Community Land Trusts (Clts): Permanently Affordable Housing Explained

The cities around the world are facing a hitherto unprecedented housing affordability crisis. With the financialization of real estate markets, more and more people are no longer able to own their own homes, and the rents are increasingly eating up larger shares of the household income. Conventional remedies such as subsidized housing, rent regulation, and first-time buyer plans have in many cases been ineffective or unsustainable in the long run. Move to Community Land Trust (CLT): a community-based approach that separates the prices of land and housing and produces permanently affordable homes that the community can afford throughout the generations.

The CLT model was created during the civil rights era as a means of Black farmers to keep their farms, but over time it transformed into a potent approach to maintaining affordability in the fast-gentrifying residential areas. CLTs can radically redefine the way housing is organized not as a speculative commodity, but as a permanent element of the community by holding land in a community trust and decoupling ownership of the property and ownership of the land beneath it. This blog discusses the history, mechanics, advantages, and obstacles of this new model.

The History and Theory of Community Land Trusts

The contemporary Community Land Trust movement has its origin in the civil rights struggle in the American South in the 1960s. Based on the civil rights movement land cooperatives and the economic theory of economist Ralph Borsodi, activists aimed to develop a model that would ensure the Black farmers were not evicted and displaced by the systemic discrimination and the economic forces.

New Communities Inc., a group of Black farmers, became the first known CLT in 1969 in Lee County, Georgia, when the group of farmers combined their resources and collectively purchased land. The concept was quite basic but ground breaking: when land was communally owned, it would never be taken or sold out of under the community so that the future generation would have a place to live and work.

The philosophy of CLTs is a critical analysis of the hypothetical land market. In traditional real estate, land value grows depending on variables that are completely outside of the control of the homeowner such as infrastructure construction, neighborhood revitalization, and market speculation, locking families in the cycle of increasing property tax and displacement pressure. The CLT model assumes that land is a shared resource, which is to be managed to benefit the community, rather than a speculative commodity to be purchased and sold.

 CLTs are meant to take housing out of the market by permanently putting land out of the market. This philosophy is consistent with the larger trends of economic democracy, community control, and right to the city. The model went beyond rural Georgia into urban areas, where it saw traction in cities such as Burlington, Vermont, and Boston, Massachusetts, where the community organizers saw that the model could be used to fight displacement and provide long-term affordability in neighborhoods with high development pressure.

CLTs in Action: The Dual Ownership Model

A unique legal and organizational framework that is founded on the division of ownership of land and ownership of buildings is at the core of any Community Land Trust. A CLT is a nonprofit organization that receives land, usually by donation, purchase, or dedication by a municipality and holds the ownership of that land indefinitely.

The homes located on such land are then sold to individual homeowners, but not the land underneath them. Instead, they sign a long-term and renewable ground lease (usually 99 years) which gives them the right to use the land with the CLT retaining legal title. This flooring lease is the key feature that makes it permanently affordable. It has a resale limitation which restricts the price at which the homeowner can sell the home, so that it will be affordable to the low and moderate income earners in the future.

The rights and duties of both the CLT and the homeowner also are described in the ground lease. Home owners own their own homes, create equities, and the property owners have the right to use, enhance, and occupy their properties. They make payments on property taxes on the structure, and the CLT usually agrees on taxation of the land.

At the time of resale by the homeowner, the ground lease determines the formula of resale, which normally enables the seller to obtain the full investment plus some of the appreciation (commonly to a percentage or based on a formula such as inflation), but the rest of the appreciation remains in the home to allow the next buyer to afford the home.

This formula is a compromise: the homeowner gains financial advantages by making an investment but fails to get windfall profits by speculation in the external market. The CLT, which is board-based (including residents, community members, and public representatives), manages the land stewardship, adherence to the terms of ground leases, and tends to offer a continuous support system to homeowners and establishes a system of shared governance and collective responsibility.

