“The Edge…there is no honest way to explain it, because the only people who really know where it is are the ones who have gone over.” ―Hunter S. Thompson
Our housing affordability crisis was well documented long before COVID-19 hit. It is about to get much, much worse. Incomes have dropped to zero for many renters, and the moratorium on evictions in a number of states is expiring. Tenants are facing balloon rental arrearages with little ability to pay. Widespread evictions are the inevitable outcome, resulting in lives uprooted and, in too many cases, destroyed.
Now, more than ever, it is time to pivot to proven housing models that guarantee security of tenure—those involving community land ownership. Options such as community land trusts (CLTs), limited equity co-ops (LECs), and resident-owned communities (ROCs) have been woefully underfunded up until now. This must change.
Before COVID-19, almost half of all renters paid more than one-third of their monthly income for housing. If we focused on those with incomes less than $15,000, almost three-quarters were spending more than half their monthly income on it. For those families, “savings” or “reserves” are not options. COVID-19 made a bad situation dire, even for those receiving unemployment insurance.
States and localities are trying to address the looming eviction crisis, but with limited success. Even with federal coronavirus funds augmenting eviction assistance pots, the need far outstrips the supply. In Houston, the city’s rental assistance fund ran dry in 90 minutes. In Baltimore, the city’s new $13 million rental assistance prevention program will cover only one-third of the need expected when the state protections expire at July’s end. At least 10 cities in six states have resorted to lottery distribution of assistance.
“Cancel Rent” campaigns have been forced to wrestle with the law’s longstanding preference for contracts and property over people. Caught in that cage, rent freezes and legislative conversion of back rent to consumer debt has been the best outcome to date. This keeps households in place temporarily, but leaves them with possible wage garnishment, liens, and credit scars.
How did we get here?
In 1872, Frederick Engels wrote that the housing shortage was not unique, and that “all oppressed classes in all periods suffer rather uniformly from it.” Circumstances have changed somewhat, in that the burden now falls disproportionately on Black and brown households, and those headed by women. But when Engels made that observation back in 1872, housing was provided only through the laws of profit-making. While much of Europe has changed and now devotes significant public money to “social housing” and housing allowances, we in the United States did not.
Yes, we dipped our toe in the pond of public housing in 1939, but since then we’ve pulled back. In the mid-1970s, the federal government began withdrawing financial support. In 1996, HOPE VI program demolitions led to a net loss of units. Three years later, the congressional Faircloth Amendment prohibited any net increase. And the 2011 Rental Assistance Demonstration (RAD) converted many public projects to private ones. In Baltimore, public housing units are now at one-third of their 1992 level. We’re about to close the book on public housing.
Housing vouchers are the preferred means of public aid now, providing the voucher holder with some mobility and leaving the private landlord to handle the costs of repair and maintenance through a government payment that covers roughly two-thirds of monthly rent charged (while the tenant provides the rest).
These public programs are hedges when economic hardship hits. Household rent payment is adjusted downward, with government picking up the difference. But vouchers and dwindling public housing units serve only one in four households who are eligible. (The hoped-for federal HEROES Act provides $13 billion to underwrite 100,000 new emergency Housing Choice Vouchers.)
But unlike public housing, vouchers are at the mercy of the for-profit forces of the marketplace. When a higher rate of return beckons, a landlord can evict the voucher tenant. As currently structured, vouchers cannot stop displacement due to gentrification or, for that matter, any increase in neighborhood property values, regardless the cause.
The COVID-19 emergency now shines a spotlight on the constant family and personal disruption built into our housing system for far too many and the corresponding need for security of tenure. The right to stability is the keystone to a household’s ability to thrive, and security of tenure is a foundational pillar. Evictions cause radical re-arrangements of education, childcare, work, transportation, and increased anxiety that takes a cumulative toll on health. They have long-term impacts on material, physical, and mental health.
Where do we go from here?
We have proven housing models that guarantee security of tenure, even in the face of speculative market forces that tempt landlords: community land trusts (CLTs); limited-equity co-ops (LECs); and resident-owned communities, or ROCs, which are also often structured as limited-equity co-ops. And like public housing, which also provides that hedge, we don’t fund them enough.
CLTs, LECs, and ROCs all involve two critical elements absent from the current housing models our tax dollars generally fund: resident involvement in housing management and community real estate ownership. Each model limits the price inflation that seems inevitable in housing, thus promising permanent affordability, as well as makes the community a legal third-party—one interested in household stability.
With CLTs, communities own the land upon which housing exists or is created. Introduced in the US during the 1960s’ civil rights movement, governance involves tenants as one prong in a three-part structure that also includes neighbors and key stakeholders. The ground lease ties all together, keeping costs affordable and giving the CLT the pre-eminent right to purchase when housing is at risk of being lost.
Nationwide, a 2017 report from the Grounded Solutions Network of CLTs and allied organizations found that members operated 35,926 rental, 30,627 co-op, and 18,946 homeownership units—the nearly 19,000 homeownership units, double seven years before. During the Great Recession, the Lincoln Institute of Land Policy found that CLT homeowners were relatively immune to delinquencies and displacement, with a 2009 foreclosure rate of 0.56 percent versus 4.58 percent for the housing market as a whole and 15.58 percent foreclosure rates for homes with high-interest, “subprime” loans.
