What are Community Land Trusts (CLTs)?
In the U.S., the Community Land Trust (CLT) model traces its
origins to an organization called New
Communities, Inc., which used the CLT model in the American South during
the 1960s to promote housing security for African American farmers. These
farmers were being forced off of their land, often in retaliation for
attempting to secure the right to vote.
The goal of the CLT model is to empower residents to create
and control a vibrant, diverse, and high-quality neighborhood. Simply put, it’s
a way to make home ownership affordable, sustainable, and accessible for
generations of lower-income families.
Typically, community organizations purchase land, upon which
they either build or rehabilitate houses. The organizations then form a CLT.
CLTs are often governed by a board of directors made up of ⅓ housing residents,
⅓ community representatives, and ⅓ Board Members of the sponsoring community
organization. Low-income homebuyers can purchase the houses at a below market
rate, while acquiring a possessory interest in the land via a long-term lease.
This dual ownership model allows the CLT to continue to maintain the long-term
affordability of the property. The homebuyers obtain equity in the home and in
the CLT, and in exchange, their alienation right is limited such that the
property must be sold to a low-income individual or family at an affordable
price. CLTs also help to stabilize the local housing market because the strict
formulas CLTs use to calculate the permissible resale value of their houses
effectively remove the properties from the speculative fluctuations of the real
estate market.
With incomes stagnant, homeownership increasingly out of
reach, and rents skyrocketing throughout the nation, communities in nearly
every state are turning to the CLT. From 2000 to 2011, the number of CLTs nationally
grew
from 90 to 242. CLTs are being increasingly utilized as a strategy to increase
access to homeownership, while ensuring that development efforts are
sustainable and inclusive for low-income households in future generations. This
is the case in rapidly growing, tight housing markets, such as Austin,
and in disinvested communities with weak housing markets, like Detroit.
In a city like Austin, homeownership is already out of reach
for low-income individuals and families. CLTs are necessary to ensure that low
income people can own their own home and build wealth, while maintaining an
affordable price for the next low-income buyer. In Detroit, on the other hand, land
speculators can purchase property for relatively cheap and then milk tenants
for rent money before eventually abandoning the property. CLTs provide
low-income Detroiters with an affordable path toward homeownership, while
ensuring that they don’t lose their homes due to over-assessed
property taxes and that properties remain permanently affordable despite
any gentrification
trends taking place throughout the city.
How does the Law recognize and treat CLTs in Michigan?
In Michigan, CLTs have been popping up all over the state,
from Detroit, to Grand Rapids, to Northern Michigan. However, state
laws make it difficult for CLTs to form and survive. Despite efforts in states
like New
York and Texas
to formally recognize, define, regulate, and support CLTs, the Michigan
legislature has yet to acknowledge CLTs as an entity.
Moreover, CLT homeowners in Michigan pay property taxes for
both the CLT home that they own and the CLT land that they lease pursuant to
the ground lease. For the purpose of property tax assessments, the State of
Michigan determines the value of each of these property interests based on their
“true cash value”, as defined by Section 27 of Michigan General Property Tax
Act (MCL
211.27). The definition fails to account for the resale restrictions on CLT
homes or the below market lease payments being made to the CLT.
Finally, in states, such as Texas,
CLT homeowners are eligible for exemptions and reductions to the property taxes
owed on their home and land, provided that the CLT conveys properties to
households that meet certain income requirements. Michigan law (MCL 211.181-182)
does provide opportunities for certain nonprofit owners of land to obtain a
property tax exemption, but that exemption terminates for the most part once
the land is leased.
A Path Forward
A crucial first step would be for the Michigan Legislature to
enact a statute, which recognizes and defines CLTs. This is an important first
step in order to help standardize the treatment of CLTs across the state and to
ensure their continued growth and survival. Moreover, the property taxes of CLT
properties must be assessed in a way that accurately reflects the costs of
property within the CLT model and the fact that many CLT homeowners are
low-income residents. Finally, as explained above, CLTs advance several policy
goals, including expanding access to wealth building opportunities through
homeownership, preserving housing affordability, and promoting community
empowerment, identity, and engagement. The State of Michigan should therefore
enact and allow for owners of CLT property to obtain certain property tax exemptions
in order to increase access to homeownership and promote the growth and
sustainability of CLTs in communities throughout the state.
This graphic was created by 2020 UCLA Community
Collaborative https://www.cacltnetwork.org/resources/
By: Matt Lustbader