Homeowner and Community Benefits

To the individual homeowners, the CLT model provides a way to the stable, respectable homeownership that would not otherwise be accessible. The entry price is reduced by a factor of 200% to 500% because the price of land, which can take up 20% of the price of a home in many urban markets, is eliminated. Families are able to buy a home with a lower down payment, get a more manageable mortgage and not be affected by a strained budget trying to compete in a speculative market. In addition, CLT homeowners develop equity with time.

Although the resale formula limits the windfall gains, it will give the homeowners a portion of the improvements and a part of the appreciation, which will enable them to accumulate wealth over time without being forced out of the market by the skyrocketing property tax or insurance premiums. This equilibrium allows the families to enjoy the stability and the pride of ownership without the fear of being forced out of their homes any moment by forces beyond their control.

The benefits are even greater in the case of communities. The CLTs are used as the long-term resistance to gentrification and displacement. CLT homes are affordable forever in the neighborhoods that are being rapidly redeveloped so that the long-term residents are not displaced and the economic diversity is not lost. Such stability leads to more social networks, improved education among children and more civic participation. Also, CLTs tend to engage in community development outside of housing, purchase vacant lots and convert them into community gardens, create green spaces, and collaborate with local organizations to provide financial literacy services and training on home maintenance.

Since the CLT has a board that is composed of residents there is always a democratic decision-making process of the decisions made by the board regarding the use and development of the land since they are the most affected. This community-based form of governance is a stark contrast to absentee landlordism or speculative investment which shift the focus of housing development to fulfill human needs rather than to maximize financial profits.

The Role of CLTs in Preserving Permanently Affordable Housing

The concept of permanence is what makes Community Land Trusts stand out of the other affordable housing interventions. The majority of affordable housing programs (including low-income housing tax credits or inclusionary zoning requirements) have expiring affordability covenants, usually lasting 30 to 50 years. Upon the expiry of these covenants, the properties may be turned into market-rate houses, which may lead to the loss of thousands of affordable units simultaneously. On the contrary, CLTs are used as permanent.

 Since the CLT will keep the ownership of the land and the ground lease will bind all the future owners, the affordability limit will never end. This intergenerational outlook implies that a house today will be affordable to the grandchildren of the first purchaser, establishing a sense of permanence in the community where there has traditionally been a pattern of disinvestment and displacement.

This permanence also enables CLTs to plan to maintain affordability strategically in regions where the land prices are quickly soaring. By purchasing land before development pressure builds up - or by collaborating with municipalities to acquire publicly owned land at below-market rates - CLTs can build a portfolio of community-controlled land which becomes a bulwark against speculation. Other CLTs have also started purchasing pre-existing market rate homes and turning them into permanently affordable units through acquisition and resale.

This two-pronged approach of new building and acquisition maintains the supply of affordable housing and neighborhoods. Moreover, since CLTs are community based and managed by local stakeholders they are best placed to take the affordability not only in legal terms, but in practice, as they maintain resale formulas localized to the economic realities of local communities and offer the ongoing maintenance which keeps the property in good condition or keeps it out of foreclosure.

Difficulties and shortcomings of the CLT Model

Although promising, Community Land Trust model has had considerable challenges that have curtailed its magnitude and effectiveness. The most obvious obstacle is the funds that are needed to purchase land and build or renovate houses. CLTs are nonprofit making organizations and are usually financed by a patchwork of subsidies provided by the government, philanthropic grants, and low-interest loans to finance the operations and acquisition of such organizations.

 This capital environment is volatile and it is not easy to scale up or react promptly to the opportunities in the competitive real estates markets on the part of CLTs. Although a few cities have started to devote governmental resources to CLT development, including the Community Land Trust Initiative of New York City or the pledging to CLT funding in Seattle, this assistance is still the exception rather than the norm. The CLTs tend to be too small to have an impact on the scale of the housing crisis, without long-term, consistent funding.

