1.
The City-CLT Partnership
Municipal Support for Community Land Trusts

2.
Agenda
CLTs in Context
The CLT-City Partnership
Building the CLT Portfolio
Sustaining CLT Operations
Taxing CLT Property
Regulating CLT Activities
Planning for the Worst

3.
Introductions

4.
CLTVariations

5.
CLT “classic”
Ownership
Dual Ownership
Leased Land
Organization
Nonprofit Corp.
Tripartite Governance
Place Based Membership
Resident Control
Operation
Perpetual Affordability

6.
Dual Ownership
“Classic”
“Variations”

7.
Nonprofit corporation
“Classic”
Independent 501(c)3 tax-exempt corporation
Variations:
Program of existing housing nonprofit

8.
Tripartite Governance
“Classic”
Variations:

9.
Place Based Membership
“Classic”
Defined geographic area
Any adult resident can join
Members elect part of board
Variations
No general membership
Regional service area

10.
Resident Control
“Classic”
1/3 of board elected by homeowners/residents
Variations
Resident directors appointed by board

11.
Perpetual Affordability
“Classic”
CLT retains affordable units as long as possible
Variations:
All CLTs strive for perpetual affordability

12.
Perpetual Responsibility
“Classic”
CLT serves as steward of the property
Ensures maintenance
Monitors for occupancy, etc
Variations
None

13.
Development
“Classic”
Active ongoing development program
Variety of housing types
Some commercial
Variations
Stewardship only

14.
City-CLT trends

15.
City as Instigator
Cities are playing a bigger role launching new CLTs
Highland Park, Chicago, Irvine, Sarasota
How do we ensure participation of broader
community stakeholders?
Is affordable homeownership the only goal?

16.
City as Governor
Cities are playing a greater role in governance
Burlington: four seats appointed by CLT
Chapel Hill: City appoints one representative
Irvine: 1/3 of board appointed by city council
Chicago: City appoints all board members
Flagstaff: No independent board
What is the right level of accountability?

17.
CLT as Steward
More CLTs are focusing on stewardship rather than
development
Portland, Cleveland, Boston, Sonoma, Irvine
Can the CLT generate sufficient revenue to sustain
itself without development fees?
Can the CLT achieve the necessary economies of
scale quickly enough if they don’t control
development?

18.
City-CLT Partnerships

19.
Rational for municipal support
Preserving affordability
Protecting public investment
Backstopping the security of homeowners
Ensuring owners occupancy
Ensuring condition of homes
Reducing the burdens of government

20.
CLT Stewardship
Overseeing production
Pricing units
Fair Marketing
Buyer Education
Documenting buyer eligibility
Executing legal documents
Monitoring compliance

21.
Stewardship Functions

22.
Stewardship Functions

23.
Who holds key responsibilities?
Potential Administrators

24.
No Designated Steward
Minimal Administration

25.
Santa Barbara County
Local Government as Steward

26.
City of Salinas
Developers Hire Private Contractor

27.
Lafayette, CO
City Hires Private Contractor

28.
City of Palo Alto
City Contracts with Nonprofit

29.
Tri-Valley Housing
Local Governments Form Nonprofit

30.
Chapel Hill
Community Land Trust as Steward

31.
Building the Portfolio

32.
Menu of Project Support
Municipally-owed land and buildings
Loans
Grants
Inclusionary Housing
Regulatory Concessions

33.
Municipal Land and BUildings
Examples:
Boston donated 30 acres for CLT development
Cleveland, OH donated tax foreclosed properties
Burlington,VT donated a decommissioned fire station

34.
LOANS AND GRANTS
Examples:
Orange County, NC provides grants to support CLT
project development
Minneapolis provides interest free loans deferred for
30-years which are then forgiven if CLT in compliance

35.
Inclusionary Housing
Examples:
Chapel Hill, NC “strongly encourages” developers to
work with CLT to meet affordable housing
requirements
Petaluma, CA provides incentives to encourage
developers to donate land to CLT
See also: Burlington,VT, Boulder, CO, Chicago, IL

36.
Regulatory Concessions
Examples:
Burlington,VT offers fee waivers for permanently
affordable housing units
Bellingham,WA offers 50% density bonus for
affordable ownership units on leased land
Ashland, OR waived requirement for Homeowner’s
Association for CLT project

37.
Structuring Subsidy
Good Money vs. Bad Money

38.
Defining “Affordability”Defining “Affordability”
Housing that people can afford!Housing that people can afford!
Housing cost as a % of incomeHousing cost as a % of income
What percentage? (25%, 30%, 33%)What percentage? (25%, 30%, 33%)
Which costs?Which costs?
Principal, interest, taxes, insurancePrincipal, interest, taxes, insurance
Homeowner Assn. FeesHomeowner Assn. Fees
Ground Lease FeeGround Lease Fee

