Rises in property values are great news for city homeowners. On the other side of the coin, they make the home buying journey that much steeper for buyers. Gentrification of near-downtown areas can make personal finances harder to handle, as property taxes go up. This is a constant challenge for U.S. cities.
Urban renewal shouldn’t mean pricing people out of the city. With that thought in mind, residents themselves are writing the next chapter in the story of affordable real estate: lasting affordability. In their quest to create permanently affordable housing, community members and leaders are teaming up to form land trust coalitions.
The Resurgence of Land Trusts
Land trusts first emerged as a form of home ownership in the United States during the civil rights movement. They were part of community-led efforts called New Communities, created by Black farmers in Georgia.
Today, the concept has re-emerged as a method of supporting relatively low-income people who struggle to afford homes in renovated urban neighborhoods.
In Indianapolis, the Old Southside Neighborhood Association has helped form a network of community groups, religious organizations, businesses, and developers, under the umbrella of the Community Land Trust Coalition. The city of Indianapolis supports the network’s growth, funding research on the implementation of land trusts.
Land trusts have found strong support in Denver. The Colorado Community Land Trust is a leader in the movement, and Denver’s Urban Land Conservancy took up a parallel project focused on 92 condo units.
Yet the largest example of a U.S. community land trust is the Champlain Housing Trust in Vermont. Formed in 2006, it merged multiple existing land trusts to encompass thousands of households. These range from rentals, to co-ops, to single-family condos and houses. The nonprofit actively develops home and commercial properties. It also offers home buyer education, repair loans, and energy efficiency support.
The Legal Structure
How do these agreements work? The community land trust is structured so that the home, condo, co-op, or apartment building is not tied to the land beneath it. The land trust owns the land, which will typically rise in value as the housing market develops.
Land trust homeowners actually embark upon long-term, renewable leases. A land trust home buyer who takes out a loan and acquires an interest in the property can later sell the home, but the home must be again sold at a deep discount. Thus, when the homeowners sell their interests, they receive only part of the gains on the property’s worth. The rest of the profit goes to the trust, which exists to maintain the property’s affordability for individuals and families to come.
The typical land trust leases its home properties for a span of 99 years to buyers that meet specific income criteria. Or the trust leases the units to property managers, who in turn rent out the affordable units to qualifying tenants.
The deed for a land trust home is a Deed for Sale of Improvement Only. It is a general warranty deed, like this one, created for the Guadalupe Neighborhood Development Corporation in Austin, Texas, modified to show that the sale constitutes a transfer of title to the built home—not the land beneath the home.
Land trust organizations typically require a third or more of their boards to be made up of local residents. Grounded Solutions Network of Portland, Oregon helps to create these legal entities. The group offers learning tools that can guide a new group through the process of drafting governance documents and the organizational structure for a new community land trust.
The Lasting Benefits Land Trusts Bring to Cities
Today’s typical land trust is a nonprofit on a mission to provide affordable owning and leasing opportunities in perpetuity. Of course, most cities do have subsidized development that holds some units aside at below-market prices for buyers whose income levels qualify them for the discounts. It’s not unusual for a developer to create buildings made up of affordable units to accommodate workers, artisans, and artists, and then sell it off 15 years later to a new corporation, after the sunset of the tax credits.
To get serious about supporting economic integration means to come up with a way to make affordability permanent. Cities are therefore testing the tools that can build long-term affordability. The community land trust serves as an especially appealing tool. Once a land trust owns land, that land cannot be sold or leased at market-rate prices again.
Thus, in marked contrast to subsidized affordable housing, in which investors keep some units temporarily discounted, the community land trust keeps local residents stable for generations.
The benefits of a community land trust include a form of collective wealth building. When people can afford housing, they can also put down roots, and support businesses in their cities. They can contribute to the stability of the schools that their children attend, and the social networks that bind neighborhoods.
Are There Drawbacks to the Land Trust Home Ownership Model?
It’s true that homeowners may not make alterations or improvements to their homes without prior approval of the trust organization. Yet this is also true of homeowners’ associations for condo owners.
Critics may also point to the rules requiring the stakeholders to sell their homes affordably. Don’t these constitute limits on these residents’ opportunities to build wealth from home equity?
On one level, yes. Yet renting doesn’t offer a wealth-building opportunity, either. And land trusts offer their households access to opportunities for social mobility. Once the stakeholder in a land trust home closes on a loan, the person is free to progress to a higher income level and still keep the home. Thanks to this feature, land trust agreements do make space for individuals and families to cultivate wealth. Consider that most residents of the Colorado Community Land Trust who sold and moved have done so to buy market-rate houses.
With land trusts, the benefits outweigh the detriments for stakeholders. People do not have to be wealthy to enjoy, and offer their children, a safe and reliable infrastructure, libraries, good schools and green spaces.
A Solution Whose Time Has Come for Near-Downtown Real Estate
Land trusts offer a supportive financial option for people and neighborhoods:
- Land trusts, by design, protect their residents from displacement that follows speculative real estate investment trends and gentrification.
- Land trusts help protect people from recessions. Their residents are not financially overburdened. Foreclosure rates for land trusts are very low, in comparison to default rates for conventional mortgage loans. Indeed, conventional mortgage foreclosures are ten times more likely than land trust loan foreclosures.
Given these selling points, land trusts are catching on. Today, hundreds of projects offer local people a say in how their community grows, looks after its land holdings, and supports the well-being of its residents.
References as Linked, Plus:
A Guide for Developing Community Land Trust Affordable Homeownership Programs in Texas (Summer 2018). Available at: https://law.utexas.edu/wp-content/uploads/sites/11/2018/07/2018-07-ECDC-CLT-Toolkit.pdf
Hayleigh Colombo, Indianapolis Business Journal (Jul. 2019). Could Land Trusts Keep Housing Affordable, Avoid Gentrification? Available: https://www.ibj.com/articles/74463-could-land-trusts-keep-housing-affordable-avoid-gentrification.
Joe Rubino, Denver Post (Jul. 2019). Denver Communities Putting More Faith in Land Trusts Amid Affordable Housing Crisis. Available: https://www.denverpost.com/2019/07/08/denver-affordable-housing-land-trusts/.