Happy birthday,” AbbyLadybug

Here at NPQ, it seems we are always covering the disappearance of affordable housing and the rise of housing prices, of evictions and gentrification, and…well, of all the problems that flow from the unfettered commodification of a basic human need. At some point, we must get to the issue of equity—both the “equity” we hold in our homes and the social equity we gain when decent housing is within the reach of most working families.

That is why we want to stop bemoaning our fate for a minute to say there is another way. Happy Birthday, Land Trusts, and we’d like to see more of you!

As NPQ has noted, the idea of the community land trust, a form of housing that creates a middle ground between renting and owning, has been gaining visibility. In a community land trust, typically the land is owned by a nonprofit, the buildings are owned by families, and a lease (or deed) specifies how equity gains are shared between the two, allowing for modest equity gains for the family while preserving permanently affordable housing for future homeowners.

Now, thanks to a study from the Lincoln Institute for Land Policy and Grounded Solutions Network titled Tracking Growth and Evaluating Performance of Shared Equity Homeownership Programs During Housing Market Fluctuations, we have better data on community land trust housing than ever before. The new study is easily the field’s most comprehensive, with findings culled from more than 4,100 sales or resales of community land trust housing units drawn from 264 cities in 20 states from 1985 to the present.

All told, today there are an estimated 12,000 units of community land trust housing nationwide—up from fewer than 2,000 units three decades ago. The first US community land trust was in Albany, Georgia in 1969. As the movement turns 50 this year, there is a growing track record of performance to review.

The report, written by Ruoniu (Vince) Wang, research manager at Grounded Solution Network; Claire Cahen, a graduate student at City University of New York; and Arthur Acolin and Rebecca Walter, two real estate professors at the University of Washington, Seattle, shows how shared equity homeownership both builds wealth and has ensured long-term housing affordability for low-income households across the country over a 34-year period.

Community land trusts, the authors note, are part of a larger sector of about 250,000 units of shared equity housing—a number that includes 166,000 units of limited equity cooperative housing (about 60 percent of which is in New York City) and over 50,000 inclusionary zoning units, in which developers set aside some housing at below-market rates in exchange for getting city approvals to build market-rate housing.

But while community land trusts still only provide a modest percentage of shared equity housing in the US, the sector is growing. And there seems to be a new uptick in enthusiasm. In the past two years, a range of cities have adopted community land trust strategies, including Philadelphia, Pennsylvania; New York, New York; Baltimore, Maryland; Buffalo, New York; Washington, DC; the San Francisco Bay Area; Denver, Colorado; Asheville, North Carolina; Reno, Nevada; and a number of cities in Florida.

Noting this interest, last fall, Freddie Mac, the government-sponsored enterprise that guarantees over $2 trillion in mortgage debt, indicated its intent to start purchasing community land trust mortgages as part of its business. In short, the number of community land trust homeowners could be poised to rise considerably.

The study by Wang and his colleagues break the data on community land trust sales and resales into four time-periods: 1985–2000, 2001–2006, 2007–2012, and 2013–2018. This allows for analysis of growth over time. For instance, of the 4,102 properties traced over the period, 580 were in land trust ownership before 2000, while 3,522 have been placed in land trust ownership since 2001. The breakdown by time periods also allows for testing the effects of market conditions. Indeed, the report classifies the four time-periods as pre-housing bubble (1985–2000), housing boom (2001–2006), housing bust (2007–2012), and housing recovery (2013–2018).

Among the key findings in the study are the following:

