Blog #54 – Community Land Trusts as Transformative Housing Reforms


Community Land Trusts as Transformative Housing Reforms

That New York City has a housing problem is rather well known. The devil here is indeed in the big picture as well as in the details. 47% of the city’s low-income renters[1] pay more than half of their incomes to obtain housing. Imagine what paying half your income just for housing means for the ordinary person, let alone one with limited income. 24% live in overcrowded quarters, more than 1.5 persons per room in the standard definition. Neighborhoods are clustered by race, ethnicity, income, household composition –what impolite critics call segregated, one of the most segregated (84.3 on the widely used dissimilarity index, where 100is completely segregated. Only Gary, Detroit, and Milwaukee, of the 314 other metropolitan area in the United States, are more segregated.[2] 224,000 units were in physically poor conditions. 164,000 units were vacant but not available for sale or rent, according even to the official figures.[3]There were 15,993 mortgage foreclosures in the city in 2013;

Bloomberg News[1] headlined the fact:

FORECLOSURES SURGING IN NEW YORK-NEW JERSEY MARKET.

Community Land Trusts may have a significant effect on New York City’s housing crisis, may affect struggling and even prospering neighborhoods, may achieve significant savings in the city’s budget for housing while increasing the afford housing supply for families in trouble. But their long term impact may go further, and be a transformative new way of looking at the housing market and its limits, and model the way it can best function to serve the needs of all the city’s resident.

 

The federal government has, in its fashion, responded to such problems; New York City has the highest number of public housing unit, owned and managed, and maintained (in niggardly fashion) by the New York City Housing Authority itself. New York State has, if reluctantly, permitted the city to establish limits on the rents that can be charged for a declining portion of the city’s large renal stock. Mayor Bloomberg responded by pushing for extensive new construction of units, with a minor allocation to those most in need. Mayor de Blasio has put forward an extensive and expensive new housing plan that envisages 200,000 new units, and more, in the next 10 years.

 

But of course, when we say “New York City has a housing problem,” hat does not mean everyone in the city has a problem. The New York Real Estate Board holds that the real estate market has rebounded from the bursting of bubble that the industry, with the active encouragement of the financial sector, itself produced so recently. Rents going up are good news for landlords, if bad for tenants.[5] Mortgage foreclosures by banks and other financial institutions provide opportunities for big operators to buy up homes at a bargain, throwing home owners willy-nilly onto the rental market, shattering hopes of accumulating wealth by investing in “asset building” in a housing market sure only to go up, not down. At the same time, a Rent Stabilization Board makes sure rent regulation won’t prevent landlords from covering the costs when they go, protecting the profits from their investments, regardless of whether that means their tenants chances of meeting their basic needs are widely jeopardized. Talk of inequality!

 

A tiny new non-profit, called NYCCLI, somewhat incongruously pronounceable as “nicely,” the New York City Community Land Initiative,has just been incorporated in New York. What does it hope to offer to deal with this situation? Quite a bit, it turns out. NYCCLI’s formal incorporation papers describe it purpose as “advocating for community land trusts.”

 

And what is a community land trust? A community land trust is a trust that typically owns land, on which the housing unit or units are leased, for 99 years, to a limited equity co-op which provides homes for households, typically lower to moderate income, who occupy the buildings as members of such a co-op and have all the rights a home owners would have except for the right to sell the unit at a profit. Their sales price is set by a formula approved by the trust, typically permitting recovering the purchase price plus improvements plus some cost-of-living adjustment, but excluding the value of the land, which of course remains with the trust. The trust that owns the land also sets some basic rules for its use, basically to ensure that the housing on it will be permanently available to household who need it at the most affordable rents possible. The board that runs the trust is typically composed 1/3 each of residents of it housing, residents of its neighborhood, and supporters, who may come from government, advocacy groups, or technical experts who may be helpful to the trust. [6]

 

What good are community land trusts? They have four major advantages:

 

First, they make possible the creation of affordable housing on a permanent basis, especially for lower income households. CLTs make a key trade-off: they give up the possibility of speculating on an abnormal increase in the dollar value of the home in return for the security of knowing there is no threat of loss if housing prices go down and no danger of eviction if the cost of occupancy become unaffordable because of job loss or ill health or other circumstances beyond a household’s ability to control. And unlike almost all currently existing affordable housing programs, if a community land trust receives public subsidy, its benefits remain permanently available to their targeted low/moderate income recipients, and do not expire after a fixed time period of 20 or 30 or 40 years, and costs for such future residents have been permanently fixed to exclude any increases in the speculative value of the unit.

