"The CLT Model: A Tool for Permanently Affordable
Housing and Wealth Generation"
The following article was originally published in
the January/February 2005 Newsletter of Poverty &
Race Research Action Council and used here with their
kind permission (www.prrac.org).
by Gus Newport
The gap between wealth and poverty is growing in the
U.S., because policies to stabilize the lives of the
poor and people of color do not focus on long-term solutions. Our
economy is unstable, in an inflationary spiral that continues
to raise the cost of basic goods, including food, gasoline,
medicine and health care. Most depressing is the
lack of affordable housing for the poor, working and
unemployed, and seniors with limited retirement income. The
severity of the shortage of affordable housing has multiplied
in recent years. Barbara Ehrenreich demonstrated the
stark reality of the situation facing low-income wage
earners in her book Nickel and Dimed in America.
She found from personal experience that in today’s
America, two incomes are required in order to live “indoors,” let
alone reside in safe, adequate housing. Insufficient
affordable housing is being developed to fulfill the
need, and most that is developed remains affordable only
during the terms of the initial financing, due to relatively
short-term subsidies, after which time it reverts to
market rates. As a result, over the longer term, public
affordable housing resources actually aid gentrification,
eventually displacing the very people they were meant
to assist.
The CLT Model
Thirty-eight years ago, Bob Swann and Ralph Borsodi
developed the Community Land Trust model, arising from
their concerns related to poverty and land tenure. The
model, drawn from the Indian gramdan land reform
movement, was conceived as a democratically-controlled
institution that would hold land for the common good
of any community, while making it available to individuals
within the community through long-term leases. Over
the years, the model has evolved and been applied primarily
to the development of permanently affordable housing
within intentional communities and more broadly in urban,
suburban and rural communities across the country. Terms
within the ground lease balance community interests with
those of the individual, providing an opportunity for
lower-income people to earn equity, while limiting appreciation
to ensure affordability for future lower-income homebuyers.
According to the classic CLT model, the trust is a geographically
defined, membership-based, nonprofit organization created
to hold land for public purposes — usually for
the creation of permanently affordable housing. Like
a conservation land trust, a CLT acquires land with the
intention of holding it in perpetuity. A central feature
of the model is a dual ownership structure whereby the
CLT owns the land, but individuals, public or private
organizations own the buildings located on the land.
Through long-term, renewable ground leases, each party’s
ownership interest in the land is protected. The CLT
retains the ability to repurchase any improvement on
the land through a resale formula written into the lease,
limiting resale value to maintain affordability. The
lease also enables the CLT to impose further restrictions
which maintain housing quality and neighborhood stability — such
as requiring that homes be owner-occupied, preventing
absentee landlordism. The ground lease is equally protective
of the individual homebuyer’s interests, providing
long-term security, while at the same time providing
an opportunity to build equity and benefit from a portion
(typically 25%) of the appreciation on the home, should
property values increase.
By removing the cost of the land from the home price
and bringing further cost reductions through government-provided
affordable housing subsidies, the CLT brings homeownership
within the reach of lower-income families (CLTs generally
seek to serve families earning less than 80% of area
median income). The interests of the individual
homebuyer are balanced with the desire to maintain a
permanent stock of affordable housing for future families
in need. The homebuyer gains the opportunity to earn
equity through monthly mortgage payments, rather than
building the equity of an absentee landlord through rental
payments. However, rather than gaining a one-time windfall
should the home value appreciate substantially, the seller
foregoes this full capital gain in order to retain affordability
for the next CLT homebuyer. The CLTs long-term interest
in the land and property assures that this balance of
interests is maintained and community wealth is retained.
The value of public subsidies used to develop the affordable
housing are permanently tied to the housing, thus recycling
subsidy dollars from owner to owner, assuring long-term
affordability and community benefit.
The governance structure of the CLT is an important
aspect of this stewardship. The classic CLT structure
has a community-based membership open to all adult residents
within its defined geographic region — often a
neighborhood, city or county. The CLT is governed by
an elected, tri-partite board that shares governance
equally among leaseholders residing on CLT-owned land;
nearby residents who do not live on CLT-owned land; and
public officials, local funders, non-profit professionals
and others representing the public interest who bring
to the board essential skills and abilities needed for
effective nonprofit administration.
The Dudley Street Experience
I first became aware of the Community Land Trust model
during my tenure as the Director of Boston’s Dudley
Street Neighborhood Initiative (DSNI). This initiative
grew out of the community’s concerns about a new
Redevelopment Area plan which was being brought forth
supposedly to raise the quality of life for the residents,
through improvements such as housing, open space, recreation
and cultural institutions. When this planning process
became public, the community came out in large numbers
to voice its opinion as to what the planning process
ought to be, and why a method had to be imposed that
would assure the community’s input in all pertinent
planning decisions and protect current residents’ ability
to enjoy the improvements into the future.
