The Homeownership Niche

HOMEOWNERSHIP NICHE: Image by Bonnie Acker (c) 2014

Finding themselves in a crowded organizational landscape and forced to compete with other nonprofits for public funding, private donations, sites, and constituents, the activists and practitioners who were creating the first CLTs in the 1980s and 1990s confronted two make-or-break questions:

  • What services were not already being provided by another nonprofit organization?
  • What could a community land trust do better than anybody else?

The answer to both questions, for many CLTs, was the long-term stewardship of resale-restricted, owner-occupied housing. Homeownership seemed a niche in which the CLT could find a foothold. Like any number of other nonprofits, CLTs would help to boost low-income households into homeownership, but would then do what most other nonprofits were not doing prior to 2000. Community land trusts were committed to preserving the affordability of these homes long after they were purchased – and whenever they came up for resale. CLTs were also committed to ensuring the sound maintenance of these resale-restricted homes and preventing foreclosure should newly minted homeowners get behind in their mortgage payments down the road. This trio of post-purchase responsibilities came to be known as the “three faces of stewardship.”

Covenant CLT-House Framing-1981

This was a significant narrowing of the more expansive mission that had once been envisioned for the CLT.  As the 1972 book had put it, “the community land trust is . . . chartered to hold land in stewardship for all mankind present and future.” After publicationof the 1982 book, however, with its greater emphasis on affordable housing, neighborhood revitalization, and urban populations threatened by gentrification and displacement, CLTs began (1) to prioritize a subset of “all mankind,” namely low-income families, and (2) to redefine stewardship more in terms of protecting housing than holding land.

This proved to be a successful strategy for CLTs that were searching for a sustainable niche in a dense ecology of competing nonprofits. It helped the movement to grow, at least in areas where public and private subsidies were sufficient to close the affordability gap between the price of available homes and the incomes of prospective homebuyers – and where the providers of those subsidies actually cared about the future affordability and sustainability of the housing they had helped to create.

Construction graphic by Bonnie AckerMany did not. Indeed, during the early days of the CLT movement, very few public officials at the federal, state, or municipal level gave much thought to what might happen down the road to the affordable housing they had subsidized, especially if that housing was owner-occupied. The Institute for Community Economics and local CLTs were to play a significant role in changing these Lincoln logoperceptions and policies. But they had a lot a help, not only from allies like the National Housing Institute and, later, the Lincoln Institute of Land Policy and the Ford Foundation, but from a changing political and economic climate in which stewardship was seen to matter more and more.

The mid-1980s was also a time when the price of owner-occupied Housing demonstration-1981- graphic by Bonnie Ackerhousing began a steep 20-year climb, even as household incomes stagnated for the bottom three quintiles of the population and mortgage interest rates rose to historic heights. A new phrase entered the lexicon of public policy, the “affordability gap,” referring to the widening chasm between housing prices and household incomes.

As politicians and the general public became increasingly concerned about the declining affordability of both market-priced rentals and market-rate homeownership, the confidence placed in traditional tenures was somewhat shaken.  These tenures seemed increasingly incapable of protecting and preserving affordable housing, especially in inflationary markets with overheated prices. The CLT, by contrast, was specifically designed to do what market-driven models could not.

Chuck MattheiAs Chuck Matthei declared at the National CLT Conference in Atlanta in 1987: “No program, public or private, is a true or adequate response to the housing crisis if it does not address the issue of long-term affordability. It’s time to draw the line politically. This is a practical challenge that confronts policy makers; it’s the practical challenge that confronts community activists; and, happily, it is a practical challenge that the community land trust model has an ability to meet.”

For the first time, both policymakers and community activists were listening. Permanent affordability began to look like a prudent course of action, a policy more fiscally responsible and politically defensible than previous governmental practice. As preservation rose higher on the public agenda, particularly in places where market prices were soaring, the number of CLTs began to grow.

To the surprise of many observers, the same proved true in cold markets. Both in places where the affordability gap was not growing wider and in times when housing prices were plummeting, the number and acceptance of CLTs continued to rise. The reason was not hard to see. CLTs did not disappear after selling a resale-restricted home. They stood behind the deal, backstopping homeownership opportunities they had worked so hard to create. They prevented deferred maintenance; they screened against predatory lending; they intervened in cases of mortgage default, arresting the slide toward foreclosure.

Business cycle

That was the promise anyway. CLTs had argued since the early 1980s that they did a superior job of preserving affordability when markets were hot. By 2008, CLT advocates were arguing that CLTs are also effective in preventing deferred maintenance and reducing foreclosures when markets are cold. “Counter-cyclical stewardship” was the name sometimes given to this two-sided capability exhibited by CLTs and by other forms of shared equity homeownership.

Beginning in 2003, a series of data-based evaluations began to appear that closely examined whether these claims were true.  Two issues loomed the largest in these studies: Do community land trusts preserve affordability for low-income households who are hoping to buy CLT homes in the future, while allowing households who choose to sell their CLT homes a fair rate of return and an opportunity to build wealth? Do CLTs enhance security for low-income homeowners, reducing the incidence of mortgage foreclosure, while allowing mobility for homeowners who want to leave the CLT?

CLT evaluations

These studies answered in the affirmative, for the first time providing hard data that the specialized focus on the post-purchase stewardship of owner-occupied housing, adopted by many CLTs, was delivering the goods. CLT homes were less likely to be lost over time. That proved to be true when hot markets threatened affordability. That proved to be true when cold markets threatened security of tenure. Even during the mortgage meltdown of the Great Recession, starting in 2008, CLT homeowners experienced far fewer defaults and far fewer foreclosures, compared to the dismal performance of homeowners holding conventional mortgages for market-rate homes. The model’s documented success, showing that stewardship works, helped the movement to grow.

Further Reading

  • Miriam Axel-Lute, Homeownership Today and Tomorrow: Building Assets while Preserving Affordability, (Washington DC: Cornerstone Partnership. 2010).
  • John Emmeus Davis, “More Than Money: What is Shared in Shared Equity Homeownership?” Journal of Affordable Housing & Community Development Law (Spring/Summer, 2010).
  • John Emmeus Davis, “Homes That Last: The Case for Counter-Cyclical Stewardship,” Shelterforce (Winter 2008).
  • John Emmeus Davis, Shared Equity Homeownership: The Cover of Shared Equity Homeownership-2006Changing Landscape of Resale-restricted, Owner-occupied Housing (Montclair, NJ: National Housing Institute, 2006).
  • John Emmeus Davis and Alice Stokes, Lands in Trust, Homes That Last (Burlington, VT: Champlain Housing Trust, 2010).
  • Rick Jacobus, “Best of Both Worlds,” Shelterforce (2010).
  • Kenneth Temkin, Brett Theodos, and David Price, Balancing Affordability and Opportunity: An Evaluation of Affordable Homeownership Programs with Long-term Affordability Controls (Washington, DC: The Urban Institute, 2010).
  • Emily Thaden, Outperforming the Market: Making Sense of the Low Rates of Delinquencies and Foreclosures in Community Land Trusts (Portland, OR: National CLT Network, 2010).
  • Emily Thaden, Stable Homeownership in a Turbulent Economy: Delinquencies and Foreclosures Remain Low in Community Land Trusts (Cambridge, MA: Lincoln Institute of Land Policy, 2011).

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