News Archives InfoFax Affordable Finance Initiatives Nonprofit Resources research mainpage

Fair Use Disclaimer is a nonprofit, noncommercial website that, at times, may contain copyrighted material that have not always been specifically authorized by the copyright owner. It makes such material available in its efforts to advance the understanding of poverty and low income distressed neighborhoods in hopes of helping to find solutions for those problems. It believes that this constitutes a 'fair use' of any such copyrighted material as provided for in section 107 of the US Copyright Law. Persons wishing to use copyrighted material from this site for purposes of their own that go beyond 'fair use' must first obtain permission from the copyright owner.
Daily Business Review - March 29, 2008    

Activists hope land trusts will help build more homes

By: Terry Sheridan
The cost of land can snarl plans for any residential development. When the project is housing for low- to moderate-income buyers, site acquisition can be an outright deal-breaker.

That’s where land trusts come in. The often misunderstood nonprofits — which are drawing increased interest from affordable housing advocates — buy land, then find developers to build houses while retaining ownership of the land. Relieved of the cost of land acquisition, builders can sell the houses at prices significantly lower than market rates.

The land trust recoups some of its costs by collecting modest land-lease payments over 99 years from home buyers.

The complexities of setting up and administering a trust can be daunting, and they’re a hard sell to politicians and bureaucrats unfamiliar with the concept.

So far, there’s been a lot of discussion among affordable housing activists — with only modest results.

One group hoping to change that is the Community Land Trust of Palm Beach County. The trust is seeking proposals for 76 single- and multifamily housing units on a Lake Worth property with a view of the Atlantis golf course.

The property offered for bids is the site of a former South County Foundation for Mental Health facility on Davis Road, which is worth at least $2.6 million to a residential builder, according to a 2006 appraisal by a county-paid consultant.

The project is the 2-year-old trust’s first effort. Two bids were submitted by Tuesday’s deadline but the builders’ identities were not revealed.

“The question was how to build up affordable housing for the long term,” and ensure it remained affordable, said trust executive director Cynthia LaCourse-Blum, who took the job in January after working as a planner for the county’s Housing and Community Development Department.

The trust is one of five in Palm Beach County. The Broward Housing Partnership’s year-old trust has yet to acquire land. And the Review could not locate a land trust that operated in Miami-Dade.

“The largest benefit to a land trust [deal] is that there is no land cost for the builder,” LaCourse-Blum said.

And because the lease includes restrictions on how much buyers can earn, “you are forever providing affordable housing by removing that land cost,” she said.

But trusts aren’t simple to operate.

The administrative task of overseeing long-term land leases tied to restricted income levels of buyers can be an obstacle, said land-use attorney Debbie Orshefsky of Greenberg Traurig in Fort Lauderdale. Orshefsky chairs the Urban Land Institute’s Southeast Florida/Caribbean District Council.

Unless land is donated to the trust, the goal of affordability is almost impossible to achieve, said James Carras, president of the Broward Housing Partnership’s trust.

Carras has been searching in vain for months for land for the Broward trust.

Palm Beach County acquired the 7.3-acre Lake Worth property last year using $2.4 million in Community Development Block Grant funds. The land will be transferred to the trust in July.

At the federal level, the block grant program is administered by the U.S. Department of Housing and Urban Development. Locally, Palm Beach County’s Department of Housing and Community Development handles it.

The funds do not have to be repaid as long as the property is used for an eligible activity like housing to benefit low- to moderate-income residents, LaCourse-Blum said.

According to the trust’s request for letters of interest from builders, all single-family homes must be priced to be affordable for buyers earning no more than 80 percent of the median annual income in the West Palm Beach-Boca Raton metropolitan area.

Based on a family of four, that income could not exceed $55,350 in 2008. For multi-family units, 51 percent must be affordable for the same income level. Proposals for units affordable to a family of four earning 50 percent or less of the area median income, or $34,600, will get priority.

