Community Land Trusts Get a California Makeover

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California laws may help community land trusts tackle a housing crisis and other issues.

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California dreamin’ has turned into a nightmare for many Californians, as residents of the state often face high housing costs and some of the longest car commutes in the United States. But due to two state laws that took effect in the past year, community land trusts may soon help keep roofs over Californians’ heads and frustrated commuters off the highways, delivering environmental benefits as well.

California’s high housing costs are the “most significant driver of inequality in the state.” The state’s housing stock has failed to increase with its population in recent decades, and building affordable housing costs about three times as much in California as in Texas or Illinois. Even the COVID-19 pandemic has not slowed soaring home prices, which rose by an average of 17 percent across the state in 2020.

Meanwhile, lawmakers have scrambled to protect millions of tenants from eviction in light of the economic strain of the pandemic, and to increase housing options for Californians experiencing homelessness, who make up one-fourth of American homeless persons. In 2019 alone, California Governor Gavin Newsom signed over 20 bills targeting the California housing crisis.

Some of this legislation seeks to address California’s housing woes by expanding the presence of community land trusts, which promote affordable housing by decoupling land costs from home costs. In a community land trust model, a mission-driven organization, such as a nonprofit, owns underlying land, while low to moderate-income individuals lease or buy housing on top. The organization enforces housing requirements, such as mandating the number of affordable units and restricting resale prices.

These measures keep housing affordable for multiple generations of buyers, as the community land trust residents are shielded from paying for the increasing market value of the land itself. Through this model, California land trust groups have managed to secure more than $220,000,000 in community assets.

In contrast, other ways of making housing more affordable, such as providing low-income earners with mortgage assistance to subsidize a home purchase, may be “lost” whenever a house is resold for a higher price. The Northern California Land Trust discovered that between 2000 and 2016, the amount of assistance that a low-income buyer would need to afford the same house in a local county would have tripled if the trust did not own the underlying land. But after assessing 40 of their properties, the Trust found that when a community land trust imposed restrictions on resale prices, any initial subsidy or mortgage assistance was not only retained, but appreciated by 1,150 percent.

Despite the purported benefits of community land trusts, in practice these trusts have faced an expensive obstacle: California tax codes. Although a 2016 state law attempted to apply tax exemptions to such land trusts, tax assessors persisted to use trust properties’ market values to assess higher taxes—without differentiating land and housing costs, much less considering affordability restrictions. As a result, community land trusts paid “very costly if not prohibitive” taxes while properties were under development.

A 2019 state law sought to remedy this problem. Senate Bill 196 exempts community land trusts from property taxes between the time that a trust acquires a property and when housing is sold. Land trusts are then taxed on the affordable housing sale value instead of the market value of the property, and resale restrictions are accounted for. After acquiring real estate, community land trusts also enjoy a “welfare exemption” from state property taxes for five years. In this way, the state treats trust property in the same ways as other property owned by nonprofits and used “for religious, hospital, scientific, or charitable purposes.”

Despite the tax advantages provided by Senate Bill 196, community land trusts are now burdened with an additional set of transportation requirements, imposed by Senate Bill 743. Effective this past summer, this law aims to reduce Californians’ car commutes by requiring municipalities to evaluate and limit vehicle miles traveled (VMT) by residents when planning new housing developments, including community land trusts.

VMT measures the miles traveled by daily car trips to and from a development, as part of an impact analysis required under the California Environmental Quality Act. Under the law, land trusts must now abide by “reasonable” VMT thresholds set by their municipalities, or “exchange” VMT by developing additional transit-related projects, such as bus stops or bike routes.

Through a recent lawsuit and community organizing efforts, affordable housing activists have opposed lawmakers’ attempts to make VMT restrictions more stringent. Activists argue that VMT restrictions encourage wealthy developers to “infill” areas near city centers and transit options—and to push low-income workers out of urban housing. But since community land trusts often prioritize developments near transit options, Senate Bill 196 tax exemptions may give land trusts new power to compete with other developers near city centers, regardless of VMT restrictions.

The mere existence of Senate Bill 196 may also indicate that California policymakers are comfortable promoting community land trusts, even as they have rejected more direct attempts to legislate affordable, transit-oriented housing. In early 2020, a bill aimed at increasing affordable housing near “major transit” hubs failed for the third time. Some legislators argued that the bill’s “upzoning” requirement, which would have removed zoning prohibitions across the state and increased building heights near transit stops, stripped too much control from local governments.

Finally, tax exemptions and VMT restrictions may create an opportunity for community land trusts to harmonize affordable housing and environmental sustainability goals. Since VMT restrictions track carbon emissions from car travel related to a development, VMT restrictions in effect regulate some of the carbon emissions that community land trusts produce. But trusts also enable low-income communities to engage in other kinds of sustainable development. For example, a community land trust in Irvine, California has developed affordable housing that meets Irvine’s green housing requirements, including a recent “urban infill” site that meets energy efficiency standards for new construction.

Looking to the future, community land trusts could also help increase low-income communities’ resilience to climate change impacts. As California wildfires continue to intensify, community land trusts may be able to acquire damaged properties and rebuild disaster-resistant, affordable housing, similar to how a Florida community land trust responded to a hurricane in 2017.

Although the eventual impact of community land trusts on the state’s housing crisis, car commutes, and environmental resilience remains to be seen, at least the recent policy changes that aim to promote the development of affordable, public transit-focused housing have given Californians more room to dream.