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HomeMy WebLinkAboutCommunity Land Trust StrategiesGreenstreet, Ltd. 2022 LEVERAGING HOUSING FOR ECONOMIC WELL-BEING Housing for All: COMMUNITY LAND TRUST JANUARY 2022 Housing for All: Leveraging Housing for Economic Well-Being WHAT IS A COMMUNITY LAND TRUST? A Community Land Trust (CLT) is a long-term mechanism to acquire property and maintain the attainability of homes and properties owned the community land trust organization. A community land trust is typically controlled by a community-based nonprofit including community developers, nonprofits, or government entities. By separating the value of the land and the improvements (for example a house), community land trusts create ownership opportunities at lower cost to potential home buyers. Subsidies can deepen the affordability levels. This allows populations that traditionally have been excluded due to lower incomes or lack of wealth to build equity and transition to traditional, market-rate ownership in the future. Community Land Trusts also support the long-term affordability of multi-family and single- family rental options in two ways – reducing overall development cost that allow for lower rents and ensuring long-term affordability. By placing land in a community land trust, the units atop the land are maintained as affordable into perpetuity as opposed to a 10-to- 30-year compliance period that expires with many subsidies, leaving properties open to conversion to market-rate rents. Housing values are growing nearly 5x faster than incomes across the US. New home prices in Hamilton County have grown by 63% between 2010 and 2019. Closing price of existing resale homes in Hamilton County have increased by 88% between 2010 and 2021. Nationally land accounts for 20%- 50% of a traditional home’s sales price. Land costs were identified by stakeholders as a barrier to attainable housing production in Hamilton County. The sales price of this example new construction home is $350,000. That would require a household to earn approximately $116,667 (or 143% AMI.) Land accounts for approximately 25% of the sales price of a new home, or in this example, $87,500. If a community land trust owns the property, the effective sales price (less the value of the land) for a qualified low- or moderate-income buyer is $262,500, or 25% less than what a traditional market-rate buyer would pay for the same home and property. This property is now affordable to a household earning approximately $87,500, or 107% AMI. CLTs BENEFIT MUNICIPALITIES. Today, most subsidies for attainable housing provided by the public-sector (including local municipalities) have an expiration period requiring municipalities and other public- sector entities to continually invest in attainability. Properties in the trust are taxed in the same manner as traditional residential properties. A community land trust recycles a single investment in attainability – the initial subsidy maintains affordability into perpetuity while still allowing the public-sector to grow its tax base. Ownership through a community land trust acts as a stepping stone for families to move to traditional, market-rate housing as they build assets through homeownership. CLTs BENEFIT EMPLOYERS & BUSINESSES. Housing and place are increasingly important to the workforce and employers. Without appropriate housing, workers face longer commutes, which studies indicate can lead to turnover and absenteeism. Additional studies have shown that replacing employees can cost a business as much as 1.5 times their annual salary in lost revenue and productivity. Both findings underscore the importance of co-locating housing and jobs. If employees are unable to find attainable housing, many may make the decision to take available jobs in nearby communities, increasing the number of unfilled jobs and stalling economic growth. The community land trust also creates an established vehicle for charitable land donation that allows businesses and institutions to ensure that donated land continues to support their charitable goals. ILLUSTRATIVE EXAMPLE While this example illustrates a single-family home for ownership, the same principles apply to multi-family rental development where the high cost of land can make the economics of attainable housing (even with the addition of subsidies) infeasible or less competitive against housing in lower cost communities. Greenstreet, Ltd. 2022 CLTs BENEFIT ATTAINABLE HOUSING DEVELOPERS. The high cost of land inherent in Hamilton County and the inability to compete with well-resourced market-rate developers puts nonprofit and for-profit attainable housing developers at an immediate disadvantage. Funding for land acquisition activities is often unavailable or, if available, requires the developer to expend funds in an unrealistic time frame, making them unusable in many developments. Funds may stipulate that the developer must pay out of pocket for eligible activities and then seek reimbursement. Many attainable housing developers do not have the bank accounts to make this work. Additionally, applying for and securing funds for land acquisition, even when done expeditiously, puts cash-strapped attainable housing developers at a disadvantage when competing with market-rate developers who may already have cash in hand. A community land trust creates a new source of subsidy