38communitylandtrust.pdf

The

Community

Land

Trust:

Preserving

Affordable

Housing

Stock

in

Orange

County,

North

Carolina

Sonia Garrison, Christine Westfall, Alison

Weiner,

and

Erin Crossfield

Orange

County,NorthCarolina,locatedin thestate's

booming

ResearchTriangleregion, is

increasingly

becoming

anarea inwhichonlythe

affluentcan affordto live,threateningthe

economic, racialandcultural diversitythatis

needed fora healthysociety. In responseto the

county'sdwindlingsupplyofaffordablehousing,

areaactivists and governmentstogether

established the

Community

Land

Trustin

Orange

County

(CLTOC),

incorporated in 1999.

Two

years later,

CLTOC

is

now

beginningto

realizeitsgoalofcreatinghousingthatwill remainpermanentlyaffordableforgenerations.

The

Housing

Crisis in

Orange County

The

economy

oftheTriangle region is

thriving,primarilyduetothepresenceofseveral

universities as well as a large

number

of

researchand technologyfirms.

From

1990to

1997.Orange

County

experienced population

growth of14.3 percent, with projectionsforthe

nextdecade increasingto 16.4 percent.1

As

a

resultofthe

booming

populationandprosperity

ofthe region.

Orange

County isfaced with a

As members

ofthe

Orange Community

Housing

Corporation Staff,

Sonia

Garrison sei~ves as the

Community

Land

Trust in

Orange County

(CLTOC)

Membership

Coordinator, Christine Westfallserves as the

CLTOC

Project Manager,

and

Alison Weiner

serves as the _{Chair of}the

CLTOC

Board

of

Directors. Erin Crossfield is

a

masters

degree candidate in City

and

Regional

Planning at the University _{of North Carolina}

at Chapel Hill.

severelackofaffordable housing. Incoming

residentshaveturnedthehousingmarketinto a

seller'smarket, andthe cost of housinghasrisen

dramatically.

Many

new

high-income

homes

and

housingdevelopmentsarecroppinguparoundthe

county,and undeveloped landnearthe

town

centersisrapidlydisappearing.

Home

closingpricesreflecttheunaffordable natureof

Orange

County'shomes. For the eleven

months

ending

November

2000.the

averageselling price forall

homes

soldinOrange

County

was

$235,404.

The

averageprice for

new homes

was

$272,354.:

Families

would

need

toearnapproximately $85,000to$100,000per

yearto afford sales pricesin thatrange.

Unfortunately, incomesin

Orange

County

are

notrising asfastas inflatinghousingprices. In

1998, familiesoffourthatearned the

median

income in thecounty($54,700)wereonlyableto

afford 24percent ofthedetached homes, and

familiesearning60 percentofthemedian income

($32,820forafamilyoffour)couldaffordonly

sixpercentofthe detachedhomes.3

Inadditionto

the costsofhomeownership.rentalcosts inthe

areaare also out ofreach for

many

working

individualsandfamilies. Rentalunitsareinshort

supply, inpartbecause

more

than 15.000

UniversityofNorthCarolinastudentslive

off-campus.4

Traditional Solutions

As

early asthe 1980s,non-profitsandcitizen

activistsraisedthe issueofthediminishing supply

ofdecentandaffordablehousingwiththe

town

and county governments in

Orange

County

(the

fourgovernments areOrange County,the

Town

ofChapel Hill,the

Town

of Carrboro,andthe

subsidized,affordable

homes

tobesold to

low-and moderate-incomebuyers.

These

homes

weretypicallybuiltor

renovatedbynon-profitdevelopersin the area.

Area governmentsoftensubsidizedthese

homes

in theform ofa no-interest"second mortgage"

tothe buyer.

The

second mortgages usually

rangedfrom$10.000to$25,000.which allowed

the

homes

tobe sold tobuyers

who

earned 80

percentorlessofthe county's median income.

The

initial

owner

ofthe

home

was

permitted

to sell itto

whomever

heorshe wished.

However, ifthe

homeowner

sold the

home

to

someone

who

earned

more

than 80 percentof themedian income,the buyer

was

requiredto

reimbursethesecondmortgage subsidytothe government. Otherwise, heorshe

was

required

topassthesubsidyon("roll itover")tothenext

buyer. Ineither case, sellerswere allowed to

realizeall ofthegains fromanyincreasesin

property value sincethey boughtthe home. This

system ensured that

when

the

home

resold,the

public subsidy

would

eitherbe recapturedbythe

governmentorpassedon tothenext low-income

buyer. However,thissystem didnot givesellers

anyfinancial incentivetosell toalow-income

buyer; sellers

would

make

the

same amount

of

money

fromthe salewhetherornot they sold the

home

toanincome-qualifiedbuyer.