39.
Two ApproachesTwo Approaches
Two Different Approaches:Two Different Approaches:
Reduce the price by $100,000Reduce the price by $100,000
Provide a $100,000 silent second loanProvide a $100,000 silent second loan
Housing Cost = $300,000Housing Cost = $300,000
People can afford = $200,000People can afford = $200,000
Affordability Gap = $100,000Affordability Gap = $100,000

40.
Types of Subsidy StructureTypes of Subsidy Structure
Bad MoneyBad Money
Sort of Bad MoneySort of Bad Money
Good MoneyGood Money
GREAT MoneyGREAT Money

41.
Types of Subsidy StructureTypes of Subsidy Structure
$ to homebuyer over time$ to homebuyer over time
$ recaptured by the source$ recaptured by the source
$ assumed by future homebuyers$ assumed by future homebuyers
$ permanent asset of CLT$ permanent asset of CLT
BADBAD
GREAT!GREAT!

42.
Bad Money
Price to CLT Buyer 300,000
First Mortgage 200,000
City Second Loan 100,000
Affordable to 70% of AMI
Resale Price 370,000
2nd buyer mortgage 370,000
Second Loan $
Available 0
Affordable to 95% of AMI
Appreciation to Seller 170,000
Homebuyer grant or forgivable loan

43.
Better Money
Price to CLT Buyer 300,000
First Mortgage 200,000
City Second Loan 100,000
Affordable to 70% of AMI
Resale Price 370,000
2nd buyer mortgage 370,000
Second Loan $
Available ?????
Affordable to 95% of AMI
Appreciation to Seller 70,000
Homebuyer loan recaptured by public agency

44.
Good Money
Price to CLT Buyer 300,000
First Mortgage 200,000
City Second Loan 100,000
Affordable to 70% of AMI
Resale Price 370,000
2nd buyer mortgage 270,000
Second Loan 100,000
Affordable to 70% of AMI
Appreciation to Seller 70,000
Homebuyer loan assumable by all future buyers

45.
Great Money
Market Value 300,000
City Subsidy 100,000
Price to CLT Buyer 200,000
Affordable to 70% of AMI
Resale Price 270,000
2nd buyer mortgage 270,000
Second Loan 0
Affordable to 70% of AMI
Appreciation to Seller 70,000
Grant of permanent subsidy to CLT

46.
Comparison
Forgivable to
Buyer
Recaptured
Loan
Assumable
Loan Grant to CLT
Market Value 300,000 300,000 300,000 300,000
Subsidy to CLT 0 0 0 100,000
Price to CLT Buyer 300,000 300,000 300,000 200,000
First Mortgage 200,000 200,000 200,000 200,000
City Second Loan 100,000 100,000 100,000 0
Affordable to 70% of AMI 70% of AMI 70% of AMI 70% of AMI
Resale Price 370,000 370,000 370,000 270,000
2nd buyer mortgage 370,000 370,000 270,000 270,000
Second Loan $ Available 0 0? 100,000 0
Affordable to 95% of AMI 95% of AMI 70% of AMI 70% of AMI
Appreciation to Seller 170,000 70,000 70,000 70,000

47.
Programatic Compatability

48.
Competing Programs
Example: Portland, OR
City operated Shared Appreciation Loan program and
funded CLT
Both programs served low-income buyers
Loans up to $71,000, CLT subsidy around $70,000
CLT units price restricted, Loans required repayment
of 25% of appreciation

49.
Modifying Programs
Repayment/recapture
requirements
Forgiveness
CLT as borrower
CLT performance requirements

50.
Sustaining CLT Operations

51.
CLT Operating Support
Government grants
HOME CHDO
CDBG
HousingTrust Funds
Development Revenue
Development Fees
Marketing Fees
Operating Revenues

52.
Government Grants
Examples:
Albuquerque, NM: $200,000 annual CDBG grant
King County,WA: $30,000 in HOME CHDO operating
funds
Highland Park, IL: $100,000 per year from housing
trust fund

53.
Burlington,VT
City has supported Champlain Housing Trust since
1984
2006/07
$125,000 from CDBG for predevelopment
$25,000 HOME for staffing HOME funded projects
$46,500 from trust fund for homeownership
center

54.
Taxing CLT Property

55.
Taxation
How should the taxible value of a CLT home be
established?
Market value of comparable homes
Restricted Price
Other

56.
Taxation
How should tax assessments increase over time
when the rate of home price appreciation is limited?
With the market
Along with the limited price
Other

57.
Taxation
How should the CLT’s land be taxed?
Comparable sales prices
Cash flow
Other

58.
Fair Taxation
Homes
Taxed based on the restricted resale value
Increased over time along with formula price
Land
Taxed based on the present value of lease
payments

59.
Regulating CLT Activities

60.
Municipal Oversight
Project development
Marketing
Selecting buyers
Pricing CLT homes
Maintaining affordability
Monitoring homeowner compliance with lease
Promoting maintenance of homes

61.
Development
Are there development issues that are unique to
CLTs?

62.
Marketing
How does the City know
that all eligible housholds
have a fair chance to buy
CLT units?
Can the CLT sell to its
staff?

