Why Do We Need A Community Land Trust?

 

A Community Land Trust (CLT) would be a non-profit corporation that would purchase and hold title to the land and lease the land to the Co-Op Village (cooperative) for 99 years with renewals. In the process of leasing, it would place restrictions on the land use, prohibit resale of the land or homes built on it, as well as maintain an entity whose only purpose is to monitor those restrictions. If this was done by the cooperative itself, the co-op bylaws could easily be changed by the residents to remove those restrictions.

The CLT would have a separate board of directors making it more difficult to change the bylaws and lift the land restrictions. Initially, the six members of the CLT board of directors could be made up of residents. However, some government loans or grants, as well as some private grants, might require that the board be made of 1/3 residents, 1/3 low income persons not residents and 1/3 interested community leaders that are non-residents, or a similar restriction of the board. In the event that this should happen the CLT is already in place and need only to change its bylaws to restrict the board member qualifications. This would then give comfort and control to a donating organization that the funds would be used as planned.

What is proposed for the Co-op Village is to have a CLT in place to own the land and to have a Non-Profit Cooperative lease the land from the CLT, own the buildings, and give member residents long-term property leases.

The CLT would focus only on the land restrictions. Therefore, outsiders would not be involved in board decisions affecting day to day village life if they were placed on the Cooperative board because of lack of a CLT. By using the CLT, non-resident board members are restricted only to the initial land restriction issues, nothing else.

The Institute for Community Economics, an advocate group for community land trusts, defines the problem this way:

Cooperative Ownership:

With the cooperative ownership model, the title to the property is placed in a corporation rather than being divided among the individual residents. The resi­dents purchase shares of stock in the corporation and participate in governing the corporation as owners. As a shareholder, the resident receives a long-term "proprietary" lease to her housing unit. In limited-equity cooperatives, the bylaws require that each resident agree to a restriction on the price that she can receive when she sells her share of stock. Perpetual resale restrictions on shares of stock do not involve the problems of legal enforceability that accom­pany restrictions on the resale of conventional resident-owned or condominium homes. The rules against restraints and perpetuities apply primarily to interests in real property. A resident's ownership of stock in a cooperative typically is considered to be an interest in personal rather than real property. It is also true that state statutes enabling the creation of co-op corporations in some states explicitly permit co-op equity-limitation provisions.

However, while the long-term enforceability of the restrictions may not be a problem, the long-term existence of the restrictions themselves may be jeopar­dized. As noted above, the restrictions are implemented through the cooper­ative's bylaws, which can be revised by the resident-shareholders, who may have a strong interest in relaxing or removing resale restrictions. Cooperative ownership is therefore a less than perfect means of preserving long-term affordability, unless the continued existence of resale restrictions can be ensured by means not inherent in the model itself.

One way of ensuring the continued existence of a cooperative's resale restric­tions is to arrange for ownership of the land by a community land trust. CLT’s themselves are sometimes the developer/sponsors of limited-equity coopera­tives on their land. In these cases, the CLT ground lease requires that specified resale restrictions remain in place perpetually. The CLT monitors the ground lease agreement with the cooperative and can enforce its terms when necessary.

Community Land Trust Ownership:

If the goal of a housing strategy is to develop a pool of permanently affordable housing, it is clear that the three ownership models discussed above are insufficient by themselves. The community land trust model provides a much stronger means of ensuring continued affordability and appropriate occupancy and use. It is much less likely than the conventional resident-ownership and condominium models to be legally unenforceable, and it is much less subject to the removal of restrictions by its residents. These strengths are a result of care­fully balanced approaches to both the governance of the organization and the ownership of land and housing.

The CLT's governance structure recognizes and protects the interests of current occupants of CLT homes, who have status as "lessee-members" of the organi­zation and who are normally represented by one third of the board of directors. But the governance structure also recognizes and protects the interests of other residents of the community, who may hope to obtain affordable CL T homes in the future, or may live next door to CLT properties, or may be otherwise affected by the CLT's program. This balanced approach is designed to remove the possibility of completely self-interested governance by anyone group.

The CLT's approach to ownership, using the ground lease device described above, is designed to allocate property rights and value between two owners ­between the CLT and the lessee. The CLT retains title to the land and leases it to homeowners through a ground lease that requires owner-occupancy, pro­hibits certain inappropriate uses, and requires that, if the owners wish to sell, the home can be sold only to the CLT or to another "income-qualified" house­hold for a price that is limited by a formula designed to preserve affordability.”

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