 

 

Second, community land trusts build communities and stabilize neighborhoods. They provide for deeply democratic management of their housing. By having not only residents but also neighbors and supporters from the wider community on their boards, they can provide diversity, establish priorities for expenditures, achieve efficiencies of scale, and put the strength of the trust behind individual members falling on hard times

 

Third, community land trusts represent a whole new approach to the principles governing the way housing is distributed, occupied, and used in a democratic society, limiting the intensity of the inequality induced by a private market which sees housing as a commodity to be bought and sold for its exchange value, for the profit it may produce, instead of for the needs it may satisfy, its social use value. NYCCLI’s approach can help change housing from a symbol and magnifier of inequality to address at least in part one of inequality’s main causes.

 

But fourth, and in the long run perhaps most important, they can be transformative.

 

Community land trusts challenge the arrangements of a housing market used to the pleasures and pains of speculating on housing value, which is, economically, fundamentally speculating on the value of a given location, and instead see housing as a necessity of a decent life and a supportive environment for all. And they provide the same opportunity for “wealth creation” or “asset building” as does buying a house with a mortgage and paying off the mortgage: put the equivalent of what is put into paying off the mortgage principal and interest on the land into a savings account or other good investment, and you have the accumulation with perhaps even less risk. Putting this together, they can move from seeing housing as a commodity, valued for its exchange value, the profit it can produce, and see it rather as a necessity of life, even perhaps up to a certain configuration as a public good.

 

The different tenures of housing and the legal and financial relationships householders have to the housing they occupy have major implications for the way people live. Community land trusts can provide a form of home ownership for a resident that combines the privacy and security and insulation of the American Dreams’ single family suburban house with the solidarity and support and social richness of the ideal urban life-style. Immediately, to reach the lowest income groups, they will need some public support for acquisition or basic running costs, and they richly deserve such support.[7] In the long run, transformatively, they can benefit not only their residents but the neighborhoods and the housing system

 

[1] http://www.bloomberg.com/news/2014-02-26/foreclosures-climaxing-in-new-york-new-jersey-market-mortgages.html

[2] Censusscope, available at http://www.censusscope.org/us/rank_dissimilarity_white_black.html

[3] The Census Bureau’s Housing and Vacancy Survey for 2011,. The count by Picture the Homeless suggests a significantly higher figure.

[4] http://www.bloomberg.com/news/2014-02-26/foreclosures-climaxing-in-new-york-new-jersey-market-mortgages.html

[5] The Real Estate Board summarizes:

“,,,notable gains this quarter, as compared to the second quarter of 2013, included: the 19-percent-increase in the average sales price for all homes in Brooklyn to $715,000; the 15-percent-boost in coop sales in Queens; and the 13-percent-increase in the average sales price for a coop in New York City to $768,000. The residential market in Manhattan also remained strong with the average sales price for all homes increasing by six percent to $1,491,000 year-over-year” http://www.rebny.com/content/rebny/en/newsroom/press-releases/2014/REBNY_2014_2Q_Report_Improving_Economy_Drives_Residential_Sales.html

[6] Detailed information is available from the national Community Trust Network, whose website, at http://cltnetwork.org/, contans extensive references to further materials, as do NYCCLI’s own educational materials.

[7] And remember the enormous subsidy that inures disproportionately to higher income households from the mortgage interest deduction in our income tax system.

About pmarcuse

Just starting this blog, for short pieces on current issues. Suggestions for improvement, via e-mail, very welcome. pm35@columbia.edu
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9 Responses to Blog #54 – Community Land Trusts as Transformative Housing Reforms

  1. Bob Dorr says:

    As a non-profit developer, I have used, with great success, a form of homeownership called a Limited Equity Cooperative. This is a model where the land title remains with the non-profit developer and the improvements (or apartments) are owned by the residents. The units cannot be sold on the market, so the equity remains and each day every resident benefits from that equity. The equity is limited to a sum equal to the qualifying amount for assistance. The rents (resident charges) are fixed at the capital costs at the time of development, and the operating costs remains fixed at that same point over time. I imagine a Community Land Trust could work in the same manner – that is, once a project is capitalized, the cost remain fairly constant over time.

