Issues and Analyses: Misperceptions About Community Land Trusts
Photo: pixy.org. Creative Commons
Editor’s note: Another article on community land trusts, Community Land Trusts Make Housing Affordable by Alexander Thompson and Jocelyn Yang can be found elsewhere in this issue of the Indy.
For the second time in the past year, a town staff member has commented in a public meeting that it seemed unfair that people who purchased a home from the Amherst Community Land Trust (ACLT) are prohibited from selling it at a market price and hence profiting from their investment. ACLT homeowners purchase their homes at a below market price and are required to sell their homes at a price that would be affordable to other low-income families when they move, a price that is pegged to an increase in the area mean income (AMI). The town planning staff felt that this policy was preventing the owner from generating wealth from the appreciation in housing prices.
There are several reasons why this reasoning is faulty. First, the owners of ACLT homes would not have been able to afford to purchase a home in Amherst without the land trust, which offered the home at an affordable, below-market price. Second, the homeowners are building equity, through their mortgage payments, that they would not be doing if they were renting. Third, allowing ACLT homes, which were purchased with contributions of public money or donations, to be sold at market rate, would remove them from the affordable housing inventory and prevent other low-income families from having the same opportunity for homeownership.
The modern idea for a Community Land Trust began in the late 1960s when sharecroppers near Albany, Georgia purchased their land together so that they would no longer have to pay a landowner. Shortly afterward, the first urban land trust began in Cincinnati. In these cases, the land trust owns the land and the homeowner owns the house with a 99-year ground lease on the land. Because the land is typically worth about one-third of the total property cost, homeowners are able to purchase houses for about two-thirds of the cost of a comparable house purchased in the traditional method. During the 1980s, the CLT movement grew rapidly, and there are now about 250 CLTs in the United States.
The Amherst Community Land Trust began about eight years ago, when several neighbors in central Amherst noted that the smaller houses in their neighborhood were being purchased by developers and real estate investors, and rented to students. They conceived of the land trust as a way to keep these homes affordable and available to families because the trust owns the land.
ACLT is unusual in that some townspeople have actually donated their houses to the trust. Currently ACLT holds five houses in its trust. This includes two donated houses that will be occupied by families. Three other ACLT home purchases have been made possible by working with Habitat for Humanity and with Community Preservation Act funds. At least three more homes will be deeded to ACLT in the future as part of the owners’ estates.
Currently, all ACLT homes are affordable, priced at 80% of AMI. When ACLT homeowners sell the home, they must abide by their agreement and “pay it forward”. Their profit is capped at an amount that still allows the home to be afforded by a low-income family. This may sound unfair when housing prices are rising so fast, but ACLT families are able to own a home at a monthly cost of less than 30% of their income, allowing them to meet their other expenses and possibly save money. If not for the land trust, they would most likely be living in an apartment and paying a larger share of their income because affordable units are in short supply. And while they are not profiting from the wildly exuberant housing market, they are building equity with their monthly mortgage payments. Should their financial situation improve, they can sell the ACLT house and use their accumulated equity to purchase a home in the traditional manner. If they were legally able to sell the house at market rate, the town would lose it as affordable housing. In addition,the public money that was invested in it would also be lost.
This loss of affordable housing is illustrated in the following real example. When retired UMass German professor and former Selectboard member Eva Schiffer died in 2010, her obituary noted that “she deeded her home to the Amherst Housing Authority, together with an agreement that ensures its sale in perpetuity to a qualifying municipal employee, at an affordable price.” In 2014 the house was sold for $225,000 to Finance Director Sandy Pooler, who had been commuting from Somerville. The next year, Pooler took a job in Arlington. He sold the house to Kendrick Place LLC in 2017 for $295,000, and in 2019 it was sold for $370,000. The current owners are not municipal employees, and the house is no longer affordable to low-income families.
Another example is the expiration of a 30-year guarantee for affordable units at Rolling Green, which resulted in the town paying $1.2 million to preserve them. The land trust model ensures that homes will always remain affordable.
Each affordable house requires much effort and investment of resources for both the ACLT and the homeowner, but with this effort comes the autonomy of homeownership. The ACLT homeowner can live in their own house, with a yard and maybe a garden, and build some equity that they could not build if they were renting. Even though buyers through the land trust have incomes below AMI incomes,, foreclosures are rare due to the fact that the monthly costs are pegged at an affordable level, and the trust offers a community of support and can even help with the steep learning curve of homeownership by sharing resources, ideas, and contacts for necessary home repairs.
As ACLT Board member and Affordable Housing Trust member Rob Crowner pointed out at the Affordable Trust meeting on May 12, home ownership through ACLT is not a “game changer” the way that building a 70-unit building of affordable apartments would be, it does represent a way for families who would ordinarily not be able to own a home to purchase one, and it incrementally increases the ability of families to stay in town, in addition to stabilizing neighborhoods from becoming dominated by student rentals.
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