Palm Beach Post: Land Trusts Touted for Affordable Housing

Susan R. Miller
Palm Beach Post (Florida)
November 11, 2006

From South Florida to San Francisco, Americans have been feeling the housing price squeeze -- and it hurts.

While many cities and counties, including Palm Beach County, are adopting policies requiring developers to build more affordable homes, a growing number of communities also are looking toward an innovative tool to create affordable housing on a large scale -- the community land trust.

There are 30 land trusts in Florida either formed or in discussion, according to Jamie Ross, affordable housing director for public interest firm 1000 Friends of Florida and president of the Florida Housing Institute. Several of them are in Palm Beach County.

"That's a huge number when you look at other states," Ross said.

In Palm Beach County, property values have jumped by nearly $104 billion during the past decade. In Lake Worth, they jumped 32 percent last year alone.

With those kinds of numbers Adopt-A-Family of the Palm Beaches decided to start a land trust and on Friday unveiled its latest project, a nine-unit complex of affordable rentals in Lake Worth. The 23-year-old nonprofit helps the working poor, homeless and those on the brink of homelessness.

"Our program has always focused on the whole family. How do you not just focus on paying the rent this month, but what is the real underlying problem," said Wendy Tippett, the agency's chief executive.

"We began to look at different models and where we go next. How do we get families into permanent housing?" said Tippett, who looked at models in Burlington, Vt., home to the nation's first community land trust, as well as one in the Florida Keys and Portland, Ore.

The concept is fairly simple. The idea is to create a permanent stock of affordable housing in fast-appreciating neighborhoods. The trust purchases the land and then provides buyers with a 99-year lease on the house. The buyer has to qualify only for the cost of the home, not the land, which remains in the trust. By taking the cost of the land out of the equation, the price is significantly reduced.

If the homeowner decides to sell, there is a limit to the amount of profit that can be made.

For Adopt-A-Family it's 5 percent above the sale price for the first five years, capping out at 25 percent. Adopt-A-Family has first right of refusal to buy back the house.

For the home buyer it's a wealth-building tool. Tippett said most families walk away with between $17,000 and $20,000 in their pocket, which they can put toward the purchase of another a home.

"It was important to me that a home could not be sold for market value and that it remained affordable in perpetuity. That's what this does, it locks folks in," Tippet said.

To fund the trust, Adopt-A-Family needs $1.9 million. Its "Hope Begins With a Home" capital campaign got a jump start from philanthropists Tim and Jayne Donahue, who provided a $100,000 challenge grant toward the goal. Tim Donahue is outgoing chairman of the board of Sprint Nextel Corp.

Keeping prices low

Adopt-A-Family owns the land where it held Friday's groundbreaking. For the nine-unit rental complex, the group will rent two-bedroom units for $400 a month and three-bedroom units for $600. Because the land is part of the trust, Adopt-A-Family will be able to keep rents low.

The agency also has a two-story historic home in need of renovation that was donated by the city and is building a home on land given to it by the Lake Worth Community Redevelopment Association.

To be eligible families have to earn less than $60,000 per year. Adopt-A-Family is working with the Family Empowerment Coalition -- a group of 13 not-for-profits whose goal is to provide services that promote family stability and self-sufficiency -- to select eligible families.

Tippett said the organization is focusing on Lake Worth because that's where its community resource center is located, allowing families to receive much-needed support services.

The agency has found that for those who receive such services, the foreclosure rate is less than 1 percent. For those who don't, it jumps to as high as 10 percent.

Other local areas in Palm Beach County that have adopted community land trusts include Riviera Beach, Northwood in West Palm Beach and Delray Beach.

Delray Beach's Community Land Trust was formed in December and has been going gangbusters, said its interim executive director, Joe Gray.

"It was the only solution we were able to come up with that seemed to solve the issue of affordable housing over the long term," Gray said.

Price of land a barrier

Delray has completed three houses. One has been sold and the other two are in contract negotiation. An additional 18 are under construction. The city also has rental properties and recently closed on the purchase of a 24-unit townhome project.

"We have this whole pipeline of projects that are happening. We will probably create more affordable housing in the next couple of years than has been created in the last 10 years. The beauty of it is that it will stay affordable," Gray said.

One barrier to the creation of additional land trusts or adding land to existing ones is the already high price of land, said Michelle Lancto, program officer for the Institute for Community Economics in Springfield, Mass., originator of the concept.

"I see that people are making an effort now to form CLTs but some have waited so long that even acquiring land has become an issue," she said.

No matter what happens with the housing market, history has shown that community land trusts will remain a viable way to provide affordable housing, Ross said.

"Even if the market were to completely flatten out," Ross said, "we have already got the massive gap between what people earn and what they can buy."