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Permanent Affordability

Housing Alliance Delaware > Programs > Permanent Affordability
Build more housing that is affordable for the long haul
Community Land Trust Home, Portland, Oregon

"Men did not make the earth..It is the value of the improvement only, and not the earth itself, that is individual property...Every proprietor owes to the community a ground rent for the land which he holds." – Thomas Paine

In our efforts to provide affordable housing – whether it be new home ownership or affordable rental – and to preserve existing stock, we have come up against a number of obstacles over the years. These have included a lack of wider community consensus that affordable housing is a priority and sometimes intense local community sentiment against the siting of affordable housing projects in the vicinity.

A marked decrease in public expenditures to provide for social needs and a disillusionment with public solutions to common problems can be added to this list. A general inability among the body politic to focus for any length of time on a public policy issue contributes to our difficulties. Lastly, there is the pressure of urgent, competing needs, few of which lend themselves to evident solutions.

To all of these must be added two critically important obstacles: conflicting land use priorities and finite public and private resources. One model that is especially helpful with regard to these latter is the community land trust (CLT).

Sharing Equity, Preserving Affordability

The CLT provides for the “perpetual affordability” of its dwellings by restricting resale value and thereby retaining the initial subsidy. No future subsidy is required to keep the property affordable for a target income-group in future resales. Through resale restriction, the initial investment keeps the unit affordable and is not lost. The investment over time in this or comparable homes climbs, without the resale restriction. Equal or greater subsidy is required at each subsequent resale in order to keep the unit affordable for the next buyer. This stewardship of resources is accomplished by the community holding the land “in trust.”

Since the buying price of the home does not include the price of the land, this contributes to affordability. Resale restriction preserves this affordability over time. Through the groundlease the resale “formula” enables the sellers to get their “mortgage equity” plus a restricted portion (25% for example) of any market increase in value. The next buyers can meet target income requirements and still afford to become homeowners.

The City of Burlington, Vermont, has invested in the CLT model to make the fullest use of its public resources. Burlington’s website states:

“Limiting equity in housing ownership makes it less possible for owners to profit from the fluctuations in the real estate market, and more possible for people to afford housing ownership for the first time. Land Trust housing ownership helps keep housing permanently affordable by controlling the ownership of the land and through limiting equity.”

The Housing Ladder

The Burlington site also discusses the concept in which the CLT model is embedded: the housing ladder of tenure. The housing market is usually almost like an on/off switch. You either rent or you own. The housing ladder of tenure, however, treats the market as comprised of – and requiring – many more rungs in order for renters and owners to climb toward stand-alone home ownership. The interim forms, including the CLT, are not meant to usurp conventional home ownership. Instead, they are “mixed” ownership forms that fill a specific purpose for a specific segment of the population.

Dwelling vs Investment

One objection to restricting equity comes from the hesitation to limit in any way any transaction into which people enter to secure a dwelling. This viewpoint sees unfettered wealth creation as a necessary aspect of ownership. It creates an equation, a covalent link, between dwelling and investment. However, while investment can lead to the creation of dwellings (primary residences which meet basic needs), it can also contribute to the displacement of them. Wealth creation can become speculation. Investment can destroy dwellings and communities and put the basic human need for housing in jeopardy.

Human community can become dominated by investment, its values and its universe of discourse defined in an antisocial way. Permanent communities can be swept aside to make way for a “highest and best use” determined by profit alone. Making a place for a more variegated set of ownership forms allows a diversity to the housing marketplace that helps it to resist the monoculture of commercial speculation.

CLTs and other social ownership forms constitute a “compromise between a flawed free market approach and heavy-handed government intervention.” This approach falls within the traditional conservative paradigm which values local community self-determination, seeks to avoid top-down solutions, and shuns reliance on government constraint.

Stewardship encourages us to think of the next generation by preserving affordability and future generations by holding land in trust. It permits us to think of our children, our community , and our environment. We are allowed, and even called upon, to manage “development” and assure that the built environment does not jeopardize the living environment and our relations with one another.

Resources

Affordable Forever (Community Land Trusts), Shelterforce Magazine Watchful Stewards, Shelterforce Magazine
Building Assets with Permanently Affordable Housing, Shelterforce Magazine Cheaper Together: How Neighbors Invest in Community, YES! Magazine, Summer 2012
City Hall Steps In, Shelterforce Magazine Stewardship of Land and Resources
Crossing Muddy Waters: Community Land Trust for Affordable Housing, Shelterforce Magazine Diamond State Community Land Trust
Homeownership Today and Tomorrow: Building Assets While Preserving Affordability Ten Characteristics of the Classic Community Land Trust (CLT)
The Shared Equity Homeownership State Policy Review