In late winter of 2014, Mayor Bill de Blasio announced one of the first major victories of his young administration: a deal with Two Trees property developers to include 700 affordable units of affordable housing, 40 more than originally planned, in the redevelopment of the Domino Sugar Factory. In return, Two Trees was allowed to build an additional 20 stories of market rate housing beyond what zoning regulations allowed.
Mayor de Blasio has been an enthusiastic and vocal champion of affordable housing. One of his most repeated campaign promises was the creation, through preservation and new construction, of 200,000 affordable housing units. The Domino Sugar Factory deal represents Mayor de Blasio’s commitment to that goal, but the extraordinary lengths the mayor took in negotiating the deal highlights the precariousness of affordable housing in New York City.
With the Domino Sugar Factory deal in the background it is worth taking a step back to examine housing trends more broadly. According to a recently released report from the Community Service Society (CSS) — a New York City based non-profit dedicated to fighting poverty — the city lost 385,000 affordable units from 2002 to 2011 (affordability is defined as a family making 200% of the federal poverty line level spending 30% or less of its total income on rent). About half of those losses came from rent-regulated apartments converting to market rate, and another 68,000 units from expiring restrictions on subsidy and incentive programs. Given the tremendous net loss of affordable housing over the last decade, does it make sense to continue with our current strategy of policies and incentives?
Students of urban economics are almost certainly familiar with Henry George. In his 1879 treatise, Progress and Poverty, he advances the idea that land should be communally owned and the subject of a single tax. The modern day community land trust (CLT) is based on just that principle. Land trusts have been a common model in the United States for the conservation of green space and parks, but only since the 1970’s has a similar model been applied to the development and preservation of affordable housing.
Community land trusts are managed by non-profit organizations that purchase land and lease it back to homeowners on a long term basis. The existence of a land trust effectively eliminates the cost of land when purchasing a home. Homeowners selling their properties can only profit from improvements made upon the dwelling, and not from increases in land value. In instances where government funding is involved in the establishment of a CLT, additional deed restrictions limit profits from improvements, guaranteeing future affordability.
Despite the promise of CLTs, the model has not been widely adopted in the United States. Recent estimates put the number at roughly 250 such developments across the country. The model is gaining momentum, however. In the 1980’s there were only two dozen CLTs in existence, but in the last couple of decades the number has increased significantly. The mortgage crisis of 2008 brought renewed attention to CLTs because of the model’s resiliency to widely fluctuating land values. Surveys have shown that the foreclosure rate of CLT homes were far lower during the crisis than in the general population.
There are still significant barriers to the growth of CLTs. On face value, CLTs are not widely recognized or understood. The fee simple structure is, and will continue to be, the dominant cultural reference point for aspiring home buyers. The limited adoption of CLTs is also indicative of uncertainty with limited-equity models, particularly when homeownership is seen as a path to wealth. In the affordable housing community, CLTs struggle for funding and political support against traditional market based approaches such as inclusionary zoning, tax credits, and abatements.
In light of these challenges there are still many ways for CLT developers to capitalize on existing programs. HUD’s Neighborhood Stabilization Program (NSP) provides money to purchase foreclosed and abandoned residential properties for affordable housing development. The New York State Land Bank Act of 2011 gives local government tools to create land banks within their jurisdictions. Land banking is a process for acquiring and rehabilitating vacant, abandoned and tax delinquent properties. Although it has yet to be fully explored, municipal land banks are potentially invaluable resources for establishing CLTs.
It remains to be seen how well the CLT model can address affordable housing in New York City. The majority of CLTs in the country are in suburban and rural areas, and are typically comprised of detached single family homes only. Shared living arrangements, in the form of multifamily construction, adds complexity to the legal structures governing CLTs. Nevertheless, there are examples of successful CLTs in New York City. The Cooper Square CLT was established in 1991 near the East Village. It includes 303 units of multifamily housing and 23 commercial units spread across 19 different buildings. A case study published in 2007 by the Lincoln Land Institute found that a two-bedroom apartment in the Cooper Square development was renting for $431 a month, or 25% of the Area Median Income. It also found that it was a more efficient use of public subsidies than other programs supporting affordable housing.
Younger organizations like the New York City Community Land Initiative are working to raise awareness of CLTs. One of their more current projects is a detailed case study for establishing a CLT in East Harlem. The plan is still in its early stages, but has already won unanimous support from the local community board.
As Mayor de Blasio moves forward with his ambitious housing plan it would behoove him to consider and encourage the CLT model. Doing so would not only cement his legacy as a champion of affordable housing, but would also give his administration something truly worth celebrating.
1. http://www.nytimes.com/2014/02/28/nyregion/plan-to-redevelop-brooklyn-sugar-refinery-hits-roadblock-new-mayor.html
2. http://furmancenter.org/files/fact-sheets/NYChousingPermanentAffordability.pdf
3. http://b.3cdn.net/nycss/27ccd4d075e4ff7b10_fwm6b9i60.pdf
4. http://furmancenter.org/files/media/Forging_a_New_Housing_Policy.pdf
5. http://cltnetwork.org/wp-content/uploads/2013/12/2012-CLTs-in-NYC.pdf
6. http://online.wsj.com/news/articles/SB10001424052702303393804579310832380848024
8. http://www.yesmagazine.org/issues/sustainable-happiness/no-foreclosures-here