The 2008 housing collapse left much in its wake: stranded commuters in drive-to-qualify exurbs, out-of-work real estate agents, zombie subdivisions, and of course millions of foreclosures. Continuing unemployment, the sluggish recovery, and tightened rules on credit have all led many to rentals, and to question the very concept of homeownership. Yet there is another approach that seems to offer more stability in home financing, according to a recently published Lincoln Institute paper: community land trusts.
Stable Home Ownership in a Turbulent Economy, a study conducted by a researcher from The Housing Fund and Vanderbilt University and commissioned by the National Community Land Trust (CLT) Network, found substantially lower delinquency and foreclosure rates in community land trusts compared to owners of market-rate homes.
Conventional homeowners were 10 times more likely to be in foreclosure proceedings than CLT homeowners at the end of 2010 (respectively 4.63% in the conventional market versus 0.46% in mortgages held by CLT homeowners), the study found. The survey results were based on 3,143 mortgage holders in 62 CLTs across 29 states.
While the Mortgage Bankers Association reported all-time highs in foreclosure proceedings, CLTs reported ongoing declines of homeowners in trouble. In terms of mortgage delinquencies, 1.30% of CLT homeowners were seriously delinquent relative to 8.57% of homeowners in the conventional market at the end of 2010, as reported by the MBA. Serious delinquencies included mortgages at least 90 days delinquent or those in foreclosure proceedings.
Community land trusts offer low-to-moderate income households the opportunity to buy homes at prices substantially below market rates, utilizing a combination of public and private subsidies. In most cases a long-term ground lease allows buyers to purchase homes excluding the cost of the land. CLTs also provide pre-purchase education and support that prepare families for homeownership, and after purchase, provide ongoing stewardship services to "backstop" homeowners for as long as they own their homes. In exchange, homeowners agree to limit the appreciation they receive when they sell their home, which has the effect of sustaining housing affordability for future generations of homebuyers.
The study found that the stewardship services offered by CLTs prevented foreclosure for 82% of the CLT homeowners who became serious delinquent during 2010.
Roger Lewis, Executive Director of the National CLT Network, said that compared to interventions by the federal government, or steps by private industry, community land trusts do a better job of securing successful homeownership to lower-income earners.
“I feel supported all throughout my home buying and homeowner experience," said Jackline Mukiibi, a homeowner in the City of Lakes Community Land Trust in Minneapolis. "I feel like I will always have a resource to get me through any challenges I may have while owning a home.”
“Fostering sincere relationships is the most valuable tool we have in resolving challenges faced by our homeowners,” said Staci Horwitz, program director at the City of Lakes Community Land Trust. “Knowing what is happening sooner than later helps us readily connect homeowners to the resources needed to minimize the impact of unexpected financial or life changes.”
“Lower earning homeowners were disproportionately hit by subprime lending and now they have been hit again by higher unemployment rates," said Emily Thaden, the researcher of the study. "CLTs never allowed homeowners to obtain subprime loans in the first place, and now CLTs — through their stewardship — are buffering the impact of the economic recession on their homeowners."
The Lincoln Institute has supported the last two surveys of the 200-plus community land trusts in the U.S., in coordination with the the National CLT Network, which provides training, advocacy, and resources to nurture and sustain healthy and economically diverse communities, by providing permanently affordable access to land, homes, and related resources.