Land Trust/Attainable Housing

The Pub
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I had a chat with Rhett Fussell of Raleigh Area Land Trust about his back story and the Land Trust model. I did a search, but wasn’t able to find much in the community about Land Trusts.

Would love to know what you all think of it as a model for producing/preserving attainable housing?
https://www.buzzsprout.com/1786561/8910167

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Thanks for the podcast! Anecdotal evidence indicates that buyers are actually hard to find for this model, due to the “shared” equity accrual, as Rhett called it in the podcast. Which is likely why Durham switched to rentals and RALT is likely using the rental model for their market rate units (so RALT can capture more upside in market pricing and not have to find wealthier buyers that may not be as eager to try this model) - just my guess though. But I hope finding and maintaining buyers isn’t a problem for RALT.

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I think you are right overall that they will not become the hottest thing out there to buy.

But, I also like how he explained that their target market are not going to miss out on equity because they never would have been able to buy a normal house. So this is a way to actually get into the market. Chapel Hill seems to be able to sells theirs. None available right now. Listings - Community Home Trust

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Community Land Trusts are certainly good (I played a role in setting one up in Chicago many years ago), but increasingly I see them as something to start early on which complements subsidies – and which will require continually generous local housing subsidies. Some reasons:

  1. It won’t cut costs that much, especially at the start. For a new SFH, the cost of land is ~25% of the purchase price; for new multifamily, it’s substantially less. Most of the cost of new construction is in hard costs, and much of the cost of existing housing is repairs & maintenance, so even a total land writedown might mark middle-income housing down to moderate-income – not low-income.
  2. It needs to be implemented very early on, ideally before the first cycle of gentrification pushes land values above nominal levels. It would be terrific to use when, say, the city has a bunch of vacant lots it’s acquired for free through tax foreclosures or housing court or the like. The returns on a land trust model diminish sharply once a neighborhood is “discovered,” but… if it’s never “discovered,” the land trust offers few benefits and only legal complications.
  3. Because land is expensive to buy and hold, land trusts require a lot of upfront capital – and, because they forego appreciation, they can’t really borrow against their real estate. So there’s a scalability problem that can only be overcome with vast subsidies; the Burlington VT land trust that Bernie Sanders created in the 1980s owns just ~7% of the city’s units.
  4. In a high growth area like Raleigh, I’d wonder about how a land trust might inhibit the process of densification. Some of this could be overcome through transferable development rights, but those are ultimately less valuable than actually vest-able development rights.
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I thought the main benefit of community land trusts was that it’s supposed to help affordable housing units become financially self-sustaining (on top of autonomous decision-making). With what you said, does that mean that’s not true?

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Fantastic commentary, Payton. Thank you!