Re: [Mpls] affordable housing & density seminar...

[Jeff Washburne]

Community Land Trusts (responses to comments and questions offered by Jim Graham) It is important to note that the potential homebuyers the Community Land Trust targets are households that "but for"significant affordability subsidy would not be able to purchase a home.  Jim Graham and I have discussed the Community Land Trust model and other models on various occasions and recognize that there are many households who could purchase a home if a.) the home was less expensive or b.) they had a greater income.  There are hundreds of households who are mortgage approved for $95,000 to $145,000, but are unable to find safe and sufficient homeownership opportunities. These factors, along with the realization that affordability subsidies do not grow on trees provide the sound rationale for there to be a Community Land Trust to serve the residents Minneapolis. As evident through in this morning's Star Tribune article "Affordable Housing to Elude Many More" http://www.startribune.com/stories/462/4225197.html., the cost of housing (whatever type or model) continues to outpace wages.  Over the past 30 years, housing prices have risen at an average of 7.5% annually in Minneapolis.  Over the past 20 years, wages have risen at only an average of 4.7% annually.  While only a slight annual difference, the effect over many years it taking it's toll on households in today's market.     Jim Graham writes: "I simply can not believe the amount of subsidy that goes into some housing, but more importantly I can not believe the justification for trapping people in housing where their wise decisions, care, and investment does not allow them the same opportunity to gain equity as other people.  The land trust model may be OK for a townhouse or condo situation but for single family owners it is "Usury" and taking advantage of both the poor family and the public tax payers.  We want people to be able to gain equity and move into the middle class." Jeff Washburne responds: This is a public policy dilemma for the U.S, MN, Hennepin County, and the City of Minneapolis.  Households don't make enough money for sufficient housing (per Ron Feldman's arguments), but is it the role of our communities to create wealth, create housing, or to truly be fair to all residents of Minneapolis.  Please give me the job that allows me to hand out necessary subsidy to those in need without worrying about how to make the allocations last.  What is at issue here is that the "system" isn't fair.  I'm all for creating a fair system, but don't realistically don't think we'll get there given the great distance to go between those who "have" and those who "don't have".  But, we can create tools that equal the playing field.  The Community Land Trust model allows the same tax benefits of "regular" homeownership, eliminates the need for Mortgage Insurance as the CLT contribution counts as equity vs. a loan, and creates "home" for households that otherwise wouldn't be able to purchase. What is the correct balance?  The Community Land Trust limits the opportunity of an individual through limited equity.  On the same note, though, it creates a lot of community equity that is a community asset.  I offer my own personal experience: In 1998, my wife and I bought a boarded up HUD home (duplex) for $40,000 (2,500 sf, built in 1883) here in Minneapolis.  We put a lot of money and LOTs of sweat equity into restoring it.  We sold it in the spring of 2001 for $250,000.  Smart me.  No, lucky me.  Sure, I'll take credit for $110,000 of that increased value.  The other $100,000 in increase was the market.  Period.  We got in at the right time and the right place and I benefit and while the community doesn't lose, it certainly doesn't have an affordable unit anymore.  (Note:  this in no way suggests that I have $, but we were able to eliminate debt in our lives - over $65,000 in student loans, cars loans, cc debt, capital gain taxes, etc.). So the question is...how do we responsibly invest our scarce dollars to ensure not only affordable housing today, but into the future?  The Community Land Trust is a tool that can accomplish this. Jim Graham writes: "Land is a small part of the cost of a house.  The house itself is by far the major investment.  Yet the land in a landtrust would limit the amount a person could gain from the increase in equity to 25%?  Something is badly wrong with that concept, at the very least it should be proportional to the amount the land contributes to the actual sales value!  Also, ask any realtor and he or she will tell you such an arrangement clouds the title and makes the house less marketable and as such further limits the value of the homeowners investment.  The GI Bill and FHA programs knew what they were doing.  They gave people a chance to buy a house at a reduced interest rate and no downpayment.  We need to get back to a form of that.  Perhaps we need a little more subsidy for those who truly need it for affordability, but it gives more to the homeowning family and costs tax payers far less." Jeff Washburne responds: Ask families looking to purchase in the market today what is most important to them.  My experience is that there are hundreds of households in Minneapolis, who want to work and live in our fair city, but don't earn enough to obtain a sufficient mortgage to buy a home here.  The Community Land Trust isn't for everyone, but the vast majority of homebuyers I meet with are not bolting out the door when I explain limited equity associated with the CLT model. Jim Graham writes: "Perhaps I can be instructed on the matter, but at the moment I see the "Land Trust" model as just another method of milking public tax dollars by oppressing and limiting poor people. My question is if it is such a good idea then why do most of the people talking about and pushing the idea own their own houses with unclouded titles?" Jeff Washburne responds: I refer back to my response to Jim Graham's first comment.  Over the last six months, I've begun asking homeowners (anyone) how they purchased their first home.  I have yet to find a response that would indicate the homeowner did it all on their own without any assistance or significant luck.  I know there are folks out there that have, but I've yet to hear the story.  Most stories are similar to my personal example, or an uncle lent them the down payment $, or it was a $1 home, or they inherited some $, or....they received a sizable grant or deferred loan, etc.  The circumstances, opportunities, and types of luck are changing as the increased $ necessary to buy increases.  The Community Land Trust model is another tool, or opportunity, that homebuyers can use to get them into homeownership.  Also ask if homeowners had to buy their home today in their neighborhood, how many would be able to do so.  Most homeowners, like myself, consider ourselves lucky to have gotten in when we did.  The "haves" and the "have nots".  How do we responsibly create opportunities for creating more "haves"? These responses are far longer than I initially intended.  I would be happy to discuss the City of Lakes Community Land Trust and CLT model with anyone who has an interest or questions.  It is one of many tools on a large continuum of housing needs.  I wish it was the end-all, be-all that would solve the affordable housing crunch in Minneapolis.  It's not, but it is a model that is appropriate to evaluate as a tool whenever and wherever affordability subsidies are used.  We are moving along, have great momentum, and believe that the Community Land Trust will bridge housing opportunities for future generations in Minneapolis.  We want it to truly be a "Community" Land Trust.  We want people to join as members to assist in guiding the organization and our collective community assets.  I encourage both Jim and Bill (another post) to join as well as anyone else wants to assist in guiding our organization.  Membership starts at a buck. Our Annual Meeting is planned for December 10 at Hope Community's new office/affordable rental building (SE corner of Franklin and Portland). Please let me know if you are interested in attending so we can plan accordingly and I can send you out a formal invite. Thank you. "Trying to do my part in making Minneapolis a better place today, tomorrow, and when I'm long gone." Jeff Washburne Corcoran Neighborhood Resident Program Director, City of Lakes Community Land Trust