A counter-trend on foreclosures

 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.

A large landscape network

For two days in May, leaders of 19 large landscape conservation initiatives joined 10 resource professionals and nine members of the Lincoln Institute’s executive committee on large landscape conservation to explore creating a network of practitioners working at the large landscape scale. The large landscape conservation initiatives represented at the meeting reflect the growing number and diversity of such efforts across North America, varying in geographic scale and distribution, the age of the initiative, focus on urban, suburban, or rural lands, and governance structure. At the same time, each initiative exhibited the hallmarks of large landscape conservation: a multi-jurisdictional, multi-sector, and multi-issue approach to addressing conservation challenges and opportunities.
     Large landscape conservation leaders shared the experiences and lessons learned as well as future aspirations and needs of their initiatives, including Chicago Wilderness, Sierra Business Council, Cascade Agenda, Roundtable on the Crown of the Continent, Ozark Partnership, Yellowstone to Yukon, Southern Appalachian Forest Coalition, Pinelands Preservation Alliance, and Wildlands to Woodlands, among others. They also examined several existing networks, including the Land Trust Alliance, National Alliance of Heritage Areas, CAMNet, and the National Network of Forest Practitioners, and extracted relevant lessons from those networks.
     At the end of the workshop, these leaders decided to create a new Practitioners’ Network for Large Landscape Conservation and organized themselves into a coordinating committee and several working groups focused on capacity building, public policy, and networking. The group selected Lynn Scarlett, former acting secretary of the Interior and current fellow at Resources for the Future, and Bob Bendick, director of U.S. government relations for The Nature Conservancy, as co-chairs of coordinating committee, which has developed a draft charter and draft work plan to guide the network moving forward. Additionally, the network is finalizing a working paper that analyzes how the upcoming farm bill reauthorization may present opportunities to assist large landscape conservation initiatives in meeting their objectives.
        The goal is to engage colleagues in large landscape conservation initiatives throughout North America in the network, and plans are underway for a Web site and a seminar introducing the idea at the Land Trust Alliance Rally in Milwaukee, Wisconsin, in October.
        Just over 20 years ago, Boston attorney Kingsbury Browne, while a fellow at the Lincoln Institute, recognized the need to provide technical support for the growing conservation land trust movement.  His efforts led to the creation of the Land Trust Exchange in 1982, which subsequently became the Land Trust Alliance, now numbering over 1,500 land trusts across the U.S. “With the launch of this new network, we are in a similar position to advance the important new field of large landscape conservation,” said senior fellow Armando Carbonell, chair of the Department of Planning and Urban Form, who helped organize the workshop with Lincoln Institute fellow James Levitt and Matthew McKinney of the Center for Natural Resources & Environmental Policy at the University of Montana.
       For more information on the Practitioners’ Network for Large Landscape Conservation, contact Shawn Johnson at the Center for Natural Resources & Environmental Policy (shawn@cnrep.org). More information is also available in the Lincoln Institute’s Policy Focus Report, Large Landscape Conservation: A Strategic Framework for Policy and Action, and a paper by Jamie Williams, Large Landscape Conservation: A View from the Field.

Property tax in China

      A residential property tax in China may seem like a contradiction in terms, but in fact a system for collecting a property tax is indeed what the rapidly growing nation, with its explosive housing market and changing rules on private ownership, is contemplating. The Lincoln Institute’s China Program has been there to help, leading a successful property tax demonstration project last year to develop a computer-assisted mass appraisal (CAMA) system that was both suited to China's needs and in line with international standards, that was employed to run a sample valuation for 18 commercial properties at Beijing's Financial Street.  The results of this demonstration project were compiled into a formal report that was presented at the China Program's conference on land taxation reform last September, which was also attended by the representatives of the International Association of Assessing Officers.
          As the public policy debate in China has now largely shifted to first implementing a residential property tax, the China Program, at the Lincoln Institute-Peking University Center for Urban Development and Land Policy, has continued efforts in research and capacity building in the areas of property tax assessment and CAMA/GIS technology.  Earlier this year, a property tax fact-finding trip, building on last year's demonstration project, included meetings with policymakers, tax officials, and scholars in Shenzhen and Hangzhou, involved with property taxation.  Shenzhen and Hangzhou are both among the China's "property tax pilot" cities, which means they have been working for some years on their own property tax pilot projects without actually formally administering a property tax.  The fact-finding trip included a day-long roundtable with the Shenzhen institution responsible for property taxation, a meeting with the Hangzhou municipal tax authorities, and meetings with two Hangzhou property tax assessment and administration information technology companies recognized by China's State Administration of Taxation as preferred technology providers. The China Program and the Center for Urban Development and Land Policy have emerged as one of the leading sources for objective information about international experiences in the property tax, assessing techniques, and property taxation in China, said China program director Joyce Man, and will continue to be available to provide assistance and information.
    A further indication of how the property tax is moving ahead in China: for the first time a Chinese delegation will travel to Phoenix in September for the annual meeting of the IAAO , where Joyce Man will also be delivering a keynote presentation on Chinese property tax reform. This account of the property tax in China and Man’s engagement on the subject appeared in Fair & Equitable, the IAAO’s monthly magazine.

Cadastre by comic book

      How can a comic book help municipal officials do a better job? In the case of Brazil’s cadastre departments, charged with cataloguing land for the collection of the property tax, an illustrated booklet published by the Brazil’s Ministry of Cities and the Lincoln Institute, with support from Caixa Economica Federal,  has proved to be widely popular. Zeca Dastro and Guidelines for the Multipurpose Territorial Cadastre available in Spanish and Portuguese, includes typical situations that employees of Brazil’s municipal cadastre departments confront in their efforts to implement new land information systems that meet the demands of both the public and private sectors.
        Some 5,000 copies of the colorful and engaging booklet have been distributed through Brazil, providing a simplified interpretation of Brazil’s 2009 Guidelines for the Multipurpose Territorial Cadastre. The comic-book style approach strikes a chord with both municipal officials and the public, illustrating common scenarios and opportunities for the improvement of the cadastre system and the property tax, including better citizen involvement, said Martim O. Smolka, director of the Program on Latin America and the Caribbean. “The situations really come to life in this format, in a readable, attractive, and compelling way, for what can be very technical material,” he said. The booklet aims to address potential areas of confusion or misunderstanding.
      Those interested in receiving hard copies should send a request with full address to capacitacao@cidades.gov.br  (O Manual está sendo distribuído em todos os municípios do Brasil. Aqueles que desejarem cópias impressas adicionais devem fazer a solicitação enviando seu endereço completo para o  e-mail:  capacitacao@cidades.gov.br ).
       Plans are underway to extend the project to other topics. A similar illustrated booklet is about to be released on the property tax in general, and another is in the works on the sale of building rights, the system of value capture under the Brazilian urban development law.

True Value II

    Land value capture is now a popular topic among practitioners of local public finance—in part because the recession-related decline in local government revenues has piqued interest in new revenue sources, and in part because of the need for new ways to finance local infrastructure that has been degraded by underinvestment, writes Lincoln Institute president Gregory K. Ingram in the current issue of Land Lines.  His report on the 6th Annual Land Policy Conference on value capture:
     Basics of Value Capture
     Changes in the value of land often result from factors unrelated to the efforts of the landowner: actions by the community in the form of infrastructure investments; nearby growth in industrial, commercial, residential, or recreational activity; zoning that permits the owner to develop the land; or the incremental growth of the community. Value capture applies a tax or fee designed to return to the community some or all of the value added to land by community actions. Its application is particularly attractive when public investment—for roads, water supply, sanitation, or even local amenities such as street lights—increases property values.
     International Experience
     Land leasing. Perhaps the broadest and most comprehen-sive application of value capture is in China, where municipalities buy agricultural land from farmers at agricultural use prices, service it with infrastructure, and sell it to developers as urban land with permits for urbanization projects. The difference in price between the land’s urban and agricultural values accrues to the municipality, provides a large share of local revenue, and pays for the installed infrastructure.
     Co-development. Transit companies in Hong Kong and Tokyo have used revenues from the co-development of residential communities and commercial areas around new transit stations to help finance their costly projects. In Tokyo nonfare revenue is 30 to 50 percent of total revenue for some transit lines. In both cities ongoing revenue from property management is becoming more important than profits from development projects and provides a sustainable income stream.
     Development taxation. Attempts to tax betterment values in the United Kingdom began in 1909, but implementation was impeded by valuation and other challenges. Direct betterment levies were replaced by contracts with local authorities under which developers contribute to infrastructure and service provision, affordable housing, and other planning obligations. These contracts are evolving into community infrastructure levies, a betterment levy by alternative means. Following a different historic path, France also has a local infrastructure tax on new development.
     Land pooling. India has experimented with land pooling in its implementation of new town planning schemes that replace the old master plans. The practice encourages owners of undeveloped or haphazardly developed land to pool their plots together and then receive a serviced parcel or constructed space when the development is completed. Ahmedabad’s approach uses 15 percent of the land for roads, 10 percent for parks, 15 percent for auction to others, and 60 percent for the pool members.
     United States Experience
     Among the specific U.S. policies that embody value capture are special assessment areas that often include betterment charges. For example, Community Facilities (or Mello-Roos) Districts apply fees paid by residents to retire bonds sold to finance developmental infrastructure. Business Improvement Districts and Tax Increment Finance schemes use earmarked tax or fee revenue from a designated area to fund improvements. Privately negotiated Community Benefit Agreements obligate developers to provide community facilities or economic benefits for local residents. Citywide development and impact fees used to finance infrastructure and related development investments are normally cost-based, but succeed only when the betterment value exceeds the cost.
     Most notable about the U.S. experience is that the terms—betterment levies or value capture—are used rarely, even though their principles are practiced widely. Moreover, this country can learn some new value capture approaches from international experience.
     The conference volume with papers and commentaries by more than 25 contributors will be published in May 2012.