In recent years, cities around the U.S. have been grappling with a crisis in housing supply and affordability due a multitude of challenges, including rising costs and barriers to developing more housing. Innovative solutions and models of taxation such as land value taxes and collective land ownership are concepts that stem from economist Henry George’s propositions, and have the potential to alleviate some of the stress of the housing crisis and reduce urban inequality.
Collective land ownership, the broader concept where land is owned and managed by a community has two major subcategories:
Municipal Land Trusts (MLTs): Municipal land trusts are operated by local governments, and they aim to manage and develop public land for community benefits such as affordable housing, parks, or public spaces. Private owners or developers own the buildings on top of the land, but the land itself is owned by a municipality.
Community Land Trusts (CLTs): Nonprofit organizations acquire and manage land to ensure objectives that benefit the greater community, such long-term affordable housing and curtailing the speculation of land. CLTs separate land ownership from homeownership, allowing individuals to own homes while the trust retains ownership of the land.
This article will outline the features, benefits and challenges of developing on municipal land trusts and review a case study of a municipal land trust still in its early development stages: The Upper Harbor Development in Minneapolis, Minnesota.
Factors of Developing on a Municipal Land Trust
- Land ownership: The municipality, or city acquires or retains ownership of the land, and land ownership is not transferred to any homebuyer or developer even after buildings are developed.
- Financing: The developer (sometimes in partnership with the municipality), secures funding for developments on the land. The municipality may issue bonds to finance the initial capital needed to build a development. The municipality may also lease the land to private parties or developers.
- Management: The management of a municipal land trust, including deciding what to build on the land, as well as obtaining and approving private-public partnerships is up to the municipality and its constituents.
Benefits
- Housing Affordability and Reducing Foreclosures: By separating the ownership of the land from the ownership of the buildings, an MLT reduces the overall cost of homeownership or development. Homebuyers finance only the cost of the building, not the land, which significantly lowers the amount they need to borrow in their mortgages. This results in smaller mortgage payments and reduces the financial burden on homeowners and reduces foreclosures. In the case of community land trusts, foreclosure rates are lower on CLT homes than conventional market-oriented homeownership. In addition, developers who develop the land are also able to focus on financing for the buildings only, and do not need to worry about purchasing the land itself. This can result in the benefits of reduced costs being passed onto individual homebuyers and renters who are looking for below market-rate housing.
- Community Benefits: By retaining the ownership of the land, the management of the land is democratized and the community can reap the benefits when land values increase. This prevents private investors from buying and retaining land and empty lots for land speculation purposes.
Case Study: Upper Harbor Redevelopment in Minneapolis, Minnesota
For the better half of a decade, the city of Minneapolis has been planning a substantial redevelopment project on a municipal land trust along the Mississippi waterfront of north Minneapolis. The 40-acre multi-use development aims to provide the community with new places to work and live including a 19-acre park and a community performing arts center. Most notably, Upper Harbor aims to include an affordable housing development, which the city desperately needs. The city reports that since the year 2000, Minneapolis has lost roughly 15,000 housing units that are considered affordable for those earning 50% of the area median income.
Initially, the city did not intend to retain ownership of the land, but their advisory board saw the potential of the land and encouraged the city to work with developers to redevelop the empty land into a multi-use development. The city worked with constituents and developers to create a community that promotes economic activity and housing affordability. However, the nature of managing a municipal land trust has prolonged the project timeline and financial factors have raised questions about whether it can maintain housing affordability.
For one, the city started to invite constituent input through listening sessions and surveys in 2015 to determine what types of amenities and housing will benefit the most people. Due to the nature of collective decision making and disagreement between different stakeholders, only two elements of the development have been greenlit: the 19-acre greenspace and an entertainment venue.
In addition, although the city promises there will be affordable housing, the developers have not been able to obtain state or federal funding to subsidize the development to make it affordable (such as through Low-Income Housing Tax Credits, or otherwise). Dr. Tom Abeles, an environmental consultant on the project noted that even if the housing is initially affordable, the location, amenities and access to greenspace could lead to rising costs in the future.
Currently, the city has completed phase 1 of development, which set up road infrastructure for the development. Phase 2 aims to include the development of market rate and affordable housing, a 19-acre park, a health and wellness hub and amphitheater. Details of these elements are yet to be determined, and their uncertainty illustrates the complexity of private-public partnerships and collective land ownership.
Sources
https://commonground-usa.net/wp-content/uploads/2020/05/Municipal-Land-Trust-final-report.pdf
https://www.lincolninst.edu/publications/articles/outperforming-market
https://www.minneapolismn.gov/government/programs-initiatives/upper-harbor