Lehigh County is currently considering an innovative "land trust" approach for the allocation of $300,000 in Lehigh County's Affordable Housing Trust Fund. As explained by Commissioner Dean Browning, this is a tool to "separate the cost of the property from the cost of the structure as a means to reduce the purchase price. The Land Trust would own the actual land and the individual or family would own the actual house."The land trust mechanism has been used in Burlington for the past 20 years, and is considered a success.
"This model supports affordable housing in several ways. First, homebuyers have to meet low-income requirements. Second, the buying price of the home is reduced because it does not include the price of the land. Third, the trust works with lenders to reduce the cost of the mortgage by using the equity of the land as part of the mortgage calculation. This reduces the size of the down payment and other closing costs and eliminates the need for private mortgage insurance. In all, the trust can cut the cost of home ownership by at least 25%."
But not everyone shares that view. A finance lawyer-blogger notes problems in Florida, and Dean questions whether a $300 thousand contribution will really make a difference. I'll let him explain his reservations in his own words.
"I have substantial concerns about the scale we can achieve with this approach. In addition, I am concerned by the decision to include spec houses built by commercial developers. According to my notes, the $300,000 requested for the Land Trust approach would provide for only 10 homes (4 with Omega, 2 with Community Action and 4 with Selvaggio Enterprises). This works out to an average of $30,000 per home and certainly does not provide the scale needed to make any sort of impact on the affordable housing issue. With a great many families struggling to make their mortgage payments do we really want to devote $300,000 to helping just 10 families? In addition, my opinion is that the inclusion of the spec houses from Selvaggio complicates this even more. The Selvaggio homes are 1,800 square feet, have 3 bedrooms, 2 baths and 2 half baths.
"The homes were originally priced at $209,900 and are currently on the market for $195,900. I can’t reasonably see how we can say that our answer to providing affordable housing in Lehigh County is to take $100,000 of County money to put 4 families into $200,000 townhouses that are priced higher than the median price for homes sold in Lehigh County last year."
Browning will meet Lehigh County officials today to discuss his concerns.
27 comments:
Wow, Browning's critique makes perfect sense.
How is it the county's business to provide affordable housing?
Why can't the house be free?
Allentown Democrat Voter
"How is it the county's business to provide affordable housing?"
Well, the state made it the county's business. It requires that a small portion of every recording fee be set aside for the creation of a fund to help w/ affordable housing.
In Northampton County, we tried to work w/ Shiloh for a portion of that funding, and you've seen what happened.
First, I agree w/ Dean's initial analysis.
Also, to me the fact that Omega and Selvaggio are involved is a flaw. Nothing against those people, but they are for-profit entities.
Lehigh County has several non-profits that do this type of work. In addition to CACLV, there is Housing Association/Development Corporation and Alliance for Building Communities. Also, could Habitat for Humanity play a role?
All of these entities build houses and build them well. And at least in HADC's case they run a training program where they use people who live in downtown Allentown to do the work, training them in the trades in the process. If we're going to use tax dollars in this fashion, let's direct this type of program to them rather than to the for-profit world.
The Banker
This doesn't sound like a very productive way to use the $300,000.
I hope when a better solution is developed they keep in mind that Allentown, and (west) Bethelehem (in LC) already have more then their fair share of affordable housing.
Put in in the western part of the county. Many low-income people work out their in the distribution centers anyway.
Affordable housing is the symptom of poor regional planning. I know that there are plenty of affordable houses in my neighborhood but there is this horrible perception that affordable houses have to be brand new. I'm not sure where the perception comes from, but if somebody buys a house for 80k and takes 10 years to make improvements, they are doing far more for themselves in building equity and value in the property than in moving into a brand new home that will lose value over the same 10 years.
Allentown, Bethlehem, Easton and the boroughs all have plenty of affordable housing. If we had any public policy sense, we would refocus our efforts to improving that housing stock rather than establishing land trusts. Besides, land trusts are intended to serve a common purpose. affordable housing is certainly a common purpose, but the best approach is improving existing housing stock, not building new housing stock. Land trusts should be used for other purposes that help to build market power where the public shares in the benefit through tangible results.
Anon 101pm, I agree in principle w/ your thoughts. Going back to mine on our local non-profits, all of them do housing rehab. Could land trust $$ be used in the property acquisition phase and act as a subsidy in rehabbing houses?
The Banker
It is also a good way to help fund affordable SUSTAINABLE communities, where the land is owned by the community and the home owned by the family. In this way we can convert existing neighborhoods into communities, putting cash into homeowners hands to do repairs and updates to better the neighborhood. It is time we began to seriously work on making the inner cities into sustainable communities.
Thanks for bringing up the topic of Community Land Trusts. I would encourage your readers to look at some of the materials from Burlington, VT. I would direct your readers to the October/November/December edition of the LV Planning Commission newsletter, which talks generally about community land trusts.
www.lvpc.org
The statement that the house is more affordable because the land is taken out of the equation is one of the most common misconceptions about CLTs. Owning the land allows the non-profit CLT to have a say in the resale price of the home. That means the initial buyer doesn't simply pocket the housing subsidy when they sell the house--they have to share the equity with future buyers. In theory, this formula keeps the home affordable for generations. I feel that this makes the CLT model an efficient way to use public housing dollars, since the initial investment is preserved from one owner to the next.
