Community Land Trusts An Essential Tool in the Affordable Real Estate Toolbox, 0420 COBJ, Vol. 49, No. 4 Pg. 36

Position:Vol. 49, 4 [Page 36]

49 Colo.Law. 36

Community Land Trusts An Essential Tool in the Affordable Real Estate Toolbox

No. Vol. 49, No. 4 [Page 36]

Colorado Lawyer

April, 2020



This article discusses the use of community land trusts to address affordable real estate needs.

Whether practicing along the Front Range or on the Western Slope, Colorado lawyers face a range of issues that accompany the double-edged sword of Colorado's booming economy and its impact on the creation, availability, and preservation of affordable real estate. As the presence of corporate headquarters and tech startups increases, so do the number of workers needed to fill those jobs and the demands on service providers required to address those workers' needs. Unfortunately, the impacts of such job and population growth include the increasing scarcity of affordable housing along with affordable land for services critical to workers and their families, such as schools, libraries, community centers, health clinics, and office space for nonprofits.

This widespread shortage of affordable real estate impacts not only individuals and families, but also the broader community. As land values rise, so do the costs of development, resulting in increased rental and mortgage rates faced by working households. When individuals and families struggle to keep a roof over their heads without spending significantly more than 30% of their income on housing costs, they are increasingly forced to live farther from work, school, and other daily activities because they are located in ever more expensive areas.

When community service providers operate far from the people they serve, households with already strained economic resources face challenges to access basic needs like healthy food and medical care. This, in turn, creates adverse collateral impacts, including traffic congestion and its associated problems.

This article discusses the use of the community land trust (CLT) as a tool to manage the scarcity of affordable real estate.

Addressing the Housing Crisis

The term "missing middle" is bandied about quite often these days when discussing affordable housing. Realtors and developers use it to refer to housing that is affordable to households earning between 80% to 120% of the Area Median Income (AMI) as defined by the U.S. Department of Housing and Urban Development (HUD).1 These households include those who do not earn enough to comfortably purchase a market rate home, given the steep increase in property values and accompanying property taxes, but who make too much to be eligible for traditional affordable housing that serves households earning 80% of AMI or below. On the other hand, when urban planners and architects refer to the "missing middle," they often do so in the context of a building typology that is in short supply these days—duplexes, triplexes, and row homes—housing that helps fill the gap in density between single family dwellings and large apartment complexes.

However, there may yet be a third way to view the "missing middle": as the gap between renting a home, either market rate or subsidized, and purchasing a home. CLTs seek to bridge that divide.

Previously, an individual or a family could rent a home for a period of time while saving money toward a down payment, and then transition to homeownership, but that scenario is rapidly becoming outdated. Rather, as real estate prices in today's markets vastly out pace income gains, households increasingly find themselves on the outside looking in on the American dream of homeownership.

Neighborhoods, towns, and cities suffer when individuals and families are priced out of the areas where jobs and services exist Those forced to relocate typically face increased expenses and a decreased quality of life, while their former communities lose their contributions to the local economy and civic affairs. This circumstance exists in urban, rural, and resort settings alike throughout Colorado. For example, places like Telluride, Vail, and Aspen conjure images of lavish ski chalets and high-end restaurants for wealthy vacationers. But what is the quality of life for firefighters who work in these communities year-round, or teachers who educate the children of service workers who cater to the visiting masses, or the service workers themselves? These behind-the-scenes service providers are often overlooked but are just as critical to the functioning of those communities as the tourists.

The widespread lack of affordable Colorado real estate in the very locations where it is needed most, combined with rising land acquisition and construction costs, raises the question of how reducing or even eliminating the high cost of land can increase options that address Colorado's affordable housing crisis.

This question spurred the emergence of the CLT2 as a creative addition to the affordable real estate toolbox. CLTs offer options for households seeking to move from renting into homeownership, for rental apartments to remain affordable in perpetuity, and for nonprofits seeking stable real estate with a lower monthly cost. The CLT structure seeks to enable occupants to better deploy their limited resources toward actual housing and/or programming needs, instead of diverting these resources disproportionately to mortgage or rental costs.

What is a CLT?

Essentially, a CLT is a public-private partnership. The hallmark of the CLT approach involves severing land ownership (the public asset) from the value of building improvements constructed on that land (the private asset). Under CLT structures, land is owned by a nonprofit entity, and the owner of the building or other improvements has a leasehold interest in the land through a long-term ground or land lease. This approach of separating ownership of the land from ownership of the building provides opportunities for building owners to create equity through the value of the physical structures while allowing landowners to ensure that the underlying land is held in trust for community benefit, in perpetuity.

Typical entities involved in CLTs are nonprofits, municipalities, school districts, and faith-based...

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