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Can communities be better landlords?

Can communities be better landlords?

Austin, Texas is beginning to look a lot like California. The city has become the preferred destination for thousands of West Coast emigrants who are making booming Sun Belt cities their new home. That’s created one of the most expensive housing markets in the US. The typical price for a single-family home in Austin has gone from $261,000 to $796,000 in the last decade.

The rising prices have scattered long-time residents, especially in predominately Black and Latino neighborhoods, outside Austin’s city center in search of affordable housing as rents and property taxes have risen. But displaced Austinites may now have a chance to return.

Families that can prove a historic tie to the city will have priority access to apply to buy affordable homes through an ownership program with the Austin Community Land Trust. The program, launched in April, will offer 28 houses owned by the trust, sold at roughly 66% below market prices.

Efforts like Austin’s are offering a “third way” between market-rate and subsidized government housing. While still a tiny share of the overall housing market, community-owned housing backed by private and public money is an increasingly popular way to ensure homes stay affordable over time, no matter who owns them or what’s happening in the local housing market.

What is community-owned housing?

Community land trusts work by separating the cost of a home from the cost of the land, and setting a limit on how much homes can appreciate. A trust, typically governed by residents themselves, along with other community members and public representatives, raises initial money from a combination of local governments, philanthropy organizations, individuals, and bank loans to buy one or more properties. The trust then maintains ownership of the land, while the homeowner pays for the cost of the structure, plus a nominal ground lease fee for use of the land. When the home is sold,  the land trust sets limits on the sale price so that it can be affordable for the next buyer.

This ensures homes are priced far below market rates. For example, a community land trust in Chapel Hill, North Carolina lists a condominium for sale at $142,000. The median sale price for a similar unit in the area is $256,000.

Community land trusts and other forms of community-owned housing protect against the risk of sudden hikes in rent and property taxes. When used across entire apartment buildings or neighborhood blocks, this stability means that people will be able to stay in one place for years or decades at a time, put down roots, and build community.

This permanent affordability subsidy distinguishes community land trusts from other housing models, explains Leo Goldberg, co-director of the California Community Land Trust Network, an umbrella organization for local community land trusts throughout the state. “The more traditional way that subsidized homeownership is done is that the government gives money to one low-income family that allows them to buy a home below market rate, but when they sell, they sell at market rate and that subsidy disappears,” says Goldberg. “With a land trust, the original subsidy that went into building or acquiring the land in the first place keeps working for successive homebuyers. We think of it as just going directly into the land.”

The types of communities served

In the two years since the coronavirus pandemic, community-owned housing models have taken off in popularity, alongside mutual aid groups, tenants’ rights organizations, and other groups based on principles of economic solidarity. The California Community Land Trust Network has gone from fewer than five member organizations 10 years ago to 26 today, according to Goldberg. Many have only acquired their first properties within the past year.

Community housing models typically target individuals and families that make less than the median household income for their area. These models are also well-suited to support demographics with particular needs, including racial minorities, elderly people, and young families. In the US, Black Americans have used communally-held land as a way to become property owners despite racist bank lending practices excluding them from traditional mortgages. The first community land trust in the US was created by a group of southern Black farmers in the 1970s. In the UK, single mothers and retirement communities have benefited from housing associations and co-operatives.

There are now at least 277 community land trusts in the US, and more than 122,000 around the world, according to data tracked by the Center for Community Land Trust Innovation. State and local governments are starting to build funding for community land trusts into their budgets for housing. New York’s city council allotted $1.5 million to CLTs in its 2021 budget, and the groups are now asking them to double that number for 2022. Groups are also advocating for cities to donate publicly-owned land that’s no longer in use directly to land trusts. In Austin, the city has started to own and manage its own land trusts.

Can community landlords disrupt the housing market?

This capacity for community building can only scale up so far. One of the strengths of community housing models—its ability to meet specific needs on a small scale—can also prevent these groups from growing. Because these groups are typically created from groups of neighbors working to solve the immediate needs of a subdivision or apartment building, it can quickly become difficult for a single group to manage real estate across an entire district or city.

For now, community-owned housing groups remain bit players in the world’s $258 trillion residential housing market. Financing is a challenge: many community land trusts and co-ops struggle to gather the upfront funding needed to buy a home or apartment block, and often have to cobble together funding from a number of public and private sources. In the US at least, community-owned housing also rubs against expectations and policies that treat homes as appreciating assets as much as a place to live. But as these models gain popularity among community organizations and local governments, proponents expect community ownership to become part of the patchwork of solutions to create more affordable housing.

“Ultimately, [community land trusts]will be part of the solution,” says Goldberg. “They will be working alongside public housing, other forms of social housing, and other pro-affordable housing laws to deal with the affordability crisis.”

Despite their small scale, community owners can provide specific, sustainable solutions to displacement for some. Austin’s land trust is starting small, within just 28 homes, and will be selling homes to eligible applicants via a lottery. While it won’t come close to serving all of the thousands who have been displaced, it will be a start.

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