Many of the organizations identified by "The Banker" support the CLT concept, because it provides a stable model for managing the affordability of these homes over the long term.
Thanks for discussing this interesting new idea, Bernie!
-Dave Totten.
Dave,
It is a fascinating topic. I spoke w/ a rep. from NCDCED very briefly today and am hoping we can get together next week so that I can prepare a story describing how this idea erupted in the LV. Apparently NC is a participant in this land trust.
Regardless of Dean's well-placed concerns about the specific use of $300 thousand in this instance, it is pretty clear that land trusts can be a useful tool to achieve affordable housing. After I do some research, I will be writing a second post.
Thanks for the link to LVPC. I am informed they've already done a lot of work on this topic and intend to check it out.
Midnight Madness
Coca-Cola Park
12:01 am tonight
Too little to benefit too few.
And the whole idea of using the land value as part of the mortgage equation smacks of a scheme.
So if the buyer defaults how can the lender take back the house and the property, if the property is in a trust?
It is prudent to be wary of these creative non traditional financing techniques.
Appears similar to the financial derivatives that have have become part of the current financial debacle.
Sounds good but the unintended consequences are not thought through.
Politically Neutral: Homeowner's associations have been around for more years than fancy schemes without regulation. They work quite well, often better than individual lot ownership.
dick nepon: I would tend to agree however I do not think that is what we are talking about here.
That is specific to a socio-economic class that is inherently discriminatory.
The organizations your are referring to, I believe, tend to operate under the guise of mutual cooperation however the true agenda is in protecting and increasing their property values and insuring group solidarity and physical protection, based on a common culture and /or exclusive generalized belief system.
This might be appropriate for Boca Raton, Florida but not subsidized housing in Allentown PA.
Politically Neutral: And why can't that be accomplished in a lower socio-economic area? The benefits of an owner's association are to the owners at any level. They function the same, and they will always have their own best interest at heart, even if that is at a lower financial stratus. But they will function as a group. That is part of the point. The other is freeing up capital for other puposes, including making the cost of entry lower, whether at $100,000 or $1,000,000. Affordable housing is about living arragements as much as about investment. That which makes housing affordable may make it a poorer or a better investment, when all the surrounding facts are considered. Are we trying to house people in a decent way, or are we trying to offer an investment vehicle for long term growth to people who otherwise have no access to such things. While I suspect that both are on the agenda, we need to be clear about who we are trying to serve, and why. I suggest that the means might differ by how we answer these questions.
The more I read about land trusts, the more convinced I am that it does provide a long-term solution to affordable housing. But the short=term problem w/ this venture at this time is that $300k will only help 10 families. Of course, it will help much more than that in the long run. But isn't the problem more immediate?
BOH: Even the longest walk begins with the first step. Maybe it is more about direction at this point, then trying to solve the whole megillah at once. At this point we have no direction so we are stepping out in all directions. Even if we change direction later, it is better to be headed in one direction at a time. Imagine a group of people all headed to the same place, but going different paths, and trying to organize a shift in direction. Let's get started with what we have and can do.
dick nepon: Maslow's hierarchy of needs. It would not work. Trust me.
West Park Squirrel said...
Maslow's hierarchy of needs.
It is a theory, not a natural law. And besides, it does appear to fit quite well with the theory, IMHO.
So the original $300,000 program to help 10 families will quickly grow into a $30,000,000 program to help 100 families?
And we wonder why government grows faster than inflation and the economy? And we wonder why the country, and the state and Allentown are bankrupt?
Please, spare me from all these do-gooders who confiscate other people's money for their goals!
Just keep those low income people away from my neighborhood.
Allentown Republican Voter
Bernie, There is a lot more to this issue than the amount of the funding. More explanatory information will come out as to why the land trusts are successful. My hope is that the issue heard fairly and is not politicized during this municipal election year.
Bill,
I think LC Comm'rs, more than other municipal bodies, can rise above the politicis. I'm pretty much sold on the land trust concept. Based on what I've read, it appears to be the way to go long-term. I also think Dean's points about only 10 families being able to benefit are cause for concern. As you note, we should wait for more facts.
So the government is given even greater control of our lives.
The amount of control is commensurate with ones financial assets.
I see - a depressed stock market really is beneficial for socialism.
Hm! starting to make sense. Now Bill L and the commissioners are jumping on board the latest trend in modern day conscription.
We should wait for more details to come out?
Should we wait until government is stepping on our throats some more, telling us how much they are going to help us?
Bill, Bill, Bill you have become such a political animal.
Property taxation in Allentown is based on a system known as land value taxation wherein land is more highly taxed then building ... Will the land trust as owner of the land pay this higher taxed portion and not the owner of the House or will the House owner pay rent for the land?
Dennis Pearson
Another way to look at this is that we are becoming more like subjects rather then citizens day by day ... In England nobody owns the land for their homes ... They just have leases ... The net effect is when the lease expires and is not renewed the house owner might have to move his home or lose it.
Dennis Pearson
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