that removes the obstacle of high land values from the attainable housing developer’s equation and brings new partners to the table. CLTs BENEFIT LOW- AND MODERATE-INCOME RESIDENTS. Hamilton County is consistently the highest value sub-market in the Indy Metro, making it difficult for low- and moderate- income families to find and secure housing. Today (Q4 2021) a household led by a childcare worker with an approximate annual household income of $33,228 would not be able to afford the cost of any recently constructed new home and could afford just one of the active listings in the entire county. A Community Land Trust could reduce the effective price a buyer pays for a home, making homeownership and wealth-building accessible to more households. As the property changes hands, restrictive covenants maintain the affordability into perpetuity, allowing for multiple buyers to benefit from the lower cost housing while still allowing homeowners to gain equity and wealth. Community Land Trusts create homeownership opportunities for a population that historically has been unable to enter the Hamilton County housing market, which includes teachers, public safety, and healthcare workers. Not only does this program offer lower cost housing options, but it also creates opportunities for wealth building. CLTs allow homeowners to build assets through increased equity in their home. The below example illustrates how a CLT creates equity. COMMUNITY LAND TRUSTS PROMOTE WEALTH CREATION AND EQUITY BUILDING. $350,000$195,840 The example home cost $350,000. An 80% AMI CLT buyer (household income of $65,280) would pay $195,840. A one-time subsidy of $154,160 would be required to make home attainable for this buyer and all future buyers. Homeowners build equity by paying down the principal with monthly mortgage payments and/or through an increase in the market value of their home. Both of these wealth building activities are available to buyers of CLT properties. Both owners own their home for 10 years and then decide to sell. The CLT buyer is required to sell at a reduced market value to ensure long-term affordability. At the time of sale, no price restrictions would be placed on the unrestricted property. In both examples, the home appraises for $560,000 at the time of the sale, resulting in a net value increase of $210,000. The CLT's shared equity model allows them to realize 25% equity. They are able to sell their home for $248,340 to another low- or moderate-income buyer. The unrestricted owner sells their home for the full appraised value, $560,000. Both homeowners stand to gain equity from the ownership and sale of their home. After paying off their remaining mortgage ($130,000) the CLT owner's total equity in the property is $118,340. After paying off their remaining mortgage ($265,000), the unrestricted owner's total equity in the property is $295,000. The CLT has preserved attainability while the unrestricted unit has become even less attainable to more people. The CLT property is still affordable to a 101% AMI buyer. The unrestricted property now requires an income of 229% AMI or $186,667. An unrestricted buyer, regardless of income, would pay $350,000.CLT PROPERTY UNRESTRICTED PROPERTY Housing for All: Leveraging Housing for Economic Well-Being TO BE EFFECTIVE, A COMMUNITY LAND TRUST IN HAMILTON COUNTY NEEDS COOPERATION AND INVESTMENT FROM A NUMBER OF PARTNERS. Municipal partners will... Adopt attainable housing vision statement Agree to the need for a community land trust Agree to explore their ability to make financial investment or donation of land Agree to donate financial resources or contribute land Provide time and expertise to select an organizational, programmatic, and governance structure Business and Philanthropic partners will... Advocate for the need for more attainable housing in Hamilton County Agree to explore their ability to make financial investment or donation of land Agree to donate financial resources or contribute land Provide time and expertise to select an organizational, programmatic, and governance structure Nonprofit and Housing Advocate partners will... Advocate for the need for more attainable housing in Hamilton County Share resources (human capital, land, etc.) Provide time and expertise to advocate for and establish a community land trust Provide time and expertise to select an organizational, programmatic, and governance structure Secure initial funding to staff the initiative. lead: HCHC Explore case studies and best practices to evaluate potential organizational and governance models. lead: HCHC Determine best legal structure, governance, and organizational needs. lead: Interim Board of Advisors Establish interim advisory board. lead: HCHC Gain local buy-in and support from County and municipal leadership. lead: HCHC POTENTIAL 18-MONTH TIMELINE Assess and advocate for State legislative definition explicitly allowing CLTs. lead: HCHC Greenstreet, Ltd. 2022 Evaluate existing local organizations for potential alignment with mission, expertise, capacity, and willingness to lead in the initial stages. If existing organizations are not in alignment, explore the feasibility of establishing a new community land trust organization from the start. lead: Interim Board of Advisors Hire initial staff to oversee start-up and execution. Leverage best practices and case study research to inform