- Eileen Zilch
Affordable Housing - A Crisis with Solutions - Part 3
In parts 1 and 2 of this series, we talked about several strategies for making more affordable housing available to those who need it. Projects partially financed by Low Income Housing Tax Credits (LIHTC) have been the primary means that developers have used to build more affordable housing in the recent past. But the availability of Low Income Housing Tax Credits is constrained by HUD's allocation to each state.
In Michigan, approximately $30-35 million in Low Income Housing Tax Credits is available annually. These credits are allocated by the Michigan State Housing Development Authority (MSHDA) twice a year to about 20-25 total projects throughout the state. More than double that number of affordable housing projects apply for an allocation of those tax credits. And typically, the projects that don't receive an allocation of tax credits are not able to fund the "gap" that the tax credits fill in the project financing - and those projects are never built. All of this despite the significant need for more affordable housing.
Many people (including me!) are trying to figure out ways to build more affordable housing without the use of LIHTC. In the last 2 posts in this series, we've discussed strategies such as tiny homes, affordable co-living spaces, and projects where developers, communities and service organizations work together to create quality affordable housing in their neighborhoods. Another strategy that leverages groups of people working together to provide affordable housing is the Community Land Trust.
What is a Community Land Trust (CLT)? A CLT is a non-profit, community-based corporation committed to the permanent affordability of housing located on its land. Most CLT's redevelop blighted neighborhoods or provide housing for lower-income people. Land acquired by a CLT is never resold. It is retained by the CLT and held in trust for the community. The CLT, with the community, provides for the use of its land by leasing out parcels at significantly lower-than market cost to be built into affordable single family homes, rental properties, etc. Often, the land is donated by individuals or the community to the CLT. With the cost of land significantly reduced, the total cost of the project is significantly lower, and more affordable to the buyer.
The CLT is able to maintain the housing affordability permanently, as the homeowner leases the land from the CLT. The CLT also controls the prices at which homes can be sold and controls the income eligibility of the persons who may buy the homes. Every CLT crafts its own resale formula, and new homeowners agree to the terms that the CLT puts forward. The Community Land Trust is a huge win for both the community and the new residents. 82% of CLT residents across the US have incomes less than 50% of area median. And 79% of CLT residents are first-time homebuyers.
If you want to learn more about CLT's, check out the CLT in Burlington, Vermont, or the Community Justice Land Trust in Philadelphia, Pennsylvania. Both have been very successful at providing affordable housing to their communities, and freely share what they've learned to help others.