Community Land Trust

[This text was originally published in AREA Chicago #2 in February 2006]

On December 1, 2005 Mayor Daley announced that the City would be initiating a “Community Land Trust” (CLT) initiative to secure affordable housing for Chicago residents. Below are notes and questions relating to this news as well as the official press release announcing the Land Trust.

1. A succinct summary and questions I had written about a month ago when I heard the City was doing this.

Community Land Trust as a flexible model of sustainable development can accommodate a wide range of specific missions, land uses, housing types, and ownership/management options. There are examples and case studies around the US demonstrating many possibilities. Boiled down to its fundamentals, CLT preserves long-term affordability of housing by removing land and buildings on it from the traditional, speculative real estate market, thereby recycling in perpetuity public funding subsidies for affordable housing. By definition, a CLT is a not for profit organization that holds title to land and upholds the by-laws and structure that organize and govern the land trust.
A CLT usually but not always develops the property itself (new or rehabbed construction), and then sells the improvements (houses, multifamily buildings, coops, and so on) to low or moderate income buyers who abide by the CLT’s by-laws. These buyers pay a lease fee for the land while earning equity and receiving the tax and other advantages of home ownership. The CLT has first right of purchase when and if the owners choose to sell, and the resale is guided by a formula that is designed to give the owners a moderate return on their original investment without raising the sale price beyond local affordability. There are various ways of designing that formula—linking it to an index (like local median household incomes), adding a percentage of the increased value of a real estate appraisal, and many others.

In the case of the longest and most established housing CLT (in Burlington, VT) the City supports the CLT through a penny-per-year increase on property taxes, conveying property to the Trust at little or no cost, and more. Burlington’s mayor is a strong CLT advocate who speaks of “de-commodifying housing” and “taking the profit motive out of development,” especially when public funding is involved. A CLT’s board of directors is generally composed of one-third residents, one-third members of the larger community, and one-third public officials, reps of agencies, and so forth. CLTs are typically a base for community participation in other issues and concerns that affect both CLT residents and members of the wider community.

So initial questions include:

—What is/are the City’s objective/s in forming a Chicago CLT?
—Who/what would be the CLT in Chicago?
—What City department is coordinating this idea? Is the idea for it to be a sister agency similar to the Chicago Housing Authority (CHA)?
—Would there be one city-wide or several, and if so would they be delegated to specific organizations in community areas?
—Was the West Humboldt Park Community Development Organization land trust done as a pilot?
—Who is guiding the process and what opportunities are there for people (individuals, organizations) to be involved in creating a CLT in Chicago?
—How would a City CLT’s Board be selected? Who would design its by-laws (and how)? Have there been proposals about re-sale formulas?
—How would the CLT obtain land/property? Where would CLT housing be located/ concentrated?
—How does a Chicago CLT relate to the affordable housing set-aside ordinance, to the CHA Transformation Plan, to the proposed affordable housing trust fund from property taxes  in Bronzeville, and so on?
—Are there other aspects/goals for the kinds  of projects a Chicago CLT would engage in (here I’m thinking about comprehensive planning to include local enterprise, jobs, ecological sustainability, renewable energy, public transportation, services like parenting assistance, home buying readiness, health and elder care)?

2. The City of Chicago Press Release >>

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For Immediate Release
Contact: Molly Sullivan
Phone: 312-742-0595
Thursday, December 1, 2005
Mayor Daley Announces Community Land Trust to Ensure Longterm Housing Affordability

Mayor Richard M. Daley said today he will ask the City Council to approve an ordinance establishing a Chicago Community Land Trust to ensure that affordable homes and apartments remain affordable when they’re sold by the initial owner.

“This is part of our ongoing commitment to provide high-quality affordable housing for the people of Chicago, so that our city can remain affordable for people of every age, income and background,” Daley said at a news conference at the new Kedzie Townhomes, 1752-56 N. Kedzie Avenue.

The seven-unit development will be the first to be part of the Chicago Community Land Trust, which will guarantee that the housing units remain affordable for generations to come.

City programs have created and preserved more than 125,000 units of affordable housing since 1989, generally by providing subsidies to create new housing units, sometimes in appreciating or high-priced markets.

“Yet we continue to face a serious challenge,” the Mayor said. “How do we make the subsidy last beyond the first homebuyer?

“When the family who first bought the subsidized unit moves out, they are unlikely to sell to a low-or-moderate-income family. That’s a step backward in our effort to increase the amount of affordable housing in our city. And the challenge grows larger as the pool of federal affordable housing resources decreases.”

Under the Community Land Trust, the land beneath a home is leased to the homeowner through a long-term renewable ground lease. When the homeowner decides to move, he or she can sell the home for an amount determined by the resale formula set forth in the ground lease.

If the unit is a condominium, the resale formula is set forth in a long-term deed restriction, which works like the ground lease to maintain long-term affordability of the unit.

When the Community Land Trust designs the resale formula, it will balance the need to give homeowners a fair return for their investment with the need to keep the price affordable for the next low-or-moderate-income buyer.

