Housing Can Be Made More Affordably and More Equitably

Renewed interest in community land trusts and land banks lead to growth in the creation of permanently affordable housing stock.

Laura Lafayette is essentially a rock star in the eyes of Erica Sims, CEO of the Maggie Walker Community Land Trust. Lafayette is the CEO of the Richmond Association of REALTORS® (RAR) in Virginia, and she’s literally transforming lives in her area through RAR’s partnership with the land trust to make homeownership more affordable and to begin paving the way to rebuild generational wealth for minorities.

“I’m not blowing smoke here,” says Sims. “Laura is really remarkable. I’ve worked in this industry for more than 20 years, and I’ve never had this kind of relationship with private-sector actors in real estate. That’s what the Richmond Association of REALTORS® provides us — a deeper connection to the private sector.”

Land trusts are just one tool housing experts are deploying to create more housing and to ensure that those new housing opportunities are affordable and equitable. Community land banks (CLBs) are adding to the housing supply, as are other models. The challenge now is how to scale up that work to create exponential growth in equitable and affordable housing.

A civil rights idea reemerges

Community land trusts (CLTs) began to take root during the civil rights movement, with the seminal trust — New Communities — established in 1969 near Albany, Georgia.

“New Communities was started by a group of Black civil rights activists who were organizing Black sharecroppers,” explains Sims. “They wanted to have ownership of their homes and ownership over their land as sharecroppers. They looked to models in Europe and elsewhere to come up with this idea.”

Greg Rosenberg, coordinator for the Center for Community Land Trust Innovation and Terra Nostra Press in Madison, Wis., has seen CLTs gain traction in the 50 years since their inception. “CLTs have been on a steady upward growth trend, particularly since the turn of the century when we started seeing hyperinflation in housing,” he says. “People understand the importance of permanent affordability. We can create a stock of affordable housing that’ll be there 50-70 years from now.”

There are currently 291 CLTs in the United States and Puerto Rico, according to Rosenberg. Cities on the forefront of the CLT movement are Burlington, Vt., with the Champlain Housing Trust. “That’s a very successful organization that owns a significant percentage of the local housing stock and is a model lots of other CLTs look to,” says Rosenberg. “There’s another in Duluth, Minn., called One Roof Community Housing. There’s also a new municipally sponsored CLT in Houston, the Houston Community Land Trust, that people have very high hopes about.”

CLTs, however, are complex, he admits. “At their core is community-led development on community land,” explains Rosenberg. “That highlights their two key elements. First is community participation in deciding what the organization will do and the types of projects they’ll be involved in. Second is community-owned property as opposed to privately owned property.

“CLTs own the land on which the property is developed,” he adds. “If it’s a single-family home, the trust will typically sell the improvements and lease the land under a long-term ground lease. Those leases are quite common in the commercial real estate world but not the residential world. CLTs can also do rental housing, but the key piece is that tenants play a role in the operations. CLTs can also do things like community gardens and hold land for development.”

Playing a long game

What’s important with CLTs is that a home developed through the process will be affordable for every future purchaser while still building wealth for each family who owns that home over its life span. “A land trust distinguishes itself from other affordable housing initiatives by seeking to make the house permanently affordable,” explains Lafayette. “In the case of the Maggie Walker trust, we have two goals — to create permanent affordability and to create inclusive homeownership and wealth-building to reduce the racial wealth gap.”

That’s different from most other affordable housing. “Typically, a nonprofit builds a house, and it’s affordable once and only once, particularly if it’s in an area that has seen price appreciation,” says Lafayette. “With CLTs, the land trust retains ownership of the dirt, and there’s a split or shared equity model.”

Imagine this scenario. Assume a home should cost $250,000 to develop, and the lot is worth $50,000. “When the first owners come to buy, we back out the cost of the lot from their purchase price, so they buy that home for $200,000,” states Lafayette. “Assume they sell in seven years and the home has appreciated in value. The sellers keep a percentage of that appreciation, depending on the percentage the land trust is working with. Maybe the house is going to cost $225,000 for the next buyer to purchase because we don’t, as we call it, ‘recognize’ our equity. So that home is always going to be far more affordable than what’s on the market.”

Infographic: initial purchase and time of resale values
Courtesy of Maggie Walker Community Land Trust

That rock star status for Lafayette comes from the fact that she was “a key person — if not the key person — in 2014 when a group of affordable housing advocates came together to address gentrification and affordable housing issues in our region,” recalls Sims. “She was the spearhead. She was pitching this idea to every funder in the region, helping us identify sites, and more.”

Sims says Lafayette also connected the trust to Eagle Construction, one of the largest market-rate builders in the region, which now builds homes for the trust at cost.

“They can build a home for us for $130,000 that would cost $220,000 if I had to hire a general contractor,” says Sims. “Eagle gives that to us as an in-kind donation. That relationship came about through Laura and RAR.”

The trust has 55 current or soon-to-be homeowners, including three lease-to-own families, reports Lafayette. There are also 58 units in the pipeline.

The average sales price of the trust’s homes is $158,247 — 54 percent lower than the Richmond metro average, reports Sims. The average income of the buyers of the trust’s homes is 49 percent lower than the region’s average of $89,400.

The trust works with people who earn from 50 percent to 115 percent of area median income, notes Lafayette. “We serve a band of income that’s broader than most of the other housing nonprofits operating in Richmond,” she says. “We also worked with a fair housing organization to create a preference for participants. We can give a preference to folks who are alumni of the city of Richmond schools; more often than not, that means you’ll be a person of color.”

The result: Sims says 45 percent of the trust’s buyers are people of color.

Banking on the future

Land banks can be a source of land used for community land trusts, and in the case of the Maggie Walker trust, they’re both under the same roof, so to speak.