Inaddition,rapid increasesinareahousing

values soon

made

these

homes

unaffordable to

income-qualified buyersin spiteofthesecond mortgage system. Inthe latter partofthe 1990s,

homes

in Orange

County

appreciated atrates in

excessoffive percent a year, while personal

income roseonly three percent or less. Hence,

iftheinitial

owner

ofan affordable

home

resold

hisorher

home

inas littleas five years, it

would

often be unaffordableto a low- or

moderate-income buyereven ifthe buyerreceived the

"rolledover"secondmortgagesubsidy.

Many

publiclysubsidized

homes

didinfact re-sell

unaffordablyontheopen marketin as littleas fiveyears afterthey were built. These

homes

werethen permanently lostasaffordablehousing

stock,andthecostof building

new homes

to

replace them

was

fargreaterthan the

amount

of

second mortgage subsidywhich

was

recaptured

bvthe government.

The

Community

Land

Trust

Model:

An

Alternative Solution

A

landtrust isa familiarconcepttoboth plannersand lay-peoplebecause ofitsuse in

landconservation. Conservation landtrusts

preservelandfor

community

healthand

enjoyment: they protect fragileecosystems and

wilderness, as well asopen spaceand

recreational areas.

Community

land trustsplay a

similar roleascustodiansoflandthatbelongsto

the

community

and arecommittedtogood

stewardshipofthat land.

The

difference lies in

theuseofthe land;

community

landtrustsusually

haveaprimary missionofholdingthelandto

create and preserve permanently affordable

housingforthose with low and moderate

incomes. Accordingtothe Housing and

Community Development

Act of1992,a

community

landtrust

(CLT)

isan organization

that:

acquiresparcelsofland, heldin

perpetuity,primarilyforconveyance

underlong-termgroundleases;

transfers ownershipof any structural

improvements locatedonsuch leased

parcels to the lessees; and

retains apreemptive option topurchase

any such structural improvementata

pricedetermined byaformulathat is

designed toensure thatthe improvement

remains affordableto low-and

moderate-incomefamiliesinperpetuity?

Community

landtrustssellaffordable

homes

tolow-and moderate-incomebuyers while maintainingtheownership oftheland underneath

thosehomes.

When

a

homeowner

buysa

CLT

home, heorshe gainstitletotheimprovements andsimultaneouslyenters intoaninety-nineyear

ground leaseforthe land. Attheend ofthe leaseterm, the

homeowner

(or"Lessee")

may

renew the lease foranother ninety-nine years.

This guaranteesthat the

homeowner

can live

securelyon the land,just as ifheorshe

owned

it. Inaddition, the

homeowner

may

bequeaththe

home

to a relative.

The

lease fee isusually kept

CLTs

must pay annuallyon the land aswellas

some

administrativefees.

The

groundleaseincludesprovisionsthat

specify therightsandresponsibilitiesofthe

homeowner

aswell asthe

CLT.

The

most

significantprovisionisthe resaleformula.

The

resale formula ensuresthat

when

and ifthe

homeowner

decidestosell thehome, heorshe

w

illsell itata priceaffordableforbuyers inthe

same

income bracket. Inadditiontothe

down

payment

andanyequitythe

homeowner

has accrued, he or sherealizes

some

percentage of

thetotal appreciationofthehome, depending on

how

many

years heor shelived there before

selling it. (Each

CLT

hasa different resale

formula, determined bytheboardofdirectors,

reflectingtheeconomicconditionsofthearea.

The

Community Land

Trust inOrange County

gives

homeowners

approximately25 percentof

theirappreciation.) Thisformulaallowsthe

homeowner

torealize

some

appreciation from

hisorher investmentinthe

home,

but isnot

enough to

remove

the house fromthe affordable

housingstockfor low-andmoderate-income

residents. Inthis way.

CLTs

tryto balancethe

interestsofthe

community

with those of

individualhomeowners.

When

and ifthe

CLT

homeowner

decidesto

sell hisorherhome, itmustbesoldtoan

income-qualifiedbuyer,definedas

someone

who

earns lessthan the percentage ofthe median income that is specified for that

home

at a price determined by the resaleformula. This ensures

thatthe

home

remainspermanently affordable

and iskept in thehands oflow- and

moderate-incomebuyers. Inaddition,

CLT

homes

mustbe

occupied bythe theirowners and cannot be rented out.