skills, expertise, and capacity necessary for successful implementation and early-stage work. lead: Interim Board of Advisors Define vision, objectives, and programmatic aspects of the community land trust in concert with the community and stakeholders. lead: CLT staff Engage in advocacy, education, and fundraising for acquisition of land for the community land trust. lead: CLT staff POTENTIAL 18-MONTH TIMELINE HOMES WITHIN REACH West Hennepin (MN) Affordable Housing Land Trust Homes Within Reach is a nonprofit, community-based organization that leverages public, private, and philanthropic dollars to “create and preserve affordable homeownership for families in suburban Hennepin County.” Since 2001, the organization has assisted over 200 working families (earning below 80% AMI) to become successful homeowners. The organization services the 44 communities that make up Western Hennepin County, a suburb of Minneapolis. “We want our teachers, nurses and police officers to be able to afford to live in the communities where they work,” noted one community partner. The organization was established to create homeownership opportunities that would allow workers to live and work in their community. With property values increasing 5 percent year over year, attainability for the workforce is an issue. The community land trust is funded by two main sources – (1) proceeds from the sale of homes to qualified buyers and (2) grants and in-kind resources that cover the costs of land, renovations (when needed), and additional soft costs. Grant dollars account for just over 50 percent of the organization’s revenue and are used to bridge the gap between the true cost of acquisition or development and the attainable sales price, known as an affordability gap. Local, state, and federal sources of funds are used to cover these costs with many of the county’s municipalities making direct contributions to the organization. MADISON AREA COMMUNITY LAND TRUST Madison, Wisconsin Founded in 1991, the Madison Area Community Land Trust (MACLT) seeks to promote affordable housing for first time home buyers at or below 80 percent AMI. The organization acquires and develops attainable housing for the long-term preservation of affordability. The organization currently owns approximately 70 units. Over the last few decades, Madison – like Hamilton County – has experienced growing demand for the high quality of life and amenities it offers. This has created escalating property values that make homeownership difficult, forcing many essential and service workers to live outside the city. The median price of a home in Madison in 1991, the year the organization was formed, was $83,000. As of 2021, the median home price is $340,000. The organization focuses on diversity, ensuring their developments include below- and market-rate housing choices. MACLT leverages local, state, and federal resources to preserve and create new attainable housing options. This includes affordable housing funds from the City of Madison. For the first time, a portion of the funds came from the City’s tax levy and will be used to buy and rehab several homes. The land trust is an efficient way to utilize scare resources as described by the former Executive Director, "the initial investment of government subsidy works much, much harder and much longer." Housing for All: Leveraging Housing for Economic Well-Being We believe that housing should be attainable for those who desire to call Hamilton County home – during every stage of their lives. We will prioritize diversity in product types and housing prices to uphold the economic well- being of Hamilton County. To ensure housing for all, we will... • work collaboratively with leadership to prioritize diversity in housing product types and prices (prioritizing households earning up to 120% AMI); • encourage and regulate for lower cost housing options near jobs and services; • explore public-private-philanthropic partnerships to expand resources and dollars aimed at removing barriers to attainable housing; and • communicate the importance of attainable housing the County’s economy today and in the future. #HOUSING4ALL VISION: The Hamilton County Housing Collaborative is a group of individuals and organizations committed to improving the inventory of housing in every category along the continuum of housing options. This collective impact initiative is staffed by HAND, Inc. Aspire, Family Promise of Hamilton County, Noblesville Housing Authority, and Westfield Washington Township are the other founding organizations. CREATE STRONG COMMUNITIES WITH #HOUSING4ALL. • Visit www.handincorporated.org to learn more and get digital copies of the 2022 Hamilton County Housing Report. • Be a knowledgeable YIMBY – “Yes in My Backyard” by advocating with your elected officials and following local zoning meetings. Support good projects that provide more workforce housing. Learn more at https://yimbyaction.org/2021/ • Volunteer with a nonprofit working in housing. Contact Kelley Romweber (kelley@handincorporated.org) to explore which nonprofit in Hamilton County would be a good fit for you. • Use your social media presence to advocate for #Housing4All. • Donate funds, land, or expertise for housing initiatives focused on low-income households. Kelley Romweber (kelley@handincorporated.org) can give you the latest information. TAKE ONE ACTION TODAY: