A Battle for the Hearts and Minds of Housing Advocates

Edward J. Dodson

[Reprinted from GroundSwell, September-October, 1993]

The United States has one of the highest percentages of household ownership in the world -- roughly 65 percent of us live in houses owned by our family group or ourselves. That, on the surface, sounds very positive. Unfortunately, a significant portion of this housing stock is in a serious state of deterioration, lacks modern systems for heating, cooling, plumbing and electricity. The worst housing is found in our inner cities and our rural communities.. Older housing units require huge sums just for maintenance; yet, our poorest citizens live in the oldest buildings with the least amount of disposable income available for repairs or upgrading. That's one side of the housing problem.

As we know full well, absentee landownership and intense speculation in land have combined to drive up land prices in rural areas being developed for second homes for the wealthy. In the inner cities, the problem may be high land prices due to gentrification or inability to obtain rehabilitation financing because the market value of homes is lower than the expense of making a property livable.

Housing advocates have in recent years discovered the concept of creating a community land trust (CLT) as a way of removing housing and land from the market system or at least significantly reducing the investment aspect of homeownership. The CLT groups intuitively understand the operation of land markets and are committed to gaining title to locations and holding those titles in perpetuity while selling whatever improvement is constructed or existing on the site. In most instances, these efforts are directed to low and very low income households. The market ground rent may be nominal or substantial depending on where the property is; however, the actual amount charged is usually kept very low based on the homebuyers' income. The capitalization of most of the uncollected ground rent is eventually captured by means of a formula for sharing appreciation at time of future sale.

As many GroundSwell readers know, I work in the housing finance industry (for Fannie Mae). My corporation has always had a program for purchasing mortgage loans even when the land is occupied under a leasehold arrangement rather than fee simple. As housing affordability has been given greater attention, I began to think about the CLT model and how the CLTs could have a more significant impact in making more housing units affordable under what we all acknowledge is a very flawed market system. My approach has been to convince CLTs to work with existing housing - in good condition - on a scattered site basis. Doing so would allow potential homebuyers to look for housing in many more neighborhoods; all that is needed is for the CLTs to raise enough seed money (or secure financing themselves) to purchase land in areas where land prices are higher (but neighborhood amenities are generally better).

A few years ago I approached the Board of Common Ground - U.S.A. suggesting the above program be adopted as a Common Ground initiative. No action has been taken on this recommendation. In the meantime, my corporation agreed to have me act as our primary liaison to the CLT groups. The most fruitful result has been my recent participation in the national conference of CLTs held in Cincinnati, Ohio during August. There, I was able to generate a good deal of interest in the above ideas. As a secondary benefit, I had the opportunity to talk with numerous individuals about the underlying problems of our land tenure and tax systems. The people who have gravitated to the CLT movement have little faith in the market system as it has existed. Much like the founders of Arden and Fairhope, they hope to create small enclaves of permanently affordable housing; and, in fact, they are doing a better job of rent collection (albeit as a sort of capital gains tax) than has occurred in those communities created in the spirit of Henry George.

Any Common Ground-USA members or chapter representatives interested in working with CLT groups in your area or starting a CLT yourselves can contact me for more specific information at ejdodson@home.com.

I believe the CLTs have hit on a practical way to put the natural rent fund to work. They are results-oriented and are becoming well organized as an inter national movement -- one with whom we have much in common.