Introduction
As incomes in much of American have remained study or
declined, households can no longer afford to compete in their local housing
markets. Families can choose to pay an exorbitant amount of income for housing
thereby leaving little for other essentials combine households thereby causing
overcrowding, or simply move away.[i]
Faced with high land and housing costs, lower-income
families face enormous difficulties in developing and securing affordable
housing.
Enter the community land trust (“CLT”).
What Is A CLT?
A CLT is a private, nonprofit organization created to
provide the community with secure affordable access to and control over land
and housing.
The first modern CLT in the United States, New Communities
Land Trust, was established in Albany, Georgia in 1969. Consisting of more than
5,000 acres of farmland, the CLT gave Black families an opportunity to affordably
access, build on, and farm land at a time when they faced significant obstacles
doing so.[ii]
(Artist’s rendering
of St Clements, London’s first CLT)
Today, CLTs can be found in a growing number of communities—in
fact, there are currently 160 CLTs operating in every region of the country![iii]
Typically, CLTs are used in neighborhoods experiencing or expected to
experience gentrification.[iv]
You might find a CLT in the middle of a city where property prices are
extremely high and where no one can afford to live, but you might just as
easily find one in a rural area with rapidly appreciating land values.
In either case, a group of people comes together to purchase
land and then either builds or develops houses into affordable homes on that
land.
How Do CLTs Work?
By separating ownership of land and housing, CLTs bring
sustainable homeownership within the reach of lower- and middle-income
families.
Ground Lease
Because the CLT owns the land and the homeowner owns the
home, both parties sign a ground lease that defines their unique roles and
responsibilities. This ground lease contains two provisions that are critical
to the long-term success of the CLT.
1. Resale
formula: In exchange for access to homes at below-market prices,
homeowners agree to resale price restrictions that keep homes permanently
affordable to subsequent households. The resale formula determines what a
homeowner can sell their home for when they wish to move.[v]
2. Preemptive
right to purchase the lessee’s home: Should the owner decide to sell
their home, the ground lease allows the CLT to exercise a preemptive right to
purchase the home. The preemptive right allows the CLT to find a new purchaser
who meets the necessary qualifications and purposes.[vi]
The combination of these provisions keeps homes affordable
in perpetuity.
Stewardship
In return, the CLT provides stewardship for the houses on
its land, preparing homebuyers for purchase, supporting homeowners through
financial challenges, and managing rental units. This stewardship results in
fewer foreclosures, better upkeep, and stable residents.
Governing Body
CLTs also ensure community control by abiding by a specific
board structure. The board of directors for a CLT is composed of one-third
trust land residents, one-third other community residents, and one-third public
interest representatives. Since board members are elected by the membership for
specific terms, members are given active control of the organization and can decide
the purpose for which the CLT will be used.[vii]
How has the pandemic heightened housing insecurity?
Households across the country have seen a reduction in their
income because of COVID-19 and, as a result, are struggling to meet their rent
and mortgage obligations. Unfortunately, mortgage forbearance and eviction
moratoriums will not last forever, and when they do end, we can expect to see a
wave of evictions and foreclosures to follow shortly thereafter.[viii]
As renters and homeowners lose their homes, Real Estate
Investment Trusts will likely swoop in to purchase the houses they leave
behind, charging exorbitant rents that are out of reach for many lower-income
households once the economy recovers. Indeed, that is exactly what happened in
the aftermath of the Great Recession, and without intervention, the cycle is
likely to repeat when the economy recovers from the COVID-19 crisis.[ix]
How might a CLT offer stability?
CLTs can help homeowners during the current housing crisis
in two different ways.
Firstly, by working local government, financial
institutions, and philanthropic networks to secure funds from the CARES Act and
subsequent COVID-19 relief packages, CLTs can help homeowners during times of
crisis by removing as much land as possible from the speculative market when
property values fall.
Secondly, CLTs can prevent people from being displaced from
their homes by providing necessary rent and mortgage assistance. In the event
that a homeowner is unable to sustain homeownership, community land trusts have
the right to repurchase and transfer title to an income eligible homeowner. As
a result, the original homeowner can avoid the costs of a foreclosure and the
negative credit score consequences.[x]
By Andrew Lee
[i] Housing Assistance
Council. 1993. "Community Land Trusts and Rural Housing." Washington,
DC.
[ii] U.S. Department of
Housing and Urban Development. n.d. Community Land Trusts and Stable
Affordable Housing. Accessed 09 28, 2020.
https://www.huduser.gov/portal/pdredge/pdr-edge-featd-article-110419.html.
[iii] Greenstein, Rosalind,
and Yesim Sungu-Eryilmaz. 2005. Community Land Trusts: Leasing Land for
Affordable Housing. Accessed 09 28, 2020. https://www.lincolninst.edu/publications/articles/community-land-trusts.
[iv] Community Legal
Resources Community Land Trust Project. 2005. Community Land Trusts: A
Primer for Local Officials. Community Legal Resources.
[v] The Florida Housing
Coalition. 2014. "Ground Leases and Resale Formulas: The "How"
of Community Land Trusts." Housing News Network 5-6.
[vi] Housing Assistance Council, supra note 1.
[viii] Florida Community Land
Trust Institute. n.d. "Community Land Trusts and COVID-19."