The majority of residents in the Dudley area were low-income,
and many of them remembered previous redevelopment processes
in the West End and South End of Boston, which had resulted
in their displacement due to gentrification. The plans’ promise
of improvements to these neighborhoods was not realized
by these residents, who were gentrified out due to rising
housing costs and limited affordable rental housing.
The Dudley area residents did not want to see this result
repeated yet again, insisting on a process whereby they
could participate in designing the community plan and
improvements. At the heart of their concerns was the
desire to promote homeownership opportunities for the
lower-income residents of the neighborhood.
Through a series of policy firsts, DSNI became the first
community nonprofit organization in the country to be
awarded eminent domain powers over vacant land in a 1.3
square mile area of the city of Boston. Through
a seldom-used statute on the books in Massachusetts known
as “special study status,” the community
plan became the zoning plan for the area. Having received
eminent domain rights over 30 acres of land, DSNI sought
a mechanism to assure permanent affordability and discovered
the Community Land Trust model. We invited the Institute
for Community Economics, the national intermediary for
CLTs, to assist us with the process.
What we learned was that the CLT did much more than
provide a mechanism to hold the land. It provided a means
to stabilize lives and the community through homeownership.
As is the case for the majority of the nation’s
lower-income inner-city residents, the families of the
Dudley Street neighborhood had little or no control over
their own housing — the most fundamental aspect
of household security. With no opportunity to own their
own homes, they were forced to live in substandard absentee-owned
rental housing, subject to displacement when and if rents
increased beyond their means. In addition to the stability
of homeownership, Dudley area residents sought to take
control of the neighborhood outside their windows — to
deal with abandoned property, to stop illegal dumping,
to stop providing havens for drug dealers and other criminal
activity.
Dudley Street has become a renowned example of the power
of truly participatory community-building for the long
term, which addresses the fundamental policies and practices
that have caused poverty and decline in cities across
the country. Through the community-controlled land trust,
the residents were able to create a vibrant multicultural
community, developing hundreds of affordable homes and
providing an opportunity for residents to personally
benefit from the community revitalization they themselves
planned. The land trust, with its ground lease and resale
formula, has been proven to empower people by providing
an opportunity for homeownership and equity generation
that is normally out of reach for lower-income, largely
minority residents.
The Racial Wealth Gap
In his highly acclaimed book, The Hidden Cost of
Being African American: How Wealth Perpetuates Inequality,
Brandeis Univ. sociologist Thomas Shapiro presents
an extensive analysis of the wealth gap from a perspective
of race and discrimination in America. His central
argument is that family wealth/inherited assets are
the key source of the wealth gap, as the black-white
earnings gap due to income discrimination has narrowed
considerably since the 1960s. As the primary
asset for most families, housing is the most salient
source of the wealth gap. Lacking the “transformative” asset
of family wealth, African American families must rely
on their income and personal savings to qualify for
a home mortgage. In contrast to white families with
a similar income level, who often benefit from their
parents’ wealth through inheritance or other
financial assistance when the time comes to buy their
first homes, African American families do not have
access to this “leg up.” They pay higher
interest rates and incur additional costs for mortgage
insurance, and as a result build less equity over time.
With each successive generation this gap increases.
As schools and social services are tied to residence
location, the wealth gap is effectively leading to ever
greater racial segregation. The current way we fund and
provide access to services produces, in Shapiro’s
words, a “privatized notion of citizenship in which
communities, families and individuals try to capture
or purchase resources and services for their own benefit
rather than invest in an infrastructure that would help
everyone.”
By creating shared stewardship of land and a mechanism
for the wealth generated through housing appreciation
to be shared from one lower-income family to another,
the CLT offers an antidote for these interrelated problems.
The land trust can, in effect, substitute for inherited
wealth, and thus has the potential to address the racial
wealth gap in this country. Examples like Dudley Street
demonstrate the ability of the CLT to change the dynamics,
to provide opportunity for all residents, to prevent
displacement, gentrification and the associated racial
segregation.
Faced with an administration that seems focused, more
than any in recent memory, on increasing the wealth of
the top few at the expense of the many, we have little
choice but to find our own solutions and implement them.
In my new role as Executive Director of the Institute
for Community Economics, I hope to raise awareness about
the potential for community land trusts to level the
playing field, creating opportunities for people of color.
Dudley Street is the quintessential melting pot, a laboratory
where the CLT model has been tested and proven to provide
opportunity across race lines.
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Gus Newport is a former two-term (1979-86) Mayor
of Berkeley, CA and the former Director of Boston's
Dudley Street Neighborhood Initiative. Most recently,
he served as the Executive Director of the Institute
for Community Economics in Springfield, MA. He has
also served on the faculty of University of California
- Santa Cruz, University of Massachusetts - Boston,
Yale and Portland State University.
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