Building Affordable Housing Through Community Land Trusts

With the cost of housing becoming increasingly unaffordable to low- and even moderate-income earners, local governments in Washington State are becoming more interested in learning about community land trusts and their corresponding benefits, such as the creation of stable and affordable ownership and rental housing options, as well as their long-term, positive impact on local communities.

This blog will be the first in a two-part series detailing the benefits of community land trusts (CLTs) and how local governments can collaborate with and support them. It is worth noting that this blog only covers CLTs and not land trusts geared towards conservation.

What Are Community Land Trusts?

CLTs are nonprofit organizations focused on delivering affordable housing to income-restricted buyers at below-market rates — with the hope that this will provide long-term stability for the communities they serve. While CLTs normally focus on providing stable ownership options for low- to moderate-income residents, some also offer high-quality rental units to qualifying tenants. CLT’s are not to be confused with other types of land trusts with the primary purpose of conserving important natural habitats, environments, or farmland.

Though there have been many iterations of this structure, the first U.S.-based organization to use the modern CLT name and model was New Communities Inc. in 1969. Civil rights activists with New Communities Inc. purchased upwards of 5,000 acres with the hopes of providing stability for Black sharecroppers in rural Georgia.

CLTs reached the Northwest in the late 80’s and 19 CLTs operate statewide currently, from the Homestead Community Land Trust, a King County-based CLT with a portfolio of over 300 units, to Methow Housing Trust, which serves the Methow Valley with a growing portfolio of around 25 existing units and 32 more under construction.

The initial acquisition of land often requires a CLT obtain grants or a discounted land purchase price in order to provide below-market-rate housing. Municipal governments and nonprofits will sometimes make donations of land or offer land for sale for a deeply discounted price to CLTs.

CLT’s can also receive grants and funding from private donors, foundations, municipal governments, and federal programs, such as Community Development Block Grants, in order to purchase land and, if needed, to construct homes. These initial grants can be used to help pass savings along to renters and homeowners over the life of their tenure.

How Do Community Land Trusts Work?

The mechanisms and structures of CLT’s may vary slightly between models but the main function is allowing buyers to purchase or rent a housing unit at an affordable cost, separate and partially protected from the cost of the land. This separation between land and housing costs allows the income-qualified homeowner to purchase a renewable, inheritable 99-year leasehold of the building and pay only a modest land-rent fee to the trust.

Rental units are an overlooked but important portion of housing services offered by many CLT’s. It is estimated that two-thirds of CLT’s across the country offer some form of rental housing in addition to the ownership model. Rental units may vary in form from single-family homes to housing units in larger multi-family buildings. For both models of tenure, a CLT ensures affordability by removing the burden of the land cost on the buyer and allows for more affordability in both the short and long term.

CLT leasehold owners are, in effect, homeowners with all the rights afforded to owners on the private market. Leasehold owners also have the ability to build equity throughout their tenure, but that equity will be capped at a certain agreed-upon rate written out in the lease. This function ensures long-term affordability even in the event of a sale by the current leasehold owner to a new owner. This approach differentiates CLT’s from other subsidized housing efforts as it limits the need for further funding from grants or subsidies for ongoing housing assistance.

To further their goal of expanding access to affordable ownership, many CLT’s offer assistance in the home purchasing process, such as financial counseling or generous down-payment options.

The CLT model also centers community members in its governance structure with members often making up a significant portion of a CLT board. A common structure consists of three groups: homeowners (may include dues-paying renters), the general public, and public representatives who usually are either elected reps or leaders of other local organizations. This governance structure ensures that CLT’s give voice to residents while also being held accountable to the needs of the broader community.

Benefits and Goals

The CLT model offers tools to deal with many problems cities face:

• They are effective methods for creating long-term affordable ownership options with limited subsidy needs over the lifetime of the housing units. This, paired with their self-management model, makes them a fiscally responsible source for limited grant money for municipalities looking to increase homeownership options for low- to moderate-income buyers.
• They allow leasehold owners to build equity, creating upward mobility for their household (60% of owners go on to purchase homes in the private market).
• They bring stability to communities where it is needed. During the 2008 financial crisis, homeowners were 10 times less likely to be in foreclosure proceedings than market-rate owners according to Stable Home Ownership in a Turbulent Economy (from The Housing Fund and Vanderbilt University). CLTs are also able to protect against pressures in hot real estate markets that can leave low-income residents vulnerable to displacement.
• CLT's offer significant potential community development benefits by giving residents a role in organizational governance and by ensuring longer tenancy.

Conclusion and Resources

CLTs are a viable and important tool to supply affordable housing and “wealth-building" options to low- and moderate-income earners. In addition to these affordability benefits, CLT’s offer significant community development benefits by stabilizing hot real estate markets, ensuring stability, and offering long-term investment options for current and potential tenants.

With the increasing prominence of CLTs in the creation of affordable housing, municipal governments may be interested in learning about what they can do to best support or encourage the development and maintenance of CLT’s in their areas. Part 2 of this series will speak more thoroughly in this issue.

For more information on CLT’s in the Northwest, see these resources:

• Center for Community Land Trust Innovation
• Grounded Solutions — For a different explanation of the CLT model (and a helpful video)
• Northwest Community Land Trust Coalition
• Partners Against Displacement: Community Land Trusts & Community Development (2019)

Author acknowledgment: I would like to thank Steve Butler, MRSC Planning & Policy Manager, for his extensive assistance with this blog.