Washington, D.C. — A new report from the Center for American Progress explores the potential of community land trusts to provide and protect affordable housing for low-income families in perpetuity. With seven years since the onset of the housing foreclosure crisis, more than 6 million homeowners underwater, local governments still facing vacant and abandoned properties and loss of assets in many neighborhoods, the rising cost of rentals, and a growing shortage of affordable housing, CAP’s report highlights shared equity homeownership—and community land trusts in particular—as a solution that could make sustainable homeownership possible for more families, especially low-income families.
“The CLT model is still evolving and has not yet achieved the critical mass that would allow it to have a broader impact on the housing market,” said Michela Zonta, Senior Policy Analyst at CAP and author of the report. “However, it is very promising, and it is worth encouraging its expansion, especially because it challenges the conventional housing market through an emphasis on the collective ownership of land in perpetuity.”
Community land trusts, similar to other shared equity models, can help lower-income families safely bridge the gap between rental housing and traditional homeownership. CLTs acquire and manage land upon which affordable homes can be developed and sold to low- and moderate-income families at below-market rates. In exchange for purchasing a CLT property, buyers agree to resell at a price that is affordable for a future low-income owner, ensuring that these properties continue to serve as a springboard for lower-income families to eventually enter the conventional housing market and realize the financial benefits of building home equity.
CAP’s report outlines how CLTs provide benefits to individual homeowners and neighborhoods alike. Economically depressed communities are often plagued with abandoned land and decaying buildings that discourage investment. In these markets, CLTs can contribute to neighborhood stabilization; they can also prevent displacement in gentrifying neighborhoods. Community lands trusts are not the sole solution to the housing affordability crisis, but opportunities exist for them to be part of the solution by protecting a portfolio of homes that are affordable for current and future generations of lower-income families.
CAP’s report focuses on areas where community land trusts face challenges—in land acquisition, funding, and mortgage financing—and makes recommendations that would allow CLTs to continue to contribute to the production and protection of long-term affordable housing:
- CLTs should take advantage of existing housing units and bring them into CLTs. Foreclosed and vacant homes in many neighborhoods represent an opportunity for CLTs to acquire land sites. In addition, CLTs should be given serious consideration for the disposition of real estate-owned properties and the donation of surplus municipal real estate.
- It is critical to identify, safeguard, and enhance sources of CLT project funding at all levels of government, as well as make existing dollars go further. For example, the U.S. Department of Housing and Urban Development could increase the affordability period above the minimum 5 years to 15 years for homeownership in the HOME Investment Partnership Program. States should also be encouraged to contribute to CLT capacity management through funding and technical assistance.
- To increase access to mortgage financing for buyers of CLT homes, it is important that lenders receive education on the CLT model and that government-sponsored enterprises enhance their effectiveness in underserved markets. As the Federal Housing Finance Agency, or FHFA, finalizes the proposed duty-to-serve rule, it should prioritize building support for shared equity models by keeping enterprise support for shared equity models as a regulatory activity and using volume and resources to evaluate the enterprise’s undeserved market plan.
Click here to read “Community Land Trusts: A Promising Tool for Expanding and Protecting Affordable Housing” by Michela Zonta.
For more information or to speak with an expert, contact Allison Preiss at firstname.lastname@example.org or 202.478.6331.