UNITED STATES NEWS

Land trusts offer an innovative way to help the middle class afford a home

Jun 7, 2023, 12:01 PM

Makeisha Robey grew up in a three-bedroom house and always wanted to provide the same for her children. But on a preschool teacher’s salary in Atlanta, that dream was out of reach. Her family moved from rental to rental as costs continued to rise.

That changed after Robey learned about the Atlanta Land Trust at a neighborhood association meeting. The community land trust, a nonprofit that helps people purchase affordable homes, offered an opportunity for her to buy a home at a below-market rate. She purchased her home for about $102,000 three years ago. The median price of a house in Atlanta in January 2020 was $287,500.

“I love this home,” Robey says. “I can see myself staying in this home for the duration of my lifetime. I feel this is a beautiful program that really can give so many options to people who have no other options.”

The nonprofit trust acquires land — sometimes homes are part of the property, and at other times new homes are built later. The houses are sold at below-market prices. In exchange, homebuyers must agree to restrictions that limit the price that the homes can be sold for in the future. That policy keeps the homes at low cost over the long term.

As homeownership is increasingly out of reach for many Americans, nonprofit community land trusts, funded by foundations, government funds, financial institutions, and individual donations, have become a popular way to help more people afford to buy homes. The number of nonprofit community land trusts has grown from 162 in 2006 to 302 today, according to the nonprofit Center for Community Land Trust Innovation.

Research by the Lincoln Institute of Land Policy found that land trusts and similar homeownership programs have seen an increase in support from foundations and other private sources since 1985. From 2001 to 2006, $125.1 million in private funds were given to land trusts and similar programs. Over the next five years, the amount given grew by 80%, in part because private funding sources stepped in to help more as government funding decreased.

Community land trusts typically aim to grow large enough to sustain themselves through lease fees paid by homeowners. Until they reach that size, they rely on government and private funding. Philanthropic dollars are especially helpful for land trusts as they get started, while the government can provide the larger-scale funding essential to helping the organizations expand more significantly.

The Atlanta Land Trust has received about $3.6 million from the Kendeda Fund, a local family foundation, and additional funding from others to build 20 homes. More homes are planned with support from the Joseph B. Whitehead, the Tull Charitable, and the Georgia Power foundations.

Land trusts have yet to meet their potential as a solution to the nation’s deepening housing crisis. The approach isn’t well understood by the public. Also, getting land and developing it is expensive, making it difficult for land trusts to expand.

Data has shown that land trusts are able to keep low-cost homes from getting lost to commercial development and ensure a neighborhood’s residents can afford to stay put. People who buy homes through a community land trust live there for longer periods than traditional homeowners and were less likely to face foreclosures during the Great Recession, according to the Lincoln Institute of Land Policy.

Concerns about gentrification fueled the creation of the Atlanta Land Trust in 2009 as a redevelopment effort was started. Leaders worried the project would fuel rising housing costs in nearby neighborhoods and displace residents. Now 20 or so homes have been completed and 120 townhomes are under development. Its goal is to build 300 homes by 2025. With support from local grant makers, the trust has nearly reached its $12.3 million goal to build some of the new homes. It also received other grants from the Bank of America Charitable Foundation, the Ford Foundation, and Wells Fargo.

Grants are just one way that foundations have supported land trusts. The Annie E. Casey Foundation independently purchased 53 homes in 2009 in Atlanta’s Pittsburgh neighborhood, which was hard hit by the foreclosure crisis. The foundation was able to keep real-estate speculators from buying the properties and perhaps raising the prices. It has nearly completed building or renovating 75 homes and will transfer ownership of about half of them to the Atlanta Land Trust.

Philanthropic help is vital to getting community land trusts started, says Amanda Rhein, executive director of the Atlanta Land Trust. The plan is for the trust to become self-sustaining through fees that are tied to housing units, such as monthly fees for use of the land. But that is possible only after a sufficient number of homes are created.

Tony Pickett, CEO of the Grounded Solutions Network, a community land trust association, says the cost of land acquisition and insufficient government funding remain problems around the country. While philanthropic dollars are especially helpful as nonprofit community land trusts build their portfolio of homes, Pickett says consistent government funding is key to helping significant expansion.

The Champlain Housing Trust in Vermont has largely been able to grow as a result of continued government support. It owns and manages 2,500 affordable apartments and 650 homes.

About half of the organization’s $35.7 million in revenue in 2020 came from federal, state, and local governments. Most of the rest came from fees and property rentals.

It also has received support over the years from philanthropies such as the TD Charitable Foundation but does not rely heavily on donations.

Pickett says the Low-Income Housing Tax Credit, which subsidizes buying and building low-cost rental housing, could be a model for government support.

“If we’re talking about folks who want to see us operate at a larger scale, some kind of basis in policy similar to the Low-Income Housing Tax-Credit program would be necessary in order for that to happen,” Pickett says.

Community land trusts will not appeal to everyone looking to become a homeowner. Some potential homebuyers may be put off by the fact that they cannot benefit from the full equity of their homes when they decide to sell.

“If you’re looking at your home as being an investment, then the (community land trust) model is not for you,” says Jeffrey Lowe, a professor of urban planning at Texas Southern University.

That makes it difficult for some people to see the value of land trusts, as homeownership is often viewed as a pathway to building wealth.

However, research shows many people who purchase homes through community land trusts are able to gain the financial wherewithal to buy their next home on the traditional market.

About 60% of community land trust owners who left their properties in the past decade purchased other homes, according to data collected by the Grounded Solutions Network.

For Lowe, getting people to understand the benefits land trusts can provide requires a shift in perspective. Rather than maximizing wealth creation, community land trusts offer long-term stability for homeowners and for communities, especially those undergoing gentrification.

“It’s really about security and stability and a way of having permanent, affordable housing that moves us away from the housing crisis that so many people face in this country,” he says.

Robey, the Atlanta mother, says the decision to become part of a land trust made sense to her.

“I was fine with the idea of the shared equity, of not owning the land outright because this wasn’t an investment property for me,” she says. “I wanted a house that I was going to live in.

_____

This article was provided to The Associated Press by the Chronicle of Philanthropy. Kay Dervishi is a staff writer at the Chronicle. Email: kay.dervishi@philanthropy.com. The AP and the Chronicle are solely responsible for this content. They receive support from the Lilly Endowment for coverage of philanthropy and nonprofits. For all of AP’s philanthropy coverage, visit https://apnews.com/hub/philanthropy.

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Land trusts offer an innovative way to help the middle class afford a home