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City-Community Land Trust Partnerships


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Slides for a day long workshop on partnerships between local governments and Community Land Trusts.

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City-Community Land Trust Partnerships

  1. 1. The City-CLT Partnership Municipal Support for Community Land Trusts
  2. 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. 3. Introductions
  4. 4. CLTVariations
  5. 5. CLT “classic” Ownership Dual Ownership Leased Land Organization Nonprofit Corp. Tripartite Governance Place Based Membership Resident Control Operation Perpetual Affordability
  6. 6. Dual Ownership “Classic” “Variations”
  7. 7. Nonprofit corporation “Classic” Independent 501(c)3 tax-exempt corporation Variations: Program of existing housing nonprofit
  8. 8. Tripartite Governance “Classic” Variations:
  9. 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. 10. Resident Control “Classic” 1/3 of board elected by homeowners/residents Variations Resident directors appointed by board
  11. 11. Perpetual Affordability “Classic” CLT retains affordable units as long as possible Variations: All CLTs strive for perpetual affordability
  12. 12. Perpetual Responsibility “Classic” CLT serves as steward of the property Ensures maintenance Monitors for occupancy, etc Variations None
  13. 13. Development “Classic” Active ongoing development program Variety of housing types Some commercial Variations Stewardship only
  14. 14. City-CLT trends
  15. 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. 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. 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. 18. City-CLT Partnerships
  19. 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. 20. CLT Stewardship Overseeing production Pricing units Fair Marketing Buyer Education Documenting buyer eligibility Executing legal documents Monitoring compliance
  21. 21. Stewardship Functions
  22. 22. Stewardship Functions
  23. 23. Who holds key responsibilities? Potential Administrators
  24. 24. No Designated Steward Minimal Administration
  25. 25. Santa Barbara County Local Government as Steward
  26. 26. City of Salinas Developers Hire Private Contractor
  27. 27. Lafayette, CO City Hires Private Contractor
  28. 28. City of Palo Alto City Contracts with Nonprofit
  29. 29. Tri-Valley Housing Local Governments Form Nonprofit
  30. 30. Chapel Hill Community Land Trust as Steward
  31. 31. Building the Portfolio
  32. 32. Menu of Project Support Municipally-owed land and buildings Loans Grants Inclusionary Housing Regulatory Concessions
  33. 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. 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. 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. 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. 37. Structuring Subsidy Good Money vs. Bad Money
  38. 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. 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. 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. 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. 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. 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. 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. 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. 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. 47. Programatic Compatability
  48. 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. 49. Modifying Programs Repayment/recapture requirements Forgiveness CLT as borrower CLT performance requirements
  50. 50. Sustaining CLT Operations
  51. 51. CLT Operating Support Government grants HOME CHDO CDBG HousingTrust Funds Development Revenue Development Fees Marketing Fees Operating Revenues
  52. 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. 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. 54. Taxing CLT Property
  55. 55. Taxation How should the taxible value of a CLT home be established? Market value of comparable homes Restricted Price Other
  56. 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. 57. Taxation How should the CLT’s land be taxed? Comparable sales prices Cash flow Other
  58. 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. 59. Regulating CLT Activities
  60. 60. Municipal Oversight Project development Marketing Selecting buyers Pricing CLT homes Maintaining affordability Monitoring homeowner compliance with lease Promoting maintenance of homes
  61. 61. Development Are there development issues that are unique to CLTs?
  62. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 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. 73. Planning for the Worst
  74. 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. 75. City-CLT agreements Grant Agreements Loan Agreements, Deeds of Trust Development Agreements Regulatory Agreements Covenants, Deed Restrictions Purchase Options
  76. 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. 77. Exercise What rights should the city have in the event of a CLT default?
  78. 78. LoANSVS GRANTS What does the City really want? Repayment of subsidy Preservation of affordability
  79. 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. 80. City Foreclosure Some states allow lender to take posession of the property Others require auction of property with lender receiving the proceeds
  81. 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. 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. 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. 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. 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. 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. 87. Supporting CLT Startups
  88. 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. 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. 90. Evaluation
  91. 91. Evaluation How could we improve the workshop? How could we improve the program manual?