Otherthanthe resaleand rental restrictions.

CLT

homeowners

enjoy all ofthe benefitsof

traditional homeownership.

They

can

make

improvementstotheir

homes

and can keepthe groundsin thestylethat suits their tastesand

lifestyles.

Owners

can use the

home

in any

way

that isconsistentwithzoningcodes, inthe

same

manner

as the

owner

ofany other

home

can.

They

cantake advantageofthe tax benefits

offeredtoall

homeowners. Most

importantly,

because the around leasehas a ninety-nine vear

term,they canrest assuredthatthey willnot be displacedbyalandlordandcan enjoythe

emotionalbenefitsof

knowing

that their

home

will

betheirs for aslongasthey

want

it.

All

CLT

homeowners

are voting

members

of

theirCLT.

As

members,theowners are involved

in

making

keydecisionsaboutthe actionsofthe

landtrust,includingvotingfortheboardof

directors.

Members

alsohave theopportunityto

beelected tothe

CLT

board,which implements

thedecisions oftheTrustand overseesthe

actionsof

CLT

employees.

As

membership

organizationswith

members drawn

fromland

trustleaseholdersandthewidercommunity.

CLTs

can providegreater local control overland andhousingownershipthan is

commonly

experiencedbylow-and moderate-income

community

members.

Inaddition,

many

CLT

homeowners

enjoythe

support that this typeoftrust canoffer. Because

the relationship betweenthe

homeowner

andthe

CLT

isbydefinition along-termone.

many

CLTs

offertheir

members

on-going

sen

icessuch as

home

repairand budgetingclasses. These

efforts serveboth partiesby helpingtoensure

thatthe individualsaswellas theneighborhoods

maintainahighlevelofstability.

The

History of the

Community

Land

Trust in

Orange County

In

November

1997. the

Towns

of Chapel Hill

and Carrboro formed atask force toestablish a

community

landtrustasonetool foreffectively

creating long-term affordable housing. These

two

towns had experienced the greatest

affordablehousingcrisis inthe county, andboth

were

fastrunning outof developable landthat

could beused tobuild

new

housing. Inthe

neighboring City of

Durham

(in

Durham

County),

the thenten-year-old

Durham Community

Land

Trusthad successfullycreated permanently

affordable,community-controlled housing and

promoted neighborhoodrevitalization ina

low-wealth

Durham

neighborhood. Inspired bythe

Durham Community

Land

Trust,the task force

researched

community

landtrust programs

nationwide(there areabout 120 such programs).

Orange

County

jointlyvotedtohelpfunda

new

community

landtrustin

Orange

County.

The

aspectofthe

community

landtrust

model thatmostinterestedthesegovernments

was

the creationof permanentlyaffordable

housing.

Government

staffandofficials

determinedthata

community

landtrustcould

make

themostefficientuseofthe limitedpublic

fundingandtheremainingland available for

affordable housing. Insteadofre-creatingeach

affordablehousingunit lost tothemarketplace

with

new

publicfundsandland, the

community

landtrustmodel

would

allow subsidy

money

to

beinvested once,afterwhich it

would

remain

withthatunittokeepitaffordablepermanently

Mission

and

Structure ofthe

Community

Land

Trust in

Orange County

(CLTOC)

The

primary missionof

CLTOC

istodevelop permanently affordablehousingforlow-and

moderate-incomepeople andtopromote

neighborhood improvementthroughtheequitable

andresponsiblestewardshipofland andother

community

resources. Secondary purposes are

toprotectthe naturalenvironment, promotethe

ecologicallysounduseoflandandnatural

resources, andsupportthe long-term healthand

safetyofthecommunity. Inaddition tolow-and

moderate-income housing development,

CLTOC

can alsofacilitate thecreation ofspecialneeds housing,group

homes

andrentalhousing. Additional goalsof

CLTOC

are to

combat

neighborhooddeteriorationcaused by absentee

ownership andlessenneighborhoodtensionsthat

arecaused by gentrificationand the

displacementoflow-incomepeople.

CLTOC

was

designedto be

community

and

residentcontrolled. Puttingpartialcontrolofthe

organization in thehandsoftheresidentsensures

thatthe

CLTOC

appropriately serves itstarget

populations.

CLTOC

providesservices topeople

who

liveor

work

inOrange

County

and

who

earn lessthan 100 percentofthe area median

income.

Most

of

CLTOC"s

projects serve those

earning lessthan 80 percentofthearea median

income.

Community

control isattainedthrough

theuseofa voting

membership

aswell as a

boardofdirectorsthatis

made

up of

community

members, government representativesand

CLT

homeowners.

