The FWD #B11 • 1,113 Words
How do Community Land Trusts promote permanent affordability, homeownership, and community control?
Community Land Trusts (CLTs) are not a new model, but they are an innovative approach to affordable homeownership. Let’s take it back to basics to understand this unique tool for creating permanent affordability and community-controlled development.
What is a Community Land Trust?
The simple answer to this is not actually so simple.
A Community Land Trust or CLT is an affordable housing model that separates the ownership of the land beneath a house to make that home more affordable to a low to moderate income (LMI) buyer. A non-profit organization, the “Trust” itself, owns the land beneath the house and leases the land back to the homeowner. The lease itself limits how much the homeowner can resell the house for, thus ensuring affordability in perpetuity.
The model is rooted in the Civil Rights Movement in Georgia with New Communities Inc.
Each CLT organization is unique.
Some CLTs are affordable housing developers, while others don’t develop their own houses at all. CLTs can be community-organized and grassroots, or built from the grasstops. Some CLTs are hyper-local and neighborhood-based, while others are statewide. CLTs can serve urban, suburban, or rural communities. And, to make things even more complicated, the CLT model doesn’t even have to be used for affordable housing development—it can also be used for agriculture and business development.
Still, there are some things that all CLTs should have: tripartite board structures, stewardship policies, and a ground lease.
- Tripartite board structure: The Board of Directors which leads the non-profit is made up of 3 groups of representatives – ⅓ CLT homeowners, ⅓ community members, and ⅓ public representatives. CLTs are meant to be inclusive and center those who utilize the services. In this way they create community-controlled land, held in trust.
- Stewardship policies: Stewardship is standard programming or policy made for relationship-building, homeowner support, and ongoing risk management. The concept of stewardship is a commonly shared value that helps maximize wealth generation for CLT homeowners, while also supporting homeowners and the surrounding community in minimizing risk of gentrification or loss of affordability.
- Ground lease: The ground lease is typically a 99-year legal contract executed between the homeowner and the CLT that separates the ownership of the land and the house, and codifies the program guidelines.
How does the ground lease work?
The ground lease isn’t your typical rental agreement, and in the CLT world, the ground lease is basically the whole program. It is how state governments legally recognize CLTs, their ability to maintain affordability in perpetuity, and the limited equity gained on the home.
The ground lease defines the purchase price of the house, which is often much lower than the market-rate appraised value. Then the ground lease sets a “resale formula” for how the value of the home can change over time. In Virginia, this is also how tax assessment offices are required to value the house, contributing to a more affordable tax bill as well.
The ground lease outlines how the homeowner must maintain the home, how the homeowner’s heirs may inherit the home, what the homeowners should do if they want to sell the home, and more. Most importantly, the term of the ground lease is set at 99 years and renews automatically, making the home affordable in perpetuity.
Legally, contracts need end dates to be recognized in court. We say permanent affordability when talking about CLTs because this 99-year renewable lease will outlive us and our homeowners, maintaining the affordability for living heirs or future homeowners if the original owners sell. The ground lease is effectively a tool for perpetual affordability.
LIHTC, deed restrictions, or covenants are great tools for creating affordability, but they are often difficult to enforce or enforceable only for a limited period. This means after 15 to 30 years, a previously subsidized unit could be sold at the market rate, no longer an affordable home to a low-income buyer.
What About Equity for the Homeowner?
The resale formula in the ground lease, while maintaining affordability, does restrict the amount of equity that can be extracted from the home upon resale. Resale formulas in the ground lease still offer opportunities for CLT homeowners to realize gains from an increase in value, but many formulas do not follow the real estate market. Instead of the value increasing based on the market rate, it increases based on the resale formula itself.
Limited equity is still equity, though, so homeowners do still gain wealth over time. CLT homes do increase in value over time, and homeowners own more of that value as they pay the principal amount of their mortgages down. At the time of sale or inheritance CLT sellers or heirs are able to keep this equity gain.
How does this promote racial equity?
Homeownership is the most common way to generate personal, intergenerational wealth in the United States. For this reason, many see increasing access to homeownership as a solution to the widening racial wealth gap.
CLTs often lower the barriers to buying a home through subsidy by removing the cost of the land from the transaction, and through connections to down payment assistance and other programs. Some researchers consider CLTs a useful tool for promoting racial equity in housing by decommodifying housing itself.
Additionally, increasing the number of permanently affordable homes in a community can counter the effects of gentrification and displacement. For example, Piedmont (formerly Thomas Jefferson) Community Land Trust in Charlottesville is launching a program that intends to focus on one neighborhood and work with current residents to prevent flipping and displacement.
Emily Thaden and Tony Pickett report in their research on CLTs as a tool to build mixed income neighborhoods:
Across 124 CLT neighborhoods in 15 states, community land trusts moderated the adverse effects of gentrification between 2000 and 2010 by increasing affordability, stabilizing housing prices, and reducing displacement, compared with similar non-CLT neighborhoods.Community Land Trusts: Combining Scale and Community Control to Advance Mixed-Income Neighborhoods (2019)
Does Virginia have CLTs?
Virginia has five community land trusts in operation. These five groups meet regularly for mutual support and to promote the work of CLTs across the Commonwealth.
- Virginia Statewide Community Land Trust serves the Commonwealth in communities where there is no active CLT, in partnership with Habitat for Humanity Virginia. VSCLT was just featured in a PBS Documentary series called “Life in the Heart Land.”
- Maggie Walker Community Land Trust serves the Richmond region as a partner and developer.
- Piedmont Community Land Trust serves the Charlottesville region.
- Lighthouse Beloved Community CLT is building a new CLT neighborhood in Lynchburg City.
- New River Home Trust operates as a program of Community Housing Partners and serves Blacksburg and Montgomery County.
Amelie Rives is a Senior Associate at HDAdvisors and serves as the CEO of the Virginia Statewide Community Land Trust.