By Christina Oatfield, Policy Director //
We believe that community land trusts (CLTs) are an underrated yet critical solution to the housing crisis, not only in the Bay Area but pretty much everywhere. They need more attention, funding, and other forms of support, such as government policies and programs to nurture their development.
What is a CLT and why are these organizations so great? Here’s an excerpt from an op-ed I wrote about CLTs last year:
"Community land trusts (CLTs) are nonprofit organizations that hold onto real estate to ensure its permanent affordability and benefit to the community.
Some CLTs simply own housing and rent it to low to moderate income tenants, without all of the normal market pressures that other landlords typically experience. Unlike government housing agencies, CLTs are known for providing more autonomy and responsibilities to their tenants, so tenants have some control over the day-to-day management of the property. And CLTs do not kick out tenants if their incomes rise beyond a certain threshold, thus allowing residents to seek out higher paying jobs without fear of losing housing. Some CLTs include neighbors and other local stakeholders on their boards.
Additionally, many CLTs work closely with limited equity housing cooperatives (LEHCs), which are partially resident-owned. In an LEHC, the selling price of a share in the property is restricted by state law to ensure long-term affordability for current and future residents, while still enabling residents to own some equity. The equity owned by residents can increase in value over time but only to a limited extent. So residents have control, stability, and ownership, but without potential for windfall profits."
There is no lucrative industry driving the development of LEHCs and CLTs and policy incentives for these affordable housing models are lacking. Because LEHCs are somewhat of a hybrid between owning and renting property, they cause some confusion for tax assessors, lawmakers, affordable housing advocates, and LEHC residents alike! These are all barriers to scaling up the LEHC model.
This confusion creates several barriers to developing LEHCs. One is tax burdens that make it difficult to develop LEHCs that are affordable for low to moderate income residents. Property tax assessors are often unsure how to assess their value for tax purposes, and there is a lot of inconsistency in how property tax laws are applied to LEHCs throughout California. In California, some LEHC and CLT-owned properties are treated as if they are owned by for-profit landlords because residents have ownership shares in the property, and thus the CLT pays property taxes accordingly. However, this often results in CLTs owing taxes that reflect property values much higher than the collective price of the LEHC shares, which can never be sold at market value. This can undermine the affordability of the LEHC because property taxes are typically factored into residents’ membership fees. Certainly, LEHC share owners should contribute their fair share of tax revenue, but high tax bills make LEHC development for low to moderate income populations quite challenging. This is unfortunate at a time when we need all the support for LEHCs and permanently affordable housing we can get.
But help is on the way. Last year the newly formed California Community Land Trust Network succeeded in developing and supporting the passage of Assembly Bill 2818 (Chiu), which defined a CLT in state law for the first time, and encouraged tax assessors to consider restrictions on ownership when assessing the value of CLT and LEHC properties. However, the network is hoping to see more legislation introduced in 2018 to provide more clarity around LEHC tax status in California law. Although AB 2818 was a step in the right direction, assessors have broad leeway in determining the effect of CLT resale restrictions on the value of the property. Further changes are also needed to help enable CLTs that serve low income residents attain exemption from property taxes even during the development phase, before low income residents reside in the property, like other nonprofit housing organizations.
The network has been having weekly conference calls to iron out the exact language of bill proposals, to mobilize California land trust staff, and to determine what lawmakers to approach about introducing the next round of legislation. At the Sustainable Economies Law Center, our staff have been playing a supporting role to this network by doing some legal research, providing feedback on drafts of legislation, writing letters, and more. CLT staff have been leading the way in articulating the problems they hope to see addressed, communicating with lawmakers, and organizing their statewide network.
Working with the CA CLT Network has been very inspiring because members of this group have deep first-hand knowledge about affordable housing and the challenges associated with addressing the affordability crisis--many of them have been doing this work for decades! It’s so encouraging to see them finding their voices in Sacramento.
Want to get involved or learn more? Contact Christina Oatfield at christina[at]theselc.org.
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