    • pmarcuse says:

      Very similiar. I assume wen you say “units cannot be sold on the market” you mean units can only be sold for a limited amount (limited equity), but surely they can be easily transferred. And operating cost of course don’t remain fixed – if utility rates go up, costs go up, and it ultimately takes subsidies to keep units permanently affordable. But the idea is exactly right; keep units free of market speculative price increases.

      • Bob Dorr says:

        I believe that property held in common for the good is the best way to provide affordable housing. In a limited equity cooperative model units may be sold, but only for an agreed upon limited value and that sum is determined when the project is capitalized. I have discovered that once capitalized, a project’s future operating costs can be predicted rather well. It is the constant recapitalizing of housing that has created the affordability problem. I believe that one’s home (or apartment) is not a Wall Street investment vehicle. I also know through my work that the PUM (Per Unit Monthly) charges increase only slightly over time, but recapitalization is city killer.

  2. What are you imagining would be the source of the land? In Rem properties come to my mind. Presently, there are about 150 properties in the Tenant Interim Lease Program that could benefit from such a program but will be included in the Neighborhood Affordable Cooperative Program another heuristic experiment that is informed by the trials and errors of HDFCs through the years.

    • pmarcuse says:

      Gregory,

      Yes TIL would be a source, Buildings from TIL that were converted to HDFCs but that are now in trouble are already planning to participate in East Harlem. Or units from any other program that landed housing in city hands, whether through tax foreclosure, enforcement of liens, or otherwise. In New York City the Third Party Transfer program. But there are also efforts to use them in connection with mortgage foreclosures, in negotiations with banks, or from charitable donations.

  3. Rob Robinson says:

    Good morning Peter,

    How are you? Long time no see! Hope all is well. Sorry to have missed the Marxist Intensive last weekend. I was fortunate enough to be invited to Venezuela for the International PreCOP Climate Justice Summit and therefore had to pass on the intensive.

    Peter, I read through blog #54, thank you for this piece. I copied the blog into a word document with a few highlighted suggested grammar changes. It’s sometimes a little strange for the student (me) to correct the teacher (you) but I’m comfortable knowing that you appreciate someone taking the time to read the piece so thoroughly. Anyway, the document is attached.

    hope to see you soon, Rob

  4. CM Berger says:

    People are already gearing up to specifically challenge the entire philosophy of CLTs – not allowing people to make a killing on their houses. I would expect a legal challenge. The timing depends on which rich witch gets affected, when. I read a paper just today by a “free market” organization, analyzing the morality or ethics of CLTs in light of “free market” philosophy. Laced with hooded threats. The only reason they haven’t launched an all-out attack is because the impact is tiny so far. As soon as you start growing it in NYC, it will be the biggest target. If you stealthily plan longer-term, you may have so many people living in them and benefiting that you’ll have more outcry and electoral-base support. Especially the 50% of CLT housing residents who are renters – who would often otherwise be homeless!!

  5. Rick Rybeck says:

    Community land trusts are a good idea. The difficulty is acquiring land.

    Another approach that relies on the same philosophy is to transform the property tax into a value capture fee. This is accomplished by reducing the property tax rate on privately-created building values while increasing the property tax rate on publicly-created land values. The lower tax rate on buildings makes them cheaper to construct, improve and maintain. This is good for residents and businesses alike. It also makes energy-saving building improvements more economically viable — and that creates jobs that cannot be outsourced.

    Surprisingly, the higher tax rate on land values helps keep land more affordable as well. The tax on land reduces the profits from land speculation, thereby reducing the speculative demand for land and thereby moderating its price.

    Several communities have tried this approach with success. It does not eliminate the need for housing subsidies. But, by reducing the market price for housing, it reduces the affordability gap, thereby allowing a limited amount of subsidy dollars to help more people. And the job-creating aspects of this reform are also important because people with jobs are in a better position to afford housing than those without.

    For more information, see “Using Value Capture to Finance Infrastructure and Encourage Compact Development” at https://www.mwcog.org/uploads/committee-documents/k15fVl1f20080424150651.pdf

  6. Pingback: Alternatives & Visions: Community Control | I HEART / BREAK NY

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