An Affordable Housing Trust for the City of Sonoma?

The Housing Land Trust of Sonoma County (HLT) made a presentation to the city council in a public meeting on 9/7/16.

The HLT website says: “Housing Land Trust of Sonoma County is a private, non-profit corporation established in February 2002. The model used to fulfill our mission is the Community Land Trust model (CLT). In this model the land trust organization owns real estate in order to provide benefits to its local community – and in particular to make land and housing available to residents who cannot otherwise afford them.”

The community land trust model has been spreading for the last 40 years and the model advocates for housing sustainability rather approaching housing as a vehicle for market rate profit. The ideas seem progressive and interesting but a look at the HLT website shows no links to staff or a board of directors, and therefore, no way to get a sense of who is running the show. According to the CLT general model, “two thirds of a CLT’s board of directors are nominated by, elected by, and composed of people who live on its land or people who reside within its targeted community but do not live on the land.” (per Wikipedia)

According to the council presentation, the model is based on a partnership between the city, the HLT and the developer. The price of a home will be tied to income, in perpetuity. Land becomes a community asset set aside for the segment of the workforce who earn @ $75,000 a year and who can afford a house priced between $250,000 and $350,000. Anyone who makes less than 80% Area Median Income (AMI) or more than 120% AMI would not qualify for the program. Preference is given for people like teachers and health care workers who have lived in the city for a designated period of time.

The HLT goal is to have the family spend no more than 35% max of their income on housing, as accounting for all housing costs. The goal is to have a debt to income ratio of no more than 42%.

The HLT program works with market-rate developers and with a city’s inclusionary housing provisions. Apparently the developer is asked to donate the land to the city and the city then deeds the land to the HLT and the HLT holds the land in trust for the community. If the HLT goes bust, the city would administer the trust or administration would be farmed to another non-profit.

The HLT makes a 99-year lease to a family and the developer sells the house to the family with a 30-year fixed mortgage. The family has rights to the property and the family agrees to sell to people of the same income level. The family can profit from the sale of the house but only as tied to increases in AMI, and accounting for appreciation, debt reduction and down payment.

The process for buying and selling the house is the same as for market rate, the only difference is that the sale price is agreed to be lower. The HLT model posits a one-time public investment that will serve multiple families down the road.

Some questions left unanswered: Who is making the investment? Does the city pay the difference between market rate and the lower sale prices? How does the developer make a profit by selling the house for less? Does this model essentially ask the developer for charity? Does the developer get a tax write-off in lieu of profit? Where would a developer make up the money lost between a Sonoma average market rate house selling at $700,000 and a HLT house selling at $250,000? Would the price of the other units in the development be increased to make up the inclusionary loss? How can preferences be applied, if public money and administration is involved, without running afoul of the Fair Housing Act? How do HLT staff get paid, by who and through what funding source?

For more info, see the HLT website http://www.housinglandtrust.org/Aboutus.htm and the Northern California Land Trust website