Community Land Trusts: A Valuable Tool in Promoting Affordable Housing

January 18, 2024

As California’s sixth housing element cycle finally draws to a close, cities’ attention turns to the practical work of actually delivering housing, especially below-market rate (BMR) housing. Market-rate developers will provide some BMR housing to meet state streamlining requirements and local inclusionary mandates. Given the severity of California’s housing crisis, as well as a shortfall in many municipalities in actually producing affordable housing, many cities will need or want to work directly to provide BMR units.

Directly subsidizing and providing affordable housing presents real challenges for cities, whether the units are deed-restricted for-sale homes or rental units subject to limits on allowable rents. A city can lose affordable for-sale stock if seller and buyer disregard (or don’t understand) the resale restrictions. Once the affordability covenant runs out (they often have five or ten year terms), the home can go on the open market, effectively losing the public investment. Property management for rentals can become a costly, continuous task for city staff or a contracted manager.

The local nonprofits known as community land trusts (CLTs) can help solve many of these problems for cities. CLTs are generally strongly connected to their communities; often tenants in a specific building or neighborhood form the organizing core that launches the trust. Models vary among organizations and projects, but the basic idea is always that the CLT holds the fee interest in land, while the homeowner (or apartment building owner) owns the structure and a long-term ground lease from the trust that imposes affordability requirements. The ground lease for for-sale units will limit the appreciation that the homeowner can capture on resale—often calculated to be enough for a market-rate down payment while maintaining BMR affordability of the unit. In rental buildings, the ground lease imposes limits on allowable rents and the CLT often helps organize a cooperative or other nonprofit that owns and manages the building, with the tenants as members of the organization.

The CLT’s basic commitment to affordability, its ongoing interest in the land, and its close ties to community and tenant organizations let such trusts provide significant advantages in operating costs in maintaining affordability. The trust’s position as landowner and lessor allows it to monitor sales easily and ensure that affordability continues in perpetuity. The specific ground lease terms, plus its relationship with homeowners, allow the trust to be hands-on if the owner has difficulty with mortgage or tax payments because the trust has a personal relationship  with the people involved and can offer trusted advice. CLTs can make direct interventions, if needed, with payment assistance. If worse comes to worst and the owner faces foreclosure or tax sale, the trust can step in and repurchase the home. All of these mechanisms protect individual homeowners and their communities, while also safeguarding public investment in continued affordability.

In rental projects, the CLT’s advantage is largely in expertise and relationships. An established CLT can have extensive experience managing buildings and applying affordability and income requirements. It will also have real connections with the community, allowing humane and effective enforcement if necessary.

With these strengths, CLTs can play several different roles as cities contemplate their BMR goals:

• As recipients of grants or loans to found CLTs and for the acquisition of existing market-rate units, which can then be converted to permanently-affordable housing;
• As contractors to manage city or developer-owned BMR rental projects; and
• As developers and permanent stewards of new BMR housing, potentially in partnership with a nonprofit or market-rate developer or with the city itself.

A report from the Lincoln Institute, The City-CLT Relationship, includes profiles of successful partnerships across the country, including several in California. For example, as far back as 2006 the Town of Truckee helped to launch a community land trust program by entering into a $45,000 contract for services with the Workforce Housing Association of Truckee. In Sonoma County, the City of Petaluma encouraged housing developers to meet inclusionary requirements by coordinating with the Housing Land Trust of Sonoma County to identify appropriate buyers for these affordable homes, and the developers also agreed to donate the needed land to the land trust. More recently, CLTs in Los Angeles and South Lake Tahoe have taken on developer roles, helping to launch large-scale BMR projects on public and surplus land.

For more information about how your city can support the development of a community land trust, or for help with specific transactions or projects, contact Gabe Ross.

The author would like to thank Leo Goldberg of the California Community Land Trust Network for his input and former SMW law clerk Sean Becker for his initial research.