Buyers generally will qualify for down-payment assistance through various state and local programs, according to Community Land Trust guidelines.

To ensure homes continue to meet restricted resale values in the ground leases, two identical bills now working their way through the state Legislature would allow county property appraisers to assess land-lease trust properties at restricted values. (The measures are Senate Bill 796 by Sen. Mike Bennett, R-Bradenton, and House Bill 431 by Rep. Keith Fitzgerald, D-Sarasota.)

The bills seek to protect low- to moderate-income buyers from big property tax bills resulting from market-rate appraisals of their homes, said attorney Jaimie Ross, president of the Florida Community Land Trust Institute in Tallahassee.

Land donations

The complexity of trust programs partly explains why officials and local governments are unfamiliar with the programs and are slow to embrace it, Broward trust president Carras said.

West Palm Beach officials, for example, refuse to allocate low-income housing assistance funds to help trust buyers because the land leases mean the buyers don’t own their entire property, according to Terri Murray, executive director of the city’s Neighborhood Renaissance community land trust.

Funds through county and state programs, though, are available.

City spokesman Chase Scott said only buyers of fee-simple homes [those owned entirely by residents, with no land lease obligations] are eligible for city housing assistance programs.

In Broward, Carras is pushing to secure land donations despite obstacles and misunderstandings.

He wants lenders to consider donating foreclosed parcels to his trust and believes community redevelopment agencies and local governments are likely contributors.

Properties taken back for nonpayment of taxes, called escheated properties, would be prime land-trust sites, Carras said.

In West Palm Beach, the Neighborhood Renaissance trust obtained seven small lots through a series of transfers involving the city and Northwood Renaissance, a community development corporation. The properties are scattered throughout the area between U.S. 1 and the Florida East Coast Railway tracks, between 29th and 59th streets.

Neighborhood Renaissance has begun building single-family homes targeting low- to moderate-income families on the lots.

In Broward, trust officials negotiated with the Lauderdale Lakes Community Redevelopment Agency for eight months last year in a failed attempt to acquire four lots for $600,000, Carras said.

“The [land trust] model doesn’t work very well if you have to pay for the land,” he said. “Creativity is the new order of the day.”

Lauderdale Lakes CRA executive director Gary Rogers said the agency owes about $400,000 on the sites, and one must be used as a trailhead for a park adjacent to a South Florida Water Management District canal.

With cities struggling to fund services and departments in the face of budget shortfalls, the CRA board was reluctant to absorb the debt, said Rogers, a former member of the Broward land trust who resigned when the trust proposed buying the sites.

Comparisons don’t work

Trusts aren’t a cure-all for the shortage of affordable housing, said Ross of the Florida Community Land Trust Institute.

Comparisons of the benefits of market-rate homeownership to land-trust homeownership fare poorly because of the limited equity build-up owners achieve, she said.

The land leases restrict re-sales to lower-income buyers, which limits how much the homes appreciate in value. The leases also impose restrictions on equity shares.

“If they can get into a market-rate home, they should,” Ross said. “But if the alternative is leaving the community, the land trust home is the right product.”

For Julie Hyatt, her 1,600-square-foot, single-family house on land owned by the Neighborhood Renaissance trust in West Palm Beach was the perfect answer.

The single mother of a teenage son, Hyatt wanted to escape from her rental apartment elsewhere in the city for the added living and yard space of a single-family home.

At the time of her purchase last July, Hyatt qualified for county and state housing grants because she earned less than the $41,500 maximum annual limit. She now earns slightly more than that, she said.

The $100,000 in grants brought the mortgage payments on her $225,000 house to $300 less per month than her apartment lease.

She also pays a $25 monthly fee on the ground lease.

Still, the reduced equity in the house required a few weeks of consideration, said Hyatt, a customer service supervisor with Jupiter biotech company Dyadic International.

“When people think of homeownership, they also think of the land hand-in-hand,” she said. “But I’m not planning to sell any time soon. I like to plant roots. The savings over the rental rate was a bigger issue.”