Community development activists, urban planners, and city government officials are increasingly taking note of a disturbing trend: escalating housing costs are forcing lower-income and working- and middle-class residents to leave our nation’s cities. Gentrification and subsequent displacement are rampant. Across the country, millions of us can no longer afford to reside in our major urban areas.
In Washington, D.C., where I live, the average selling price of a home is $462,000, a price that requires an income of nearly $100,000 to finance a mortgage. We’ve all heard the reports about San Francisco, where working families with small children can no longer afford housing. Same situation in Manhattan, where people are being pushed out by rent increases and conversions of rental units to high-end condos and co-ops (I have personal experience of this – my daughter who teaches in West Harlem and used to live in a small apartment on the Lower East Side recently had to relocate to Brooklyn when her rent was raised).
Or, to put it in the vernacular of the commons, many of our most vibrant urban areas are being “enclosed.” Our cities which once were centers of diversity (ethnically, culturally, and in terms of income levels) are now becoming modern-day analogues to the medieval walled cities of Europe – available to the wealthy elite (and single, young, college-educated professionals with high levels of disposable incomes) while the people who make those cities function (service workers, teachers, police and firemen, city employees) must move to inner and outer-ring suburbs.
Is there a way to preserve our urban areas as diverse, affordable communities? Can we protect the city as a commons available to all? Traditional, low-cost housing programs have tried to do this. Community Benefits Agreements (CBAs), for instance, are legal documents in which the developer of a project commits to a set of benefits that often includes a requirement that a certain number of new units be affordable. But CBAs terminate after a fixed period, of, say, 15 or 20 years. When the agreement runs out, housing costs revert to market rates, and affordability becomes a thing of the past.
Just ask Montgomery County, MD (a suburban area near Washington, DC) which was a pioneer in early 90s in using CBAs to create affordable units. But a couple years ago these agreements began terminating, and as a result, housing prices are now sky-rocketing in the county.
Fortunately, in recent years a new institutional mechanism that provides permanent affordability is gaining momentum around the country: the nonprofit community land trust (CLT). Nonprofit land trusts use ownership strategies to help stabilize housing costs in areas threatened by gentrification, and they are proving to be the best way to provide low-and moderate-income housing in an era of ever-declining subsidies.
Here?s how it works: A CLT is a locally-based, non-profit organization that buys land on behalf of the community. The trust then develops homes which it sells to a buyer who receives a 99-year lease with a restricted deed. The purchaser owns the house, but the land trust retains ownership of the land. In exchange for a low purchase price, families agree that when they sell the house, they will do so at a price that is below market value. The deed requires that when buyers are ready to sell, they give the trust the option to repurchase the house at a cost set by a predetermined formula. The formula varies, but typically the seller gets the value of the principal payments and down payment plus 25% of the accumulated equity, while the trust retains the other 75% of the accumulated equity.
By maintaining ownership of the land, the trust controls the price of housing built, so both rental and homeownership units remain at affordable levels. And by taking the land out of the market and capturing most of the equity gain for the community, the land trust builds an important community asset (permanently affordable housing) while shielding the community from both land speculators and the dislocating effects of gentrification. In short, a commons is established to provide shelter for present and succeeding generations.
Today there are more than 150 community land trusts in the country. Their number is increasing rapidly. For example, as recently as 2000, there were only two in the state of California. Last year there were a dozen.
One of the nation’s oldest and most successful land trusts is in Burlington, Vermont. Thanks to the land trust, 15% of the city’s housing stock, 2,000 homes, is permanently affordable. A study of the Burlington land trust over a 20-year period shows that the average family gained between $5,000 and $8,000 in equity in about six years of home ownership, allowing the majority who moved to “step up” to more traditional homeownership. At the same, three-quarters of the equity gain was retained by the trust so that the CLT can continue to provide the same affordable housing into the future.
Now, bigger cities around the country, such as Chicago, San Francisco, Cleveland, and Irvine, California are developing land trusts.
The Irvine example is particularly important because it is attempting to take the land trust idea to scale. Irvine, a rapidly growing city of 180,000 located 40 miles southeast of Los Angeles, is creating a land trust with the ambitious goal to make 10% of the city’s housing permanently low-cost. By 2025, the nonprofit Irvine Community Land Trust plans to own 9,700 homes, condos, and apartments, more than any other community land trust in the country. Through the trust, housing will remain low-cost because residents will buy their homes or condos from the trust and sell them back when they move, keeping a small percentage of the equity. For rent-restricted apartment projects, developers will serve as landlords but the city will retain ownership of the land.
Says Irvine Mayor Beth Krom (quoted in the L.A. Times): “We’re making history. [A]t the end of the day, shelter, food and mobility are essential and common interests that people share.”
_For more information on land trusts: http://www.community-wealth.org/strategies/panel/clts/index.html