Affordability Locked In

Summary:

The price of housing has now risen so high in many places that even professionals cannot afford to live in the same community as they work in. Yet as the crisis deepens, the ability and the will of governments to take action is diminishing.

A big part of the problem is the cost of land. The cost of building a house cannot be reduced, unless you can build it yourself. The cost of a mortgage cannot be reduced, barring the introduction of fee-based lending. But there is something we can do to put a lid on the cost of land – even to remove it from the price of a house forever.

The Community Land Trust (CLT) is a nonprofit corporation which retains title to a collection of donated or acquired lands, while permitting people or organizations to purchase, maintain, improve, and sell the buildings on those lands. Selling is subject to a resale formula that keeps the buildings affordable to households within a specific income bracket. When a house sells, its price is primarily determined by the condition of the house and by the Area Median Income, not by the market value of the land which the house occupies. If the government uses a subsidy (e.g., a home ownership loan) to make the house affordable in a “hot” real estate market, higher subsidies are not required to keep the same house affordable five or ten years later.

That’s one reason why there are now over 250 CLTs in the United States. CLTs encourage government investments in affordable housing by ensuring that taxpayers do not have to increase housing subsidies simply to keep up with the real estate market.

This article is part of the basis for the more extensive examination of alternative land tenure in The Resilience Imperative: Co-operative Transitions to a Steady-State Economy, by Michael Lewis and Pat Conaty (New Society Publishers, 2012).

This article is part of the i4 special series, Housing We Can Afford. It is produced in partnership with the BC-Alberta Social Economy Research Alliance (BALTA) and with funding from the Social Sciences and Humanities Research Council of Canada (SSHRC).