The membership

includesallthose

who own

or lease a housethrough the

CLTOC

program and

community

members

who

are

supportiveofthe

community

landtrustconcept.

In orderto ensure cooperation ratherthan competition with otherlocalaffordablehousing developers,oneofthe positionsontheboardis

reserved fora representative of another

non-profitorganizationthatprovideshousingor other

services forlow-income people.

Current

Projects for

CLTOC

CLTOC

isconstantly in theprocessof

identifying potential futurebuildingsites.

Once

a

siteisfounditmustbeevaluated; topography,

possibilitiesforaccesstoinfrastructure,zoning, environmental status,and landvalueare

examined. Ifthe land isappropriateforhousing

development andsubsidy

money

isavailable.

CLTOC

can

make

an offer on the land (or the

land can be donated).

Once

thesite is acquired.

CLTOC

mustobtain liabilityinsuranceon it.pay

taxes andinsurance, andtake careof any

necessary maintenance on the property.

CLTOC

works

with developerstobuildor

rehabilitatehousingontheland.

Whilethehousingisbeingdeveloped.

CLTOC

conductsoutreach to the

community-at-largeand topotential

homeowners.

It assists

future

homeowners

with arrangingthe

appropriatepublicandprivatefinancingto

purchase the homes.

CLTOCs

work

is not

finished

when

the

homes

have been purchased; it

isresponsibleforpayingtaxesand insuranceon

the land,collecting thegroundlease fees,

workingwiththe

homeowners

tomaintaintheir

homes,andeducatingthepublicon

community

land trusts.

When

the

owner

wishestosell,

CLTOC

will helpthesellerarrange fora

new

buyerand market thehome. Currently.

CLTOC

isdevelopingfourteentown

homes

onland

donated bythe

Town

of Chapel Hill. Ten ofthe

homes

arealreadyspoken for. andcompletion of

theprojectinthe springof2001 iseagerly

anticipated.

A

Sticky Issue

The

CLTOC

programdoes an effectivejob

the sectorofthe populationwith low-and moderate-incomes. Partofthis lowered costis

achieved through theremoval ofthe priceofthe

land fromthe priceofthe home. However, even

thissubsidy

would

beinsufficienttoguarantee

permanentaffordabilitywithoutrestrictingthe

resale priceofthe home.

Thisisan important considerationfor

potential

CLTOC

home

buyers. While

CLTOC

homes

dohelppeoplebuildequityand area

much

betterfinancialinvestment thanrenting,

theyare not investment propertiesthat canoffer

large returns. In the past century,

many

American

familieshavebuiltwealthbyrealizing

largegainsthroughthe appreciationoftheir

homes. Traditionalaffordable

homeownership

programs have investedlargeamountsof

money

tohelpafewfamilies benefitfrom buyingtheir

home

affordably. thensellingitata

much

higher

priceonthe open market.

By

restrictingthe

priceatwhich landtrust

homes

can bere-sold,

the

community

landtrustmodelbalancesthe

homeowner's

opportunitytobuildwealth with

thecommunity's needforpermanently

affordablehousing.

Isthe benefittoonefamilyofrealizingfull

equityonthe saleofits

home

more

valuable than

thebenefittothe

community

ofguaranteeing

affordablehousingforcountlessfamilies? This

isa particularlyimportant considerationto

minorities,

who

havehistoricallybeen denied

opportunitiestocreatewealth,includingthe

opportunity forlandownership. Itisreasonable

that

some

may

questionthe

CLT

model wherein

wealth accumulationisrestricted.

Despitetheseconcerns,the

Community

Land

Trust in

Orange

County

shows

much

promise as a

way

to both increaseand preserve

Orange

County's stockofaffordable

housing.©

Notes

ABODE:

CoalitionforHousingDiversity in

Orange

County. 1999.

"Who

Can

Affordto

Livein

Orange

County:

An

Assessment of

Orange

County'sHousingStockand Affordability.

TriangleMultipleListingServiceInc..ending

12/01/2000.

Knuth, Sharon L. 1999. Implementation of

a Countywide

Land

Trust in

Orange

County,

NC.

Master's thesis. Universityof NorthCarolinaatChapel Hill.

Instituteof

Community

Economics

internet

web

page wAvvv.iceclt.org.

November

24,

2000.

Housing and

Community

Development

Act

of1992.

amending

Section233 ofthe

Cranston-GonzalesNational Affordable

Housing Act (42 U.S.C. 12773). This

definitionappearedat

H

11966 ofthe