The City-CLT PartnershipThe City-CLT PartnershipMunicipal Support for Community Land

TrustsMunicipal Support for Community Land

Trusts

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

Supporting CLT Startups

Closing/Evaluation

Introductions

CLT Variations

CLT “classic”

OwnershipDual OwnershipLeased Land

OrganizationNonprofit Corp.Tripartite GovernancePlace Based MembershipResident Control

OperationPerpetual AffordabilityPerpetual ResponsibilityExpansionist AcquisitionFlexible Development

Dual Ownership

“Classic”

“Variations”

Nonprofit corporation

“Classic”

Independent 501(c)3 tax-exempt corporation

Variations:

Program of existing housing nonprofit

Subsidiary of existing nonprofit

Subsidiary of local government agency

Tripartite Governance

“Classic”

Variations:

Appointed Seats

No Membership

Organizational members

Existing

Place Based Membership

“Classic”

Defined geographic area

Any adult resident can join

Members elect part of board

Variations

No general membership

Regional service area

Resident Control

“Classic”

1/3 of board elected by homeowners/residents

Variations

Resident directors appointed by board

Residents on ‘advisory board’

Perpetual Affordability

“Classic”

CLT retains affordable units as long as possible

Variations:

All CLTs strive for perpetual affordability

Some variation in definition of ‘affordability’

Perpetual Responsibility

“Classic”

CLT serves as steward of the property

Ensures maintenance

Monitors for occupancy, etc

Variations

None

Development

“Classic”

Active ongoing development program

Variety of housing types

Some commercial

Variations

Stewardship only

Single project CLTs

Focused products

Foreclosure

Commercial

City-CLT trends

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?

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?

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?

City-CLT Partnerships

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

CLT Stewardship

Overseeing production

Pricing units

Fair Marketing

Buyer Education

Documenting buyer eligibility

Executing legal documents

Monitoring compliance

Managing resales

Enforcing restrictions

Preventing foreclosures

Stewardship Functions

Stewardship Functions

Who holds key responsibilities?

Potential Administrators

No Designated Steward

Minimal Administration

Santa Barbara County

Local Government as Steward

City of Salinas

Developers Hire Private Contractor

Lafayette, CO

City Hires Private Contractor

City of Palo Alto

City Contracts with Nonprofit

Tri-Valley Housing

Local Governments Form Nonprofit

Chapel Hill

Community Land Trust as Steward

Building the Portfolio

Menu of Project Support

Municipally-owed land and buildings

Loans

Grants

Inclusionary Housing

Regulatory Concessions

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

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

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

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

Structuring SubsidyGood Money vs. Bad Money

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%, What percentage? (25%, 30%, 33%)33%)

Which costs?Which costs?

Principal, interest, taxes, Principal, interest, taxes, insuranceinsuranceHomeowner Assn. FeesHomeowner Assn. FeesGround Lease FeeGround Lease Fee

Two ApproachesTwo Approaches

Two Different Approaches:Two Different Approaches:Reduce the price by $100,000Reduce the price by $100,000Provide a $100,000 silent Provide a $100,000 silent second loansecond loan

Housing Cost = $300,000Housing Cost = $300,000People can afford = People can afford =

$200,000$200,000Affordability Gap = Affordability Gap =

$100,000$100,000

Types of Subsidy StructureTypes of Subsidy Structure

Bad MoneyBad Money

Sort of Bad MoneySort of Bad Money

Good MoneyGood Money

GREAT MoneyGREAT Money

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 $ assumed by future homebuyershomebuyers

$ permanent asset of CLT$ permanent asset of CLT

BADBAD

GREAT!GREAT!

