact that CLTs limit the ability of their residents to build wealth via increasing home equity. For many Americans, their most valuable asset is their home, which appreciates over time even as the owner gradually pays off the home mortgage loan. By capping profits, the CLT accomplishes one goal, that of maintaining the unit’s affordability over time, while undercutting another, that of helping homeowners accrue wealth in the form of home equity.
This places CLT owners at a disadvantage in expanding their net worth as compared to other residents. In short, whatever subsidies are provided by governments or donors are shared by consecutive owners rather than retained by the initial owner. There is no correct answer to this question of course, but merely a choice that must be made between two important but inconsistent policy goals.
This Report serves as a useful introduction to CLTs for those who may not be familiar with what they do and how they operate. It traces the history of these projects and notes the ways in which they have evolved over the past few decades. It stresses the importance of partnerships with state and local governments and the different types of support these governments can provide.
The Report is also presented in an extremely user-friendly format, with sidebars, illustrations, graphs, and tables, as well as photographs illustrating how some of the text’s examples actually look. It is a beneficial contribution to the literature, a good introduction for newcomers to the subject, and a strong advocacy piece for increased public-private partnerships that can support the construction and ongoing maintenance of one type of affordable housing.
