Group Land Trusts are getting a California makeover

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The Regulatory Review

California law can help community land trusts cope with a housing crisis and other problems.

Dreaming in California has turned into a nightmare for many Californians as residents of the state often face high housing costs and some of the longest car commutes in the United States. With two state laws that went into effect last year, municipal land trusts could soon help keep rooftops off the highways of California and frustrated commuters, which also has environmental benefits.

California’s high housing costs are “the major driver of inequality in the state”. The state’s housing stock has not increased with population in recent decades, and affordable housing costs about three times as much to build in California as it is in Texas or Illinois. Even the COVID-19 pandemic hasn’t slowed soaring property prices, which rose an average of 17 percent across the country in 2020.

Meanwhile, lawmakers have sought to protect millions of tenants from eviction amid the economic strain of the pandemic and to improve housing for Californians with homelessness, who make up a quarter of America’s homeless. In 2019 alone, California Governor Gavin Newsom signed over 20 bills to combat the California real estate crisis.

Some of these laws aim to solve California’s housing problems by building the presence of community land trusts that promote affordable housing by decoupling land costs from housing costs. In a community land trust model, a mission-driven organization – for example, a nonprofit – owns underlying land, while low-to-middle-income individuals also rent or buy rental housing. The organization enforces the housing requirements, e.g. B. setting the number of affordable units and limiting resale prices.

These measures keep housing affordable for generations of buyers, as residents of the communal land trust are protected from paying for the land’s increasing market value themselves. Through this model, the California Land Trust Groups have secured more than USD 220,000,000 in community assets.

In contrast, other ways of making housing more affordable, such as providing low-income mortgage aid to subsidize a home purchase, can be “lost” when a home is resold at a higher price. The Northern California Land Trust found that between 2000 and 2016, the amount of assistance a low-income buyer would need to buy the same home in a local county would have tripled if the trust hadn’t bought the underlying land would have owned. However, after evaluating 40 of their properties, the Trust found that if a municipal land trust capped resale prices, the initial subsidy or mortgage assistance would not only be retained but would be upgraded by 1,150 percent.

Despite the supposed advantages of community land trusts, in practice these trusts faced an expensive obstacle: the California tax codes. Although a 2016 state law attempted to apply tax exemptions to such land trusts, tax officials continued to maintain the fair values ​​of trust properties to assess higher taxes – without differentiating land and housing costs, let alone considering affordability constraints. As a result, municipal land trusts paid “very expensive, if not prohibitive” taxes during the development of real estate.

A 2019 state law attempted to fix this problem. Senate Draft 196 exempts municipal land trusts from property tax between the time a trust acquires property and the time a property is sold. Land trusts are then taxed on the affordable value of the home sale instead of the property’s market value, and resale restrictions are taken into account. After purchasing real estate, municipal land trusts enjoy a “welfare exemption” from state property taxes for five years. In this way, the state treats trust assets in the same way as other assets owned by nonprofit organizations that are used “for religious, hospital, scientific, or charitable purposes”.

Despite the tax benefits offered by Senate Draft 196, the community’s land trusts are now burdened with additional transportation requirements imposed by Senate Draft 743. Effective last summer, this bill aims to reduce Californians’ car commuting by asking local authorities to assess and limit the vehicle miles traveled (VMT) by residents when planning new housing developments, including local land trusts.

VMT measures the miles traveled by daily car trips to and from a development as part of an impact assessment required by the California Environmental Quality Act. Under the law, land trusts must now adhere to the “reasonable” VMT thresholds set by their communities or “swap” VMTs by developing additional transit projects such as bus stops or cycle routes.

Through a recent lawsuit and community organizing effort, affordable housing activists have resisted legislative attempts to tighten VMT restrictions. Activists argue that VMT restrictions are encouraging wealthy developers to “fill” areas near city centers and transit options – and pushing low-income workers out of urban housing. Because municipal land trusts often prioritize developments near transit options, Senate Act 196 tax exemptions can give land trusts new powers to compete with other developers near city centers, regardless of VMT restrictions.

The very existence of Senate Act 196 could also indicate that California policymakers are keen to promote land trusts in the community even when they have declined more direct attempts to regulate affordable, transit-oriented housing. At the beginning of 2020, a bill to increase affordable living space near “major transport hubs” failed for the third time. Some lawmakers argued that the law’s “upzoning” requirement, which lifted zoning bans across the state and increased building heights near transit stops, removed too much control from local governments.

Finally, tax exemptions and VMT restrictions can give municipal land trusts the opportunity to balance goals for affordable housing and environmental sustainability. Since VMT restrictions track carbon emissions from car trips related to a development, VMT restrictions actually regulate some of the carbon emissions caused by community land trusts. Trusts also enable low-income communities to get involved in other types of sustainable development. For example, a municipal land trust in Irvine, Calif., Has developed affordable housing that meets Irvine’s green housing requirements, including a recently constructed “urban backfill” site that meets energy efficiency standards for new buildings.

Looking ahead, community land trusts could also help increase the resilience of low-income communities to the effects of climate change. As the wildfires in California worsen, community land trusts can purchase potentially damaged land and rebuild disaster-resistant, affordable housing, much like a Florida community land trust responded to a hurricane in 2017.

While the potential impact of communal land trusts on the housing crisis, commuting, and the state’s environmental impact remains to be seen, at least the most recent policy changes aimed at encouraging the development of affordable, public transit-oriented housing have the Californians Dream given more space.