Land trusts are an alternative to private land ownership. Key features are:
- Ownership by a third party (a trustee)
- Controls on the use of the land
- Constraints on the value of the land
Why talk about land trusts in an affordable housing blog?
A growing number of people and households are unable to purchase or rent homes. Incomes are not keeping up with rising housing costs. Many households are housing cost burdened: that means paying more than 30% of their income for their homes and struggle to remain housed.
The cost of housing is driven by three groups of costs: land, construction and soft costs (e.g. permits and other fees that must be paid to obtain building permission). Depending on where they are located, land costs are a significant part of the final price of a housing unit. The uses permitted on a piece of land affect the cost of land as well.
There is an alternative
Land trusts, which can control the price of land, have significant potential as sites for affordable housing. They can also ensure that the land continues to be used for affordable housing and will not revert to the private sector for speculative purposes.
Land trusts offer flexibility in many jurisdictions
There are precedents in English Common Law that allow land trusts. This includes Great Britain and all its former colonies, including the United States. Evidently there are precedents in other legal traditions as well, as land trusts can be found in Central and South America, Europe and Scandinavia.
Land trusts are set up to achieve a range of purposes. Trusts that protect significant environmental or historic features are quite common. They are also used to protect land for housing uses. There are housing trusts with rental housing and with ownership housing. Housing that is owned and operated by a non-profit or co-operative are a form of land trust.
Why have third party ownership?
The corporate structure of the land trust specifies its goals and objectives. The third party, the Trustee, is responsible for managing the land in a way that ensures the goals and objectives achieved.
How are land uses controlled?
Permitted land uses are specified in the Land Trust’s operating documents (charter, goals, objectives, policies, etc.).
How is the value of the land controlled?
The Trustee ensures that the land is managed for its specific purpose. When housing units change hands, there are processes to ensure that the land does not leave the trust.
How do land trusts affect individual households?
Households living in units on a land trust enjoy right of occupancy for the time they are living in the unit.
The risk of land ownership is shared among the households in the trust. In a market where land costs are increasing rapidly, increases to the cost of land in the trust are controlled and small compared to privately held land. Conversely, should land values fall substantially, as they did in the 2008 mortgage crisis, households are relatively cushioned from a fall in value.
In trusts where units are owned, households receive a return on their investment in the unit. The amount of return is controlled by the terms of the trust.
In land trusts with rental housing, rents cover the cost of operating the building and capital replacement (including any capital financing). Rents for residents with low incomes may be controlled, for example 30% of income. A subsidy may be applied when there is a gap between the cost of the unit and the rent paid by the household living in the unit.
Looking ahead, land trusts offer the prospect of non-market housing to households that need affordable housing in the future.
Are land trusts part of the toolkit to build affordable housing?
It sure seems that way. There are significant challenges to creating land trusts, not the least of which is securing land for the trust, but it can be done. And, land trusts have been used successfully to control the cost of land and provide affordable housing in different countries and contexts. If you want to dive deeper, see this article in the International Journal of Housing Policy Volume 18, Number 1: Self-organized and civil society participation in housing provision
and
Community Wealth.org: Community Land Trusts (CLTs)