Bad MoneyPrice to CLT Buyer 300,000First Mortgage 200,000City Second Loan 100,000Affordable to 70% of AMI

Resale Price 370,0002nd buyer mortgage 370,000Second Loan $ Available 0Affordable to 95% of AMI

Appreciation to Seller 170,000

Homebuyer grant or forgivable loan

Better MoneyPrice to CLT Buyer 300,000First Mortgage 200,000City Second Loan 100,000Affordable to 70% of AMI

Resale Price 370,0002nd buyer mortgage 370,000Second Loan $ Available ?????Affordable to 95% of AMI

Appreciation to Seller 70,000

Homebuyer loan recaptured by public agency

Good MoneyPrice to CLT Buyer 300,000First Mortgage 200,000City Second Loan 100,000Affordable to 70% of AMI

Resale Price 370,0002nd buyer mortgage 270,000Second Loan 100,000Affordable to 70% of AMI

Appreciation to Seller 70,000

Homebuyer loan assumable by all future buyers

Great MoneyMarket Value 300,000City Subsidy 100,000Price to CLT Buyer 200,000Affordable to 70% of AMI

Resale Price 270,0002nd buyer mortgage 270,000Second Loan 0Affordable to 70% of AMI

Appreciation to Seller 70,000

Grant of permanent subsidy to CLT

Comparison

Forgivable to Buyer

Recaptured Loan

Assumable Loan

Grant to CLT

Market Value 300,000 300,000 300,000 300,000Subsidy to CLT 0 0 0 100,000Price to CLT Buyer 300,000 300,000 300,000 200,000First Mortgage 200,000 200,000 200,000 200,000City Second Loan 100,000 100,000 100,000 0

Affordable to 70% of AMI70% of

AMI70% of

AMI70% of

AMI

Resale Price 370,000 370,000 370,000 270,0002nd buyer mortgage 370,000 370,000 270,000 270,000Second Loan $ Available 0 0? 100,000 0

Affordable to 95% of AMI95% of

AMI70% of

AMI70% of

AMI

Appreciation to Seller 170,000 70,000 70,000 70,000

Programatic Compatability

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

Modifying Programs

Repayment/recapture requirements

Forgiveness

CLT as borrower

CLT performance requirements

Sustaining CLT Operations

CLT Operating Support

Government grants

HOME CHDO

CDBG

Housing Trust Funds

Development Revenue

Development Fees

Marketing Fees

Operating Revenues

Ground Lease Fees

Resale Fees

Membership Dues

Private Grants

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

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

Taxing CLT Property

Taxation

How should the taxible value of a CLT home be established?

Market value of comparable homes

Restricted Price

Other

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

Taxation

How should the CLT’s land be taxed?

Comparable sales prices

Cash flow

Other

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

Regulating CLT Activities

Municipal Oversight

Project development

Marketing

Selecting buyers

Pricing CLT homes

Maintaining affordability

Monitoring homeowner compliance with lease

Promoting maintenance of homes

Preventing Foreclosure

Development

Are there development issues that are unique to CLTs?

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?

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.

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?

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

•Live or work in Highland ParkLess than 80% AMIContribute property to CLT

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?

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

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?

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

Portland, OR requires annual report

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?

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

Right to Purchase

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.

Planning for the Worst

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

City-CLT agreements

Grant Agreements

Loan Agreements, Deeds of Trust

Development Agreements

Regulatory Agreements

Covenants, Deed Restrictions

Purchase Options

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

Exercise

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

LoANS VS GRANTS

What does the City really want?

Repayment of subsidy

Preservation of affordability

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?

City Foreclosure

Some states allow lender to take posession of the property

Others require auction of property with lender receiving the proceeds

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

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

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

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

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

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

Supporting CLT Startups

CLT Startup

Prior to Incorporation:

Planning CommitteeEducation and OrganizingMarket AssessmentResource AssessmentLegal ResearchArticles and Bylaws

After Incorporation:

Form BoardDraft LeaseAdmin SystemsSelection PoliciesBusiness PlanTax Exemption

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

Providing project financing

Evaluation

Evaluation

How could we improve the workshop?

How could we improve the program manual?