63.
Marketing
Berkeley, requires an Affirmative Fair Marketing Plan
for each project before start of marketing.
Boulder and Albuquerque approve a general
marketing plan for all projects.

64.
Buyer Selection
Who is eligible to buy a unit?
Do certain eligible buyers have priority over others?
Does the selection process have to be transparent?

65.
Buyer Selection
Highland Park, IL
115% of AMI or less
Asset Limit
Mortgage Approval (approved lender)
Immigration Status
Size of household appropriate for unit
Priorities

66.
Initial Pricing
How do we define “Affordable?”
Target income group (80% of AMI)
What percent of household income (33%)
Which costs (mortgage, taxes, insurance, etc.)
Who fills in all the assumptions and calculates the
actual price?

67.
Initial Pricing
Most cities set general rules and rely on CLT to
determine specific price
Bellingham,WA reviews sales price prior to closing
Madison,WI provides annual price table for all
projects

68.
Resale Pricing
Should the City help set the CLT resale formula?
What happens if the formula generates a price that
turns out to be too high?
Should the city monitor each resale to ensure
affordability?

69.
Resale Pricing
Most cities have not been involved in setting CLT
resale formlas
Sarasota, FL and Chicago, IL are examples where the
City actively debated the options with the CLT
Chapel Hill, NC reviews and approves each price for
each resale
Burlington,VT relies on CLT but reserves the right to
audit later

70.
Homeowner Compliance
Can the CLT promise to ensure that units are owner
occupied?
Can the CLT promise that units will be well
maintained?
Can the CLT promise that owners will carry
insurance and pay property taxes?
Can the CLT prevent foreclosures?

71.
Homeowner Compliance
Right to require proof of occupancy
Right to Require Proof of Insurance and Payment of
Taxes
Right to Inspect and bill for maintenance
Foreclosure Rights
Right to Notice
Right to Cure

72.
Performance Standards
Example: Marketing
CLT must produce a marketing and selection plan
that describes how the CLT will ensure that all
eligible households have equal opportunity to
purchase the homes. City must approve the plan
before any marketing begins.

73.
Planning for the Worst

74.
CLT Defaults
Failure to act to protect occupancy or condition of
homes
Failure to act to preserve affordability
Sale of CLT land
Dissolution of CLT

75.
City-CLT agreements
Grant Agreements
Loan Agreements, Deeds of Trust
Development Agreements
Regulatory Agreements
Covenants, Deed Restrictions
Purchase Options

76.
City-CLT Agreements
Regardless of the legal form, should include:
Performance Standards
Events of Default
Opportunity to Cure
Remedies
Non-disturbance of the Ground Lease

77.
Exercise
What rights should
the city have in the
event of a CLT
default?

78.
LoANSVS GRANTS
What does the City really
want?
Repayment of subsidy
Preservation of
affordability

79.
City-CLT Loans
Bellingham,WA makes loans to support Kulshan CLT
projects
The loans allow the City to demand repayment if
KCLT fails to meet certain conditions
.... But how would KCLT ever repay?

80.
City Foreclosure
Some states allow lender to take posession of the
property
Others require auction of property with lender
receiving the proceeds

81.
City-CLT Loans
Cleveland, OH loans funds to Cuyahoga CLT
City can demand repayment of subsidy in the event of
default
Foreclosure would result in City owning land
Loan Agreement states that foreclosure by city will
not alter homeowner/lender rights under lease

82.
Loan with Option
Santa Monica, CA developed a CLT loan
Right to require “specific performance”
City has option to purchase land for the amount of
the initial subsidy in the event of CLT default
City can appoint another nonprofit to buy land
All homeowner rights under lease protected

83.
Impact on homeowners
Loans secured with a lien on the land complicate
financing for homeowners
Fannie Mae allows superior leins on CLT land only for
public agencies
And only if ground lease survives foreclosure
But they don’t provide an approved mechanism for
nondisturbance of the lease

84.
Grant with Covenants
Orange County, NC provides grants to OCHLT
They also record a restrictive covenant on the land
Requires CLT to preserve affordability
Names county as ‘third party beneficiary’ of lease

85.
Loans vs Grants
Repayment is usually not an option
Repayment is usually not enough - cost to
replace affordable unit has grown
City needs to be able to require
performance
Or take possession of the land from the CLT
Become the CLT or find another CLT

86.
Loans vs Grants
Loans and grants with covenants
provide similar levels of protection
to the City
But loans make homebuyer
financing more difficult
And loans look bad on CLT balance
sheet

87.
Supporting CLT Startups

88.
CLT Startup
Prior to Incorporation:
Planning Committee
Education and Organizing
Market Assessment
Resource Assessment
Legal Research
Articles and Bylaws
After Incorporation:
Form Board

89.
Municipal Support
Building commitment to permanent affordability
Introducing the model
Participating in planning
Staffing start up
Contracting for assistance
Providing start up grants
Re-tooling funding programs

90.
Evaluation

91.
Evaluation
How could we improve the workshop?
How could we improve the program manual?