Mortgage delinquencies are skyrocketing and are at levels even higher than during the Great Recession. According to a recent USA Today (May, 21, 2020) article: “Mortgage delinquencies surged by 1.6 M in April, the biggest monthly jump ever.” And it’s not just in one particular region of the country:
In the top 100 largest metropolitan areas, Miami (7.2%), Las Vegas (6.2%) and New York City (5.4%) topped the list for cities with the largest delinquency increases. Nevada was among the states with the biggest delinquency rates, climbing 5.2% to nearly 8%. New Jersey and New York followed, rising 5.1% and 4.9%, respectively.
And “according to real estate data company RealtyTrac, there were 6,324,545 completed foreclosures from January 2006 to April 2016.” (Market Watch, May 31, 2016)
The effects of losing a home disrupts every other part of a household’s stability: its credit rating, its family stability and security, its social network, and, not least, its future welfare prospects. Having to restabilize one’s life in a new home can take months, and even years. It may necessitate moving to a new locality and finding a new job. The disruption is not just personal; each foreclosure impacts our whole society.
Little thought has been given to means by which to now mitigate such disruptions. But what has been ignored by policy analysts of every stripe is that a home, viewed as a real estate parcel, is separately both a house and a land parcel. In the United States these have typically been accepted as one unit. But not always. There are many instances where the titles to land sites and to structures are treated separately. This is true in several instances in the state of Hawaii, as well as on Native American lands. Most creatively, several new housing developments have relied upon community land trusts (CLTs), an arrangement now widely employed in several states (https://community-wealth.org/strategies/panel/clts/index.html). There are now over 225 CLTs in the United States, according to one association supportive of this design (groundedsolutions.org). They are sited in both urban areas, such as one in Albany, New York (albanyclt.com), and remote in locales. A reasonably up to date list of CLTs in North America can be accessed at https://centerforneweconomics.org/apply/community-land-trust-program/directory/.
It should also be noted that not all CLTs are contiguous parcel sites. Four incorporated programs in Vermont are long established, and the Champlain Housing Trust in Burlington has 78 homes, 228 rental units, and 340 sites in nine mobile home parks. All told, it stewards 6,000 acres of conservation land. A home is owned much like conventional housing, but the land on which the house is sited is rented. Because it is the land that is often the most expensive component of the property, relieving the owner of a daunting down-payment (and a steep mortgage) makes living arrangements much more feasible.
There is no reason why the land components of many homes in danger of foreclosure should not be able to cede their land titles to CLTs, or for that matter to local governments, and retain titles to their structures. An indebted homeowner might sell his claim to the future land rent flow from his homesite to the government, and then take the cash received and use it to pay down the mortgage (or any other debts) and also keep title to the house. The greatest challenge is in accurately identifying what portion of the home parcel is land value and which is its structure. This calls for a sound separate assessment of land and improvements, which is common practice in all States but not often performed well. In Maryland, to take a good example, the state does one third of the counties each year, so that assessments are always fairly up to date. But use of the CLT model would require better assessment administration.
Providing and assuring greater homeownership stability such as the CLT model provides for may require legislative action in some States. On the other hand, it appears that every State now has CLT designs of some sort, even though the arrangements often call for contiguous parcels. Whether the CLTs are private corporations or collections of sites owned by local governments, the advantages to be gained by assuring greater housing continuity and stability argues that this is a model that should much more widely be put into practice.