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 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
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.
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:
- to protect the use rights of users as defined by a lease agreement
- to distribute the economic rent collected on the land in an equitable manner in the community
- 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.
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.
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.
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.
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.
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.
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.