  • Community land trust homeowners as a group have become much more diverse. Even though the first community land trust was developed in a Black community in Albany, Georgia, in the 1980s and 1990s community land trust housing primarily took off in communities like Vermont, which were largely white. As of 2000, 87 percent of community land trust homeowners were white. In the 2013–2018 period, however, 43 percent of community land trust homeowners were people of color.
  • The report finds that 95 percent of shared equity homes are priced affordably for families earning 80 percent of area median income or below, meaning that families in community land trust homes are spending less than 30 percent of their income on housing.
  • Affordability is achieved for both first purchases and resales of shared equity homes. In fact, the numbers are almost identical, with about half rated affordable for buyers with less than 50 percent of area median income and nearly half rated affordable for buyers with between 50 and 80 of area median income, with a small number out of that range. Bottom line: the claim of “permanent affordability” is in fact being realized.
  • Community land trust housing is beyond stable. During the Great Recession, foreclosure rates in community land trust housing were one-eighth the rate of market-rate housing. This study also reveals that once residents buy community land trust housing, they stay. The average annual move rate in the sample is 2.6 percent—at that rate, the homeowners are on track to hold onto their homes for 38 years! By comparison, on average 6.9 percent of all homeowners and 14 percent of all households nationwide move each year.
  • When families do move—those who moved tended to move after an average tenure of six years—the family typically receives about $14,000 in cash from the sale. By contrast the median down-payment is $1,875. This equity gain includes both the family’s share of the increase in home price plus the “forced savings” gain from having partially paid down the mortgage. This gain has helped enable an estimated 58 percent of families that do move out of community land trust homes to “step up” to market-rate housing.
  • The majority who buy are first-time homebuyers (about seven in 10). They tend to earn 50–80 percent of area median income (58 percent, with another 27 percent earning less than 50 percent of area median income). The typical buyer is a woman who heads her household (62 percent of total households), is in her late 30s, and works in office, retail, or service industries.

The report itself contains five tables and 36 charts and is chock full of data. One interesting finding shows how community land trusts contribute to stability. Specifically, during boom times, the shared equity formula means that homeowners gain less than if they owned market-rate homes; however, community land trusts also shield homeowners from downturns.

Thus, during the 2001–2006 housing boom period, the value of market-rate homes increased at six percent a year (inflation adjusted) compared to 1.9 percent above inflation for community land trust homes. However, from 2007 to 2012, fee simple homes’ value fell 0.3 percent a year, while community land trusts gained 0.6 percent a year in value. Over the long haul (1985-2018), the gap is small; community land trust homes have appreciated at an annual rate of 0.4 percent above inflation compared to 0.6 percent for fee-simple homes.

Another important finding speaks to the importance of public support. Notably, even though community land trusts make very efficient use of subsidy—once a subsidized unit of housing is created, it stays affordable in perpetuity—you still need subsidy on the front end to help finance construction and, often, to subsidize the initial purchase of the community land trust home (i.e., bring down the amount of the loan to a level the homebuyer can afford).

In terms of development costs, before 2000, 56 percent of these costs were covered by public sector resources—both as loans that got repaid upon sale and grants, which, evidently, are contributed to the project. By the 2013–2018 period, that number had fallen to 29 percent. The other 71 percent of development financing, the authors note, must come from “buyer’s savings, conventional loans from financial institutions, individual donations, and foundation grants.” Arguably, however, the fact that community land trusts are able to fund more of their development costs through private sources may be a product of their success.

More challenging, however, is making the homes “pencil out” for the buyers. Before 2000, the average buyer received less than $20,000 in subsidy and production was limited—that is, 580 units within the sample over 15 years. In the 2007–2012 period, however, the average subsidy was $61,000 per buyer and production within the sample group was 1,515 units. Between 2013 and 2018, however, subsidy fell to $53,000 per buyer—even as housing values began to climb again; the number of new properties in the sample for that period dropped almost in half to 832.

Between 2013 and 2018, the share of public resources coming from local government increased from 11 percent to 19 percent. But, all told, public sector funds for community land trusts fell from $120 million in 2007–2012 to $80 million in 2013-2018. Now, 19 percent of $80 million is still about $2 million more than 11 percent of $120 million, so local financing had actually gone up. But the bottom line was a $40 million drop in public-sector financing. Private financing, too, climbed slightly, but, again, not nearly enough to make up for that $40 million decline.

In other words, even as local interest in community land trust housing increases, raising the needed resources remains a very real challenge. As NPQ noted last year, “a relative lack of public policy support has made it harder both to preserve existing units and to develop new ones.” It is to be hoped that institutional measures, such as the decision by Freddie Mac to finance community land trust homes, will make up for the decline in public sector resources. But clearly no matter how strong the development financing, up-front investment is still needed to take land off the market and put people in affordable community land trust homes.

In their conclusion, the authors note, “Shared equity homeownership models are uniquely situated in providing stable homeownership opportunities to lower-income populations.” According to their study, over 34 years, it took about $10 million a year in public resources to develop over 4,100 units of community land trust housing. In a country where an estimated 19 million households pay more than half of their income on housing, the case for increased investment would seem to be clear.