Community Land Trusts or Common Land Ownership

Samuel JABLON, 2014

Controlling the cost of land is a major driver for making housing more affordable for poor households. In the United States and England, there is a cost control scheme based on collective land ownership: community land trusts. This system allows an organisation - within a neighbourhood, a city or a region – to become a permanent landowner and manage land occupancy according to its goals: preserving natural areas, building housing or farmland, etc.

Modern urban land trusts started developing in the 1970s in the United States: they were inspired by very old models of collective ownership and joint management (Native American traditions in Northern America, British garden cities, the cooperative movement, South American urban social movements…). Today, there are over 200 in different American cities. They are all based on the idea of “community” ownership of land but they have different objectives, not necessarily related to housing. Their purposes range from revitalising a neighbourhood to establishing “community” control over public financing or community supported agriculture in rural areas. Though initially land trusts were developed through grassroots and activist organising, today local authorities account for many of the new creations.

A Democratic Organisation which Guarantees “Permanent” Collective Ownership

Land trusts purchase land mostly thanks to public funding and occasionally thanks to donations or foundation grants. Once the land is purchased, it remains within the trust’s “portfolio” “permanently”: regardless of its use, it can never be resold at a speculative price. The organisation’s Board of Directors gathers different stakeholders. Reselling the land is very difficult and almost impossible since this Board is composed of:

• one third of representatives of the inhabitants who live in the housing on the land trust,

• one third of exterior members - community members - who support the organisation, are awaiting housing on the land trust or are just interested in the project (so these are mostly people who will make sure the housing remains affordable).

• one third of institutional representatives: public financiers, banks, other non-governmental organisations.

This Board is designed to safeguard the land trust’s social mandate, as is the rule that land can only be sold with the approval of 2/3 of the Board of Directors and of the majority of the members (the people who live on the land are members, as well as anyone else who is interested in the project).

Striking a Balance between Safe Proceedings and Price Control by Breaking Up Ownership

One of the CLTs innovations is its combination of collective land ownership and individual housing ownership, two aspects which could appear to be contradictory because of their interests and purpose. By dividing the value of the property, as well as the rights, assets and risks it entails, the CLT satisfies American households’ marked aspiration to home ownership. At the same time, it ensures that in the long term, when these homes are resold, they will remain accessible and not lead to speculative operations.

In CLT home ownership programmes, a household purchases whichever home it wants on the private market - within a price limit - and receives a grant which is equivalent to the value of the land. The CLT becomes the owner of the land. The buyer becomes the owner of the home and the tenant on the land, by means of a long-term lease. If the home is an apartment in a building, there is an equivalent legal arrangement: when the subsidy is granted it entails “shared ownership” of the home with the land trust.

This mechanism presents many benefits:

• It is affordable for the people who have the hardest time accessing home ownership, since it is granted to people with predefined income levels (80% of the median income in the area)

• The household chooses the home it wants to purchase.

• The land trust’s « portfolio” increases without it having to prospect.

• The property’s future and value (namely if it is to be resold) is jointly controlled by the buyer and the land trust.

• Homeowners are given advice: checking the bank loan (for unfair terms), training on housing costs, insurance, maintenance…

• It provides guidance and safety for the homeowner during the whole loan repayment period, to prevent defaults and losing the home. At the first payment default, the land trust is contacted and can step in to assess the situation and act as an intermediary (by rescheduling the loan, helping to reduce expenses, providing budget management pointers). If the buyer cannot keep the property, he/she can be rehoused in another home managed by the land trust (rental housing, social housing, cooperative…).

Controlling Prices

When the owner wants to resell the housing, he/she must sell it to the trust. Each CLT has its own resale formula, depending on the context - rural or urban - and the market - tight or slow. The idea is to reach a balance between the land trust’s interest - economic affordability - and the owner’s interest - recovering part of the added-value). For instance, the owner can sell the home for a premium of up to 25% of the market added-value, in addition to pricing in the enhancements made to the home over the years.

Other CLTs have formulas which are not based on market prices but rather on income trend indexes, on a maximum annual increase in the housing’s value or on the valuation of the duration of occupancy… The formula always reflects an attempt to strike a balance that is “fair” for the owner while making sure the home remains affordable for other low-income households.

After the buyback, the land trust sells the home to another low-income family. Every time it is resold, the property’s price only increases by 25% of the market price rises, so the property actually becomes more and more affordable.

A Long-Term Social Mandate which Combines Collective and Individual Interests

Land trusts are an extremely flexible tool for habitat policy. They can be used for all different kinds of access to housing: once the CLT is the landowner, whatever is on the land can be bought, leased, or built under different legal arrangements or by different persons (companies, households, cooperatives…). On CLT lands, there are families who are individual homeowners, cooperatives, joint ownerships, hostels and shelters, parks and gardens, office buildings…

Given the current real estate market situation, public investment is required to bridge the gap between housing prices and the poorest households’ ability to pay. The land trust’s strength is to “seize” this initial public investment and give it and the land a long term social function.

In the traditional home ownership scheme - subsidies, tax exemptions -, public investment targets just one household and can even have a negative impact, as it drives up market prices or encourages the production of a supply which does not necessarily match demand. Public subsidies even make the market more expensive and thus less open to poorer households.

On the contrary, with an initial investment the Community land trust ensures a long term social function: for the market - by controlling prices -, and for people - social access to housing, guidance for homeowners. It can be viewed as a tool to help keep prices down and to prevent real estate upsurges. It is easy to implement since property is directly resold to the land trust. This means that it provides a tighter oversight than anti-speculation provisions, which can prove difficult to use after several years have gone by, such as the French provisions. The recent economic crisis also demonstrated how CLTs can be a safeguard, as many home bankruptcies struck poorer households in the US. They therefore act as counter-cyclical buffers and as a shield against crises, from policymaking to poor households’ options.

The CLT pragmatic model is both progressive and conservative, namely regarding public funds. It could thus garner support across the political spectrum. It is a creative combination of individual interest: private property, property accumulation and transmission; and collective interest: control over property prices and guarantees of accessibility.

Paradoxically, land trusts only make sense within a broader, more speculative market, where separating the value of land and property constitutes a comparative advantage. This mechanism is interesting because it is a way to act “within the market”, to take a step back and establish a relative advantage for poorer households.

Despite these numerous advantages, CLTs are not that commonplace and only own small estates. This is mainly because of public financing limitations on these programmes (in the US, the Federal government has not invested in social housing since the 1980s; today most financing comes from states and cities). They also spark serious ideological oppositions: going beyond a traditional approach to property proves challenging and there are two major objections to this mechanism. The right wing considers that partial ownership is “anti-American” and the left wing believes that this mechanism does not provide sufficient help to poor people, since they only collect part of the profit on the resale (“exploiting the poor”…).

There is another ideological barrier: it has to do with establishing models which are not based on a simple dichotomy between public/private; market/non-market; leasing/ownership, etc. Land trusts are a complex mechanism which stands half way between the free market and totally state-controlled ownership. It is part of an intellectual tradition which posits the idea that land belongs to everyone and can be handled by the community, whereas individual ownership should only apply to constructions and to what is produced on the land.

Despite these remaining obstacles, the subprime mortgage crisis has shed a new light on these mechanisms and has renewed their legitimacy in the United States. This may lead to new experiments in Europe and in France.

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