Thursday, July 28, 2011

Community Land Trust = Most Expensive Affordable Housing in Hawthorne?

Some of you may have noticed my soft spot for the Hawthorne neighborhood. 

I’m not sure if it’s that I just always love the underdog, or perhaps a challenge, but whatever it is, I find myself paying an inordinate amount of attention to this small neighborhood on the opposite end of the Northside from my own.*

In terms of real estate values, Hawthorne may well be the single most depressed neighborhood in all of the City of Minneapolis. Indeed, over the last four months, the average sold price for single-family residences in that neighborhood was a mere $39,085.

(click to enlarge) 

So knowing this, and being able to count a healthy and growing number of friends who today live MORTGAGE-FREE in NoMi as a result of these ridiculously low prices, is it any wonder that I was a little taken aback to hear that the non-profit Urban Homeworks had decided to sell their newest Hawthorne listing as a Community Land Trust property?

What does this mean, you may ask? Right right – let’s talk about exactly what that means:

The City of Lakes Community Land Trust promotes a model of “homeownership” which is supposed to preserve affordability, among other things. Here’s a little background from their website:

The City of Lakes Community Land Trust resulted from a collective, committed effort by Minneapolis residents and neighborhood associations to preserve affordable housing ownership in their community. 
In late 2001, a collaboration of Powderhorn Residents Group (PRG), Seward Redesign, Powderhorn Park Neighborhood Association (PPNA), and the Lyndale Neighborhood Development Corporation (LNDC) began educating themselves on best practices relating to creating and stabilizing affordability in their neighborhoods. 
Through research, community conversations, an environmental scan, and the identification of opportunities, the collaborative group determined that there was a significant need in the City of Minneapolis to form a Community Land Trust (CLT). 
Housed and incubated by PRG, the collaboration incorporated as the City of Lakes Community Land Trust (CLCLT) in August 2002 and acquired its 501(c)(3) status in August 2003. 
The CLCLT hired its first staff person in October 2002.  Current CLCLT staff consists of three employees (two full-time and one part-time). To date, the CLCLT has assisted over 70 low- and moderate-income households into CLCLT homeownership since the fall of 2004 and anticipates adding another 20-30 households over the next 18-24 months.   
The mission of the CLCLT is to provide and foster stewardship of perpetually affordable home ownership opportunities for low- and moderate-income families throughout Minneapolis and is achieved through three major objectives, including:
• Assisting households that otherwise would never be able to purchase a home responsibly in having the ability to do so;• Ensuring that, if and when the homeowner(s) decide to sell, the CLCLT is there to keep the home(s) affordable for other income-qualified households; and• Provide support necessary for CLCLT homeowners be successful in homeownership. 
Nationally, there are over 150 CLT’s, which work to create perpetually affordable housing while simultaneously balancing escalating housing market appreciation with the ability to meet housing needs for low- to moderate-income homebuyers. 
CLT’s provide permanently affordable housing by owning the land of a particular property but selling the home on the land to an income-qualified buyer.  The homeowner then leases the land from the CLT through a 99-year, renewable ground lease. 
The ground lease connects the homeowner to the community and to keeping the house permanently affordable by including a resale formula that determines the home’s CLT sale price and the homeowner’s share of the home’s increased value at the time of sale. 
This mechanism facilitates the initial investment made in the home by public and private subsidy sources remaining with the home to make it affordable to subsequent, income-qualified buyers.  
Now, that’s all well and good, and I’m very pleased about their three staff people and their commitment to affordability and all… but it really begs the question: Isn’t Hawthorne affordable ENOUGH already? And frankly, considering the fact that the property in question is currently listed at $130,000 (more than THREE TIMES the average sale price over the last four months in this neighborhood) one has to ask, is this really about affordability?

And yes, I am sure that the UH property is (will be when the rehab is completed) in better condition than much of its active competition in Hawthorne right now. And if anyone wants to check, here's that inventory list:

(once again, click to enlarge)

But here are two important things to keep in mind with respect to that notion:

First, a CLT sale includes the house ONLY. So, for one hundred and thirty thousand dollars, you, my friend, do not actually become the owner of real estate. You become the owner of an improvement (the house) and enter into a lease for the land.

Second, even if the competing houses are in poorer shape, they are SO much cheaper, that even when combined with rehab costs, they’re mostly going to end up more affordable than the UH/CLT property.

So, what gives?

I’d really like to know, personally… because I find this highly perplexing.

 Oh, and here's the house:

 I do admit that it's got good bones... 

But so do a whole lot of other homes in Hawthorne that wouldn't sell for such a price in this decade.

*Oh, and I also love a deal – so there’s that as well.

1 comment:

The Hawthorne Hawkman said...

I spoke with Urban Homeworks about this issue as well. Admittedly the purchase price comparisons in this post aren't quite apples to apples. Probably quite a few of those comps were not livable at the point of sale. Still, I'm convinced a more thorough market analysis would still find the CLT houses to be overpriced.

I liked--LIKED in the past tense--the CLT model when home prices were skyrocketing. But purchase prices/monthly payments are not the barrier to home ownership that they once were. Now that barrier has much more to do with access to credit or down payment.

I don't see the CLT model as addressing barriers to home ownership, and in this marketplace they don't seem to offer a more affordable alternative either.