But more generally, local governments often create land banks into which they place unproductive properties for future development. Think of abandoned property and property for which the taxes are delinquent. Lafayette credits the Maggie Walker trust’s early successes to the fact that several local jurisdictions deeded to it a number of tax-delinquent properties.

“We work in three jurisdictions,” explains Lafayette. “In Richmond, we’ve received tax-delinquent parcels. Chesterfield had an old elementary school they weren’t going to use. They deeded it to us, and we razed the school. We’ll now build 10 single-family homes on that site.

“We’re the first combined land bank and land trust in the country,” says Lafayette. “We say to local governments: ‘Look at tax delinquent parcels, other parcels you own, and buildings that are surplus. Put them in the land bank, and we’ll hold onto them until the time comes for those to be developed.’ We can get parcels in Richmond for $1 plus court costs, or $2,500 total. That’s how we’re able to put affordable housing on those parcels.”

Signs of a brighter future

There’s been renewed interest in CLTs and other affordable and equitable homeownership models, spurred in part by the racial justice movement that arose after the 2020 death of George Floyd. “This is a solution that people have really been looking for — it’s an antidote to some of these forces of gentrification and inequitable development we’ve been seeing,” says Sims. “I can’t tell you how much more this topic comes up these days, especially in the aftermath of George Floyd’s death.”

Akilah Watkins, president/CEO of the Center for Community Progress in Washington, D.C., is also part of that discussion. “We’re getting contacted more because people want an equitable frame on solutions,” she says. “We’re also getting contacted because we’re doing a lot of work with the country’s land banks to assess the level of vacant and problem properties and determine how we put those back to productive use. One way is through affordable housing.

“We’re at a really important juncture where we’re talking about equity, how to bring communities back and make them more resilient, and the technical tools to increase our housing supply to small communities across the country,” she adds.

It’s not just housing policy leaders and industry players joining the discussion. “More corporations and financial institutions are getting involved, and that’s exciting to see,” reports Watkins. “Since 2019, we’ve been doing work around community land trusts and community land banks, and in year one, it was funded by Wells Fargo. But I do think after May 2020, when George Floyd was murdered, we started to see more corporate acknowledgement of racism and support of the racial social movement, and we did see money following that.”

In addition to CLTs and CLBs, other tools can make a difference in growing affordable housing while meeting equity goals. “There are three models of shared equity: land trusts, co-ops with limited equity, and deed restrictions, which a lot of inclusionary zoning programs use,” reports Brett Theodos, senior fellow of the Community Economic Development Hub at the Urban Institute in Washington, D.C. “I think these models have incredible potential, but the number of CLT units isn’t huge; I’d say in the lower thousands across the country.”

The challenge is that CLTs, CLBs, and other entities compete in an open housing market that’s seeing huge increases in value. It’s difficult for them to keep pace.

CLTs are also little understood. “CLTs can be challenging because they’re unfamiliar to mortgage lenders and construction lenders,” says Rosenberg. “When you have your go-to mortgage lenders and sources of construction finance, and you’ve done some public education about the split ownership of land and improvements, things get easier.”

They’re also expensive, in part because experts on the ground have learned that CLT homes need to be solidly constructed. “If you’re building a single-family home that’s going to serve multiple generations of homeowners, it should be durable and energy efficient,” says Rosenberg. “In my experience developing housing for a Madison-area CLT, we wanted to make our very earliest houses as cheap as possible to make them as affordable as possible. But when they came up for resale, there was a lot of deferred maintenance we needed to do. We didn’t renovate to the standard we should have initially.

“Now we use fiber cement siding instead of vinyl, better roof shingles, and more energy efficient materials — we’re paying a lot of attention to building envelope and quality materials,” he says. “You’ll see that in a lot of CLTs. We sell a house with a 99-year ground lease, so that points us to durable construction and energy efficient and green building.”

What would help CLTs and other affordable and equitable housing vehicles gain more traction? “They take a lot of subsidy up front and overall need considerable resources to make them happen,” says Theodos. “And there’s not a steady subsidy source. There’s the low-income housing tax credit (LIHTC) going on in rentals, but we don’t have something like that in the ownership space. CLTs are often cobbled together with state, local and private resources.

“Ideally, there would be lots of money for these, and it would be allocated every year so that people can plan on it and put it to productive use rather than haphazard, frantic use,” he adds. “The LIHTC has created a market for its use. There’s a market for shared equity and CLTs, yet to get appreciably more of those units, we’d need a sizeable and regular subsidy.”

Rosenberg also would like policymakers to think in terms of forever. “I think it would help to place a greater emphasis on permanent affordability for affordable housing projects,” he says. “In many cases, affordable housing has to be affordable for 30 years, which is a long time. But after 30 years go by, that affordability evaporates and is far more expensive to replace than when you built it.”

Watkins is excited at the possibilities coming from evaluating new ideas and rediscovering existing ideas. “There are a lot of things we’ve been doing that we’d love to scale more,” she says. “Those are tried and true, and I’m excited that a lot of oldie but goodie tools are getting more attention and more resources.

“I think this is also a great opportunity for us to use different tools,” adds Watkins. “One thing we’re having conversations around is the role land banks play in community revitalization. They’ve been part of the landscape since 1991, and more than 30 years later, we’re looking at what could be their increased role. We’re working hand in hand with community development groups, lending institutions, and local developers on problem properties.

“That’s a new conversation, whether land banks can be not just a repository for problem properties but part of the long game on revitalization and how they work with other revitalization tools,” says Watkins. “I’m excited about the synergy around community revitalization tools. We’ve long seen them as a silver bullet and one-off tools. More than ever, we’re seeing them being braided in a way to produce maximum results.”

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