The second difficulty is the complexity of the model and the requirement of special skills. Designing a CLT involves complex legal organization, permanent management of ground leases, and the ability to mediate homebuyer education, financial counseling and foreclosure prevention. Several CLTs are run on lean staff and are overly dependent on volunteers and this may cause capacity issues. There is also a resistance in the traditional lenders who are not used to ground lease structure thus finding it hard to get mortgages to CLT homebuyers. Although Fannie Mae and Freddie Mac currently consider lease ground leases on CLT, not every local lender is capable of navigating it.

The philosophical conflict of the resale formula is also possible: some critics believe that capping equity capture discourages homeownership or confines families in a class of assets that cannot accumulate complete wealth. The CLT proponents argue that the model provides an alternative, more stable model of wealth-building, in which community stability takes precedence over individual windfall payments, but such a trade-off must be well communicated and in line with expectations of residents.

Future of CLTs and Case Studies

Community Land Trusts are proving to be a lasting affordability at scale, across the United States, and increasingly around the world. One of the oldest and largest urban CLTs is the Burlington Community Land Trust in Vermont that was founded in 1984. It has created or conserved more than 3,000 affordable homes and it has given hope to countless other projects. The organization has also grown beyond the single-family housing to encompass rental houses, cooperatives, and commercial premises, which has proven the flexibility of the CLT model.

 In Atlanta, the Atlanta Land Trust Collaborative has targeted to maintain affordability in quickly gentrifying communities, purchasing homes and turning them into permanently affordable CLT housing in collaboration with the city to create a pipeline of publicly-owned land. The model has established itself internationally, with such organisations as the National Community Land Trust Network, assisting a rising number of CLTs in rural and urban housing development, and cities in Canada such as Vancouver looking at CLTs as a means of reconciliation and Indigenous-led housing.

The future of Community Land Trusts is the scaling of the model by providing systemic support of the public policy. The supporters are demanding policies that require the transfer of publicly owned land to CLTs, establish special funding sources to support the acquisition of land, and simplify the permission procedure of CLT developments. Federal CLTs have now started to be considered as attractive beneficiaries of housing development funds by the federal Neighborhood Homes Investment Act and many state level programs. Hybrid models involving CLTs with cooperative housing, permanent supportive housing and community development financial institutions (CDFIs) are becoming of interest as well to make more comprehensive solutions.

With the affordability crisis growing more severe, and the constraints of market-based solutions becoming more apparent, the CLT model presents an attractive vision: housing that is never again put on the speculative market, is democratically managed by the community, and is organized to make sure that the advantages of development are distributed evenly. Through proper political will, public investment, and community organizing, CLTs might also get placed at the center stage of a more just and sustainable housing system than by the margins.

Conclusion

The Community Land Trusts are another way of rethinking the connection between people, land and housing. Swallowing by a world in which housing has become more of a mechanism of wealth extraction than a home, CLTs are an alternative based on permanence, community ownership, and mutual prosperity.

This separation of land ownership and home ownership will bring a system in which affordability is no longer a short-term subsidy but a long-term reality of the housing landscape. This is an opportunity of having a stable and dignified homes in the case of individual families with the fear of being displaced at any given time. In the case of communities, it translates to the maintenance of the social structure and economic heterogeneity that render neighbourhoods flourish. In the eyes of the society at large, it implies reclaiming land as a common good and not a speculative asset.

The issues that are vexing the CLT movement are legitimate, including the lack of funding, the capacity building, and the necessity of the system-wide policy backing. However, the experience of successful CLTs in the country and in the world proves that this model is effective.

The concepts of the Community Land Trust are increasingly finding a following among policymakers, activists and communities that are dealing with the twin crises of housing unaffordability and displacement. The CLT is not a fast solution, but it is a permanent solution. With short-term solutions and market instability, the opportunity to have permanently affordable housing based on community stewardship and tailored to the coming generations provides the answer to the future. The land, nevertheless, is left. It is our choice whether it is speculation or community service. 

Also Read: The Impact of Community Land Trusts on Housing Affordability