The Community Land Trust is modeled on the Chicago Low-Income Housing Trust Fund. It will be established as a nonprofit corporation with a Board of Directors appointed by the Mayor, with the advice and consent of the City Council. It will be administered and staffed by the Chicago Department of Housing.

Daley thanked the John D. and Catherine T. MacArthur Foundation for providing a three-year, $396,000 grant to cover start-up costs for the trust, which is expected to become self-sustaining within three years. He said his goal is to bring 300 units into the Trust’s portfolio during the first three years.

Daley’s ordinance would make Chicago the first big city in the country to create a citywide community land trust. The ordinance was prepared in consultation with an advisory group whose members represent community-based and faith-based organizations, as well the legal, financial, and philanthropic sectors of Chicago.

Kedzie Townhomes was developed by Hispanic Housing Development Corp., which converted a building originally designed as a group home into six four-bedroom town homes with full basements and one two-bedroom apartment for very-low-income families.

The units will be sold to families earning less than 60 percent of median income, which means an annual income of no more than $45,250 for a family of four.

The development was built under the City Department of Housing’s New Homes for Chicago program, which provided subsidies of up to $40,000 to make the homes affordable at a price $150,000. The Illinois Housing Development Authority also provided subsidies of up to $40,000.

The project also used donations tax credits. Additional financing was provided by LaSalle Bank, Harris Bank, Marquette Bank, Countrywide Home Loans and U.S. Bank.

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3. Some thoughts in response to the press release’s description of Chicago’s CLT.

“Land trust” is a bit of a misnomer because a CLT is not a fund or a collection of parcels but an actual non profit organization, by definition in federal law. CLT is not a designation but an entity, a process, and a set of assumptions and procedures. Whoever holds the reins to that is charged with keeping it true to the spirit of CLT and to its own by-laws.
Community Land Trust as a model around the country not only recycles public subsidies for housing, keeping the subsidy in the property beyond the tenure of a first owner—this is Chicago’s emphasis—but also decommodifies land/housing, removing or decreasing the profit motive from development using public dollars. Most everyone who has formed one has had a broader vision beyond a set of financial/property acquisition mechanisms, so that this housing and its residents will be integrated into a neighborhood along with needed services and engaged participation in decision-making with other com-munity members. Otherwise, CLT housing could easily become stigmatized as a “lesser option,” like public housing is now, instead of being held up by residents and neighbors as a shared community asset and even a revolutionary project above and beyond the housing units it provides. Chicago’s land trust—generalized beyond the jurisdiction of or application to any individual community, with a City appointed Board, and distant from neighborhood-level accountability and oversight—could become another pass-through for city land and a contractor/developer slush fund. It’s not a community land trust, in the original tradition and definition of that model, and I hope we can keep the distinction and standards clear.

The idea is that a CLT itself holds the land trust and upholds the bylaws and values on which the land trust is founded—the CLT either develops the property itself or pays others to do so, but then sells the improvements (housing) while retaining title to the land. Evidently the City’s land trust will be under the jurisdiction of the Department of Housing (does it qualify as a non profit?). The Board has been appointed by the Mayor and includes board members of the Chicago Rehab Network. Several people who have been involved tell me they don’t think the City’s land trust will preclude or present obstacles to the formation of local land trusts.

My concern, regardless, is that there will be little/no community oversight/accountability mechanism, or way to engage in the planning and implementation, and the safeguards that make CLT work over the long term through local participation and community-building will be gone. Burlington, which has a community land trust that works hand-in-hand with the city, maintains the two more separate from each other. Also, Burlington is a much smaller city—how can a single entity in Chicago be responsive to individual community process or concerns? I fear it will be about as democratic, empowering, responsive, and accountable as the cha, with a similarly inaccessible Board. A more ideal scenario might have the City acting as land conveyor and assembler, an umbrella or clearinghouse that simplifies and standardizes the real estate processes, while neighborhood/community level groups operate the land trust(s) in their areas.

A CLT is not a designation but an actual non profit with by-laws and formal structure, whose board generally consists of 1/3 residents, 1/3 wider community members, and 1/3 public official and others, and usually with a broad-based membership. The point is to have people in the community participate and to keep it small enough to be responsive to concerns, ideas and on-the-ground realities, and a forum for community planning and organizing, an entity that receives neighbors’ support because they experience its valuable contributions and are part of its process of engagement. In the best-case scenario with this city-wide idea (in my opinion), groups within smaller geographic areas would have their own boards and be able to ask the City to put land/property into the overall land trust for them.
Boston, the Dudley Street Neighborhood Initiative (a “Community-Based Organization”, or CBO) created a paired but separate entity, Dudley Neighbors, Inc. (CLT) that provides an example. Similarly, the West Humboldt Park Development Council (WHPDC) did the organizing and community work to develop a land trust organization, the First Community Land Trust of Chicago, with community membership and a board. They have got their 501c3, and land approved by Department of Housing (DoH) and Department of Planning and Development, within the whpdc’s priority area. 27th Ward Alderman Walter Burnett was a major force supporting it, along with doh Commissioner John Markowski. Alderman Burnett affirms CLTs’ power for community organizing, voice, and “taking charge.”

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