LECs generally are multi-family buildings that provide resident members an ownership share and the final say in management. Unlike traditional housing co-ops, the purchase and resale price of the share are limited to maintain perpetual affordability. In addition to the initial share purchase, LEC residents pay monthly fees based on the “carrying costs” of housing. Unlike traditional rent, these costs may actually decline over time as the building’s mortgage is paid off. There are presently an estimated 166,608 LEC units.
Resident-owned communities (ROCs) also are co-ops but involve mobile homes or trailer parks where the land is community-owned and managed. There are roughly 106,500 manufactured units operated by ROCs. Limited-equity ROCs, like LECs, keep the cost of ownership shares low, preserving affordability.
While the models vary, the safeguard against involuntary displacement is community land ownership. LECs, for example, may eventually opt to convert to market rate housing if the residents agree. Since the early 1990s, it appears that roughly 260,000 units opted to convert. Were these LECs operated on CLT-owned land, the resale limits in the CLT ground lease would have stemmed the loss and preserved over a quarter million units of community-controlled housing.
How does housing on community-owned land look during this crisis?
“Response to COVID-19” is the banner that greets visitors to the Champlain Housing Trust (CHT) website, which includes links that direct residents to information about economic impact payments, unemployment benefits, and assistance with mortgages and food. An emergency loan program is available for CLT members only. Champlain operates 2,300 rental, 120 co-op, and 630 homeownership units, serving three counties in Vermont. The land trust can trace its origins to the early 1980s when a renegade socialist mayor named Bernard Sanders governed in Burlington.
“Our goal during this crisis,” says CHT director Brenda Torpy, “is that nobody loses their housing. Security of tenure is what people need.” CHT has been polling residents on their economic status.
In California, the Oakland Community Land Trust’s website looks similar to Champlain’s. Director Steve King has been busy determining which CLT homeowner mortgages are eligible for federal relief and making sure no renter loses their housing. “It would take a lot for someone to get evicted,” he said.
But these models, serving their communities in ways that are in marked contrast to private landlords and mortgage services, together serve less one percent of the 118 million households in the US. If targeted only to the 7.5 million households in poverty, they would serve eight percent. What are the obstacles to meeting this obvious need?
The primary problem has been public and private finance.
Despite the fact that community land housing models are smart public investments—a one-time subsidy can help keep a property affordable permanently, as it’s tied to the property and not the household—government support pales in comparison to the tax expenditures it provides to traditional housing, both homeownership and rental.
Private lenders have balked in the past at the third-party rights of communities to buy back at-risk housing, which can gum up a finance system that profits from selling and reselling bundled mortgage and rental-backed securities to investors on the secondary market. The ability to quickly foreclose and evict is a key lubricant in this finance machine.
There is some light on the horizon. Advocacy with the Federal Housing Administration (FHA) produced a promising “Duty to Serve” initiative, pushing government-sponsored enterprises such as Fannie Mae and Freddie Mac to buy and guarantee loans made to non-traditional housing. And last January, Baltimore City’s Affordable Housing Trust fund announced its annual allocations for its first three years would prioritize CLTs.
But there is a political challenge that faces community land ownership. Municipal governments generally rely upon revenue from property taxes. As land values are bid up, cities reap more tax revenue. The appreciation also helps homeowners, increasing their equity to make refinancing, remodeling, or selling more attractive. And higher land values prime the profit-making pump of developers and speculators. As developers tend to underwrite political candidates, and as homeowners are more likely to vote than renters, there is a formidable political trinity united around the goal of increasing private property values.
Community land ownership does not easily fit within this paradigm. While it improves community cohesion, quality of life, and land values, the community’s resistance to allowing land values to control the price of all housing appears to be anathema to public leaders and private lenders. They treat individual and community wealth as mutually exclusive despite studies showing otherwise, a challenge that has been evident for at least a decade.
Perhaps it’s no surprise, then, that community leaders in Baltimore, not politicians, pioneered the ballot petition to cement the city’s commitment to CLTs. Low-income Black communities have faced the ill winds of racial zoning, redlining, blockbusting, covenant communities, and urban renewal, all of which spread the seeds of serial displacement that sprout today. They also have seen private lenders find new and creative ways to discriminate against them, by claiming the issue now is risk, not race, ignoring what NPQ’s Cyndi Suarez has called the “coloring of risk.”
Were the fight for security of tenure in housing simply a battle regarding policy efficiency, it would be over. Community land ownership is a proven success. It delivers what the market cannot. Were CLTs “at scale” during this pandemic, millions of families would have secure housing. None would have to endure having their housing security decided through an eviction-prevention lottery.
Getting community land ownership “to scale” is a political fight, however. It must be fought from the bottom-up, as with Baltimore’s community-driven Trust Fund priorities, and from top down, like with the FHA’s “Duty to Serve” initiative. We’ve been wandering in the desert of displacement for too long. But there is a promised land—one that offers security of tenure and affordability. We will own it together.
Peter Sabonis is the Director of Human Rights Based Development at Partners for Dignity & Rights. He can be reached at [email protected].