As our main feature explains, community land trusts, or CLTs, are organizations that work to create and preserve affordable homeownership opportunities for low- and moderate-income people. Many CLTs fill niches in high-cost metropolitan areas and are relative newcomers on the community development scene. The City of Lakes Community Land Trust (CLCLT) in Minneapolis is one example.
CLCLT was created in 2002 with resources from several neighborhood organizations in south Minneapolis, including Powderhorn Residents Group, Seward Redesign, Lyndale Neighborhood Development Corporation and Powderhorn Park Neighborhood Association. As of April 2007, CLCLT has placed nearly 50 families in land trust homes. The organization receives funding through public and private grants and land trust fees, with additional support from the City of Minneapolis, Hennepin County and the State of Minnesota. Community Dividend spoke with Jeff Washburne, director of the CLCLT, to learn more about the organization's work and the challenges CLTs face.
Community Dividend: What is your organization's mission and how has it shaped your work?
Jeff Washburne: Our central mission is to help low- and moderate-income people buy homes in Minneapolis and ensure that those homes remain affordable for future generations of buyers. In addition, we've focused on making sure people are successful in homeownership. That means supporting people if they get behind on their mortgage payments and working strategically to get them more involved in the leadership aspects of their neighborhoods—essentially, the "community" part of the community land trust. We also work with our homeowners through their neighborhood associations and organizations.
CD: Are potential homebuyers becoming more aware of the CLT model?
JW: Yes. It's rare for us to get a call from a potential buyer who doesn't know anything about land trusts. The public still doesn't really know how the land trust model works, but we've succeeded in getting the word out enough so that potential buyers are already aware of some of the important aspects of the model, such as the resale formula. Our success reflects the number of hours we've spent over the past five years talking to loan officers, real estate agents, neighborhood groups and others in the city about the workings of a CLT.
We do have some difficulty explaining the model to people from other countries—especially recent immigrants, because ownership of the land is important to them. Explaining the model is certainly one of our ongoing challenges.
CD: How do you attract potential CLT customers?
JW: I think we've arrived at a place where the average CLT owner is our greatest asset, in terms of attracting more buyers. Until a year or so ago, we found potential CLT homebuyers through realtors and lenders, but today we get a number of referrals from our people.
We also present our information to at least a hundred people a month through Homestretch homebuyer education courses. During each course, we explain the model and ask people to consider it or pass the information to a friend or neighbor who may be thinking about buying a home. That's how we fill our waiting list now.
CD: CLCLT has succeeded in getting land trust units included in multifamily housing developments. How did that happen?
JW: We're fortunate that the state, county and city have all emphasized long-term affordability in their review guidelines for the funding of housing projects. The development of affordable units is important, but the fact that they'll be affordable for a longer time period is the key. Under Minneapolis' funding criteria, a project will score considerably higher than others if the development has a long-term affordability component. So initially, many developers and nonprofits saw the CLCLT as a way to ensure that they'd score highly in the selection criteria for funding. My hope as we move forward is that developers will still want to work with us, regardless of funding selection criteria, because we've proven ourselves to be a good partner.
The relationships we've built with city neighborhoods have been another factor in our success with multifamily developments. We've gone out and met with all of the Minneapolis neighborhood organizations. We went to their meetings and talked about the land trust, but didn't ask them to provide us with anything. We wanted them to see us as a community asset, but one that doesn't require any neighborhood resources. The only thing we asked of them was to think about the CLT model, particularly if there was potential for a housing development to be built in their neighborhood. Our message was, "If you and your neighbors feel that the development requires affordability—especially long-term affordability—then your neighborhood association should suggest that the developer come and talk to us." In more than one instance, neighborhood groups have told developers to talk to us before the groups would agree to move forward on a project.
CD: Do you work with single-family properties, in addition to multifamily developments?
JW: While we will work with housing developers on single-family homes, our principal focus for single-family is on our Homebuyer Initiated Program, or HIP. Under the program, we don't serve as the developer. Instead, we help finance the purchases of existing for-sale homes in Minneapolis. We offer each buyer an affordability grant of $25,000 to $65,000, depending on household income and size. Depending on the condition of the home, we can offer the buyer up to $25,000 in rehab grant funding as well, which we coordinate through a local nonprofit organization. The rehab grant helps ensure that the new homeowner's financial stability isn't jeopardized by an expensive repair.
We've brought in about a dozen new homeowners in the past year through that method. We don't have many single-family homes in our portfolio right now and we need to work on diversifying our portfolio by increasing our numbers. Buyer demand is driving our need for diversification. Families tell us they've lived in multifamily units for a long time and what they really want now is a home with a fence and yard, so their kids and dog can run around. So, the HIP is where we focus much of our effort, in terms of fundraising and staff resources. If all of the funding were in place, we could provide affordability and rehab subsidies for about 24 homes a year.
CD: How would you characterize the demand, past and current, for CLT homes?
JW: It's changed, especially for some housing types. The condominium market has slowed down considerably, for example. We currently have several units in a condominium project that are priced below $100,000 and they haven't sold. That wouldn't have happened in last year's market. I used to think we could stay ahead of the market, but that hasn't been the case. A number of condominium projects have backed off, given the inventory out there. On the other hand, we still have a waiting list for single-family homes through HIP. I believe there is and will continue to be a huge demand for single-family homes.
CD: Many nonprofit housing organizations talk about the need to achieve some sort of scale to be successful. What does "scale" mean for your organization? And what are some of your challenges as you move ahead?
JW: Most land trusts have been struggling with the dilemma of scale. For us, a threshold of 100 to 120 homeowners would, in theory, allow us to achieve self-sufficiency. With revenue from leasehold fees, memberships, and resale fees, the land trust could operate without any further growth. Another way to look at the scale question is to determine the end goal of our work: How much homeownership in the city should be affordable and part of a land trust? The question of sustainability is one that we plan to address more strategically this year as part of our planning process.
In terms of the challenges we face, I think we need to continue to work at getting our message out there, explaining the land trust model. In particular, we need to talk more about how CLTs invest in neighborhoods, both through the funds provided to new homeowners and the equity returned to the neighborhood after the sale. Given the recent spike in predatory lending and foreclosures, we also need to tell people about the safeguards that CLCLT requires of its members, such as a 30-year fixed-rate mortgage and mandatory pre- and post-purchase homeownership counseling.
Nationally, CLTs are still struggling with the problem of generating enough earned income. Some CLTs have encountered additional problems that we haven't experienced. They've had a hard time working with more than one lender, while we've worked successfully with a variety of local lenders. In other parts of the country, public and private funding for CLTs can be scarce, but funding in our region is more generous. We've succeeded in getting public and private funding for HIP, for example, and we typically receive more funding from grants than comparable CLTs in other states. That said, I think in the end, we'll have to remain nimble and flexible in order to adapt to an ever-changing funding and housing environment.