Community Land Trusts explained

With the growing pressure to find affordable accommodation and our excitement at the Canberra Land rent proposal, we thought it high time we showed you a growing trend through the northern hemisphere – Community Land Trusts

by Prosper Tasmania’s Leo Foley

(Based on material from the Institute of Community Economics, Massachusetts)

A Community Land Trust (CLT) is a democratically controlled nonprofit organization that owns real estate in order to provide benefits to its local community – and in particular to make land and housing available to residents who cannot otherwise afford them.

CLT’s recognise that land is a finite resource and will naturally appreciate in time due to social progress and population growth. This natural appreciation in land values is recycled back into the Community Land Trust to ensure that future home owners can afford to enter the CLT.

CLTs influence housing costs by “locking in” these natural subsidies provided by community development so that they benefit one homeowner after another and do not need to be repeated each time a home is sold.

CLTs have been established in different kinds of communities, but they share some important features, including a distinctive approach to the ownership of real estate, and a distinctive approach to community-based governance.

Defining Principles of a Community Land Trust

  • A CLT is an organisation committed to economic justice and to the economic empowerment of low-income people and communities.
  • An essential purpose of a CLT is to provide access to land, housing, and economic opportunities for low-income (or low and moderate-income) people who are otherwise denied access to these resources.
  • As a steward of land and other resources, a CLT has responsibility to see that these resources are used in ways that are environmentally and ecologically sound, as well as economically just.
  • As an organization promoting economic justice, a CLT should seek to educate its community regarding the causes of economic injustice and the ways in which the CLT model addresses these causes.

A Distinctive Approach to Ownership

Acquiring Land for the Community

Sometimes CLTs acquire vacant land and arrange for the development of housing or other structures on it. At other times, CLTs acquire land and buildings together. In both cases, CLTs treat land and buildings differently. The land is held permanently by the land trust so that it will always benefit the community. Buildings can be owned by those who use them.

Homeownership on Community Land

CLTs help people to own their own homes on Trust land. When a CLT sells homes, it leases the underlying land to the homeowners through a long-term (usually 99-year) renewable lease, which gives the residents and their descendants the right to use the land for as long as they wish to live there.

Still Affordable for the Next Homeowners

When CLT homeowners decide to move out of their homes, they can sell them. However, the land lease requires that the home be sold either back to the CLT or to another lower income household, and for an affordable price. The new owner pays for the house, the improvements, and agrees to maintain land leasehold payments to the CLT.

Homeowners Rights

Homeowners have the same rights as other owners with respect to privacy, security of tenure, exclusive use of their property, the right to bequeath, etc.

A Distinctive Approach to Governance

Membership organization

CLTs are usually organized as “membership corporations,” with boards of directors elected by the members. Usually there are two groups of voting members. One group is made up of all the people who live in CLT homes (or use CLT land in other ways). The other group is made up of other people in the community who are interested in what the CLT is doing – including neighbors of CLT residents, and people who may want to have CLT homes in the future.

Board structure

Usually the CLT board includes three kinds of directors – those representing resident members, those representing members who are not CLT residents, and those representing the broader community interest. In this way, control of the organization is balanced to protect both the residents and the community as a whole.

Election of Trustees

Various models are available, but a common model is for members to elect one-third of the Trustees; non-members to elect one-third; and one-third are appointed/elected from the wider community.

What is a Trust/Trustee?

The concept of Trust as used by the Community Land Trust, is rather different than that understood by lawyers in their legal definition of “trust.” The members of the Community Land Trust elect trustees. The trustees have a threefold obligation:

  1. to protect the use rights of users as defined by a lease agreement
  2. to distribute the economic rent collected on the land in an equitable manner in the community
  3. to protect the natural resource itself, which belongs to all the people, from ecological abuse and human degradation

These trust duties are spelled out in the by-laws of the Community Land Trust and in the lease agreements between the Trust and the users.

Selling Price

Community Land Trusts are part of the 21st century, and are intended to allow people the mobility and lifestyle choices of a modern society. Owners are able to sell to a willing buyer at any time.

Because Community Land Trusts are established to ensure houses remain affordable, the selling price is critical. CLTs often establish a formula to determine resale values. Various models exist, each with

  • Index-based formula:- this model uses the CPI to calculate the resale price, calculated on the house-price only.
  • Appraisal-based:- Valuers establish the increased value over the ownership period, and a pre-determined percentage (eg 30%) of the increase is retained by the seller
  • Itemised formula:- the value of improvements made by the owner are added to the original price, less depreciation.

Ensuring Affordability

Lease

Community Land Trusts assist low-income families to purchase a home through lease-purchase arrangements, which allow potential purchasers to move into the home as a tenant, while completing the financial arrangements to obtain a mortgage.

Transitional housing

Potential buyers are provided with accommodation while they develop their work and economic base. When they achieve economic independence, they are given priority for placement for CLT housing.

Resource Centres

CLTs work with potential buyers to guide them through the home-buying process, developing seminars, publications, workshops, and individual counseling.

Read this report to see how Burlington’s CLT has provided affordable housing for 22 years in a financially independent and sustainable manner. All manner of creative industry has been spawned by the economic freedom this model allows.

Summary

Community Land Trusts

  • Provide affordable housing for lower income residents in the community
  • Promote resident ownership and control of housing
  • Keep housing affordable for future residents
  • Capture the value of public investment for long-term community benefit
  • Gain control over local land use and reduce absentee ownership
  • Build a strong base for community action

Community Land Trusts are a practical application of Georgist principles, applied to a 21st Century need.

Useful Links

Burlington resources
Of People and Land

If you have any questions, please don’t hesitate in contacting us on how we can provide both legal and economic understanding to your group.

12 Comments

  1. Realty Forum18-05-2009

    Thanks for sharing such great information.

  2. John Waters03-06-2009

    We found this article very interesting and wish to ask if you know of any Community Land Trusts in Australia.

    Sincerely

    John Waters

  3. Karl Fitzgerald
    Karl Fitzgerald05-06-2009

    Hi John,

    there are some close variants, but none of the style we are proposing. Some have re-sale caps on them which is ok but you still have to borrow the lump sum amount for the land from the banks. Interest payments are then too high. My report is coming out soon to explain this in more detail.

    You could join this email list to find out more on the latest CLT developments in Oz – http://groups.google.com.au/group/australian-clt-network/subscribe?hl=en-GB&pli=1
    cheers
    Karl

  4. Lisa Walton26-07-2010

    Hi Karl,

    Your article explains the CLT model very clearly. I have been researching the US and UK CLT models extensively, trying to understand the legal structure.

    Can you provide me with any information on the applicable legal structure under the Australian Tax Office? Is it an Incorporated Association with charitable status?

    Best regards,
    Lisa Walton
    Melbourne, VIC

  5. Karl Fitzgerald
    Karl Fitzgerald27-07-2010

    Hi Lisa,

    thanks to Leo Foley, he wrote this piece.

    the legal structure does vary. One of our trustees is a solicitor who happens to live at Tuntable Falls, Nimbin (Australia’s oldest intentional community). He believes that a company structure is the best legal structure. Members owns shares that give certain voting rights. Independent directors have voting rights too, at varying degrees. The cheapest and fairest system.

    Mt Alexander CLT near Castlemaine has more practical experience than we do. Speak to Grace!

    If you would like to join our casual email list on an inner Melbourne CLT, we are looking to get one up and running in 24 months time when land should be cheaper.

  6. Dom Gilligan05-02-2011

    Several years ago, I drew up a concept plan for a place that would be home & workplace for professional creatives needing 20-30 sq m. of workspace.

    I have not pursued it since I was able to use of one of the places that inspired the concept .

    The need for such places is still large though.

    If ever I pursued the concept plan again then CLT is one path to be considered for legal/financial model.

    Dom

  7. Moira Corby15-11-2011

    The Warratah Community Land Trust, located NSW, is a group formed to raise awareness, implement change in legislation and to purchase land for the purpose of conversion to CLT.
    There are several co-housing developments that I am aware of located in Victoria,eg: Commonground, Seymour is established for 25+ years. This was efore legislation in Vic changed.

  8. Melanie Weaver21-02-2016

    Hi Karl
    Myself and some friends want to set up a community land trust in our area (Maleny QLD)….I have an idea that we need to form a mission statement to present the idea to landholders.
    My idea is that older people on farms who are finding it harder to maintain the land will place their land in the trust…Participants will move to the land and grow food, dairy etc and maintain the land for the farmer…The farmer will be assured they have a home and however many acres they are still able to farm
    The farmer will benifit by being provided with food and have input into how they want the land maintained to preserve the integrity of the farm.
    The main hurdle is that we are in an area where real estate is expensive and also rental prices…
    Got any ideas how we can proceed ?
    Melanie

  9. Karl Fitzgerald
    Karl Fitzgerald22-02-2016

    Hi Melanie,
    that sounds like a good sharing of resources. Very timely. I wonder if the people at Transition Towns have any ideas? Theo Kitchener, featured in this article, operates a similar concept in urban areas. What you really need is a farmer who you build a relationship with who will then let you build some housing there. You’d need re-zoning approval et al and an economic model to share the rising value of this emergent community, but that’s where I may have an answer or 2 for you. There are many interesting things happening in this space, including Wiki House. But its the land you need most. Keep in touch!

  10. Alec Thornton25-02-2016

    Hi Karl,

    did you receive a reply to your post re land trust to preserve agricultural land? I am interested in this system, as a way to prevent development on arable urban land. Is this the same as purchasing development rights?

  11. Greg Barlow21-05-2016

    Melanie, sounds great idea.
    Will you get a farmer who is willing to divest himself of his property by transferring into your CLT?
    30+ years ago, some of the most exclusive housing in Brisbane was found in what were called Private Courts where the land was owned by a unit trust.
    I’m keen to do the same thing north of Brissie.
    Join me for further chats.
    gregbarlow46 at gmail.com

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