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Champlain Housing Trust: Affordable housing through community land ownership

With city dwellers facing ever-rising housing costs, there is rising interest in community land trusts (CLT) as a way to curtail rampant speculation in the property market and provide permanently affordable housing. Inspired by the garden cities movement and the ideas of Henry George, CLTs aim to keep housing affordable in perpetuity via a housing model which allows families to rent or own their home, but with ownership of the underlying land being retained by the community. Housing within the CLT is typically governed by clear rules intended to maintain affordability, such as requirements to sell houses to low-income families, and limits to the amount of capital gains that homeowners can make when selling their property.

Given that many CLTs establish a clear distinction between the ownership of land and buildings, they hold significant promise as an alternative housing model that can provide affordable housing while also implementing the core principles of Resource Justice (RJ). Specifically, CLTs allow for the fruits of human labor (such as houses) to be owned by individuals, whereas the value of natural resources (such as the land) is partially captured by the trust and deployed for purposes that benefit the community at large. 

To explore the extent to which actual existing CLTs accord to these principles, this article conducts a case study of a highly regarded land trust operating in Burlington, Vermont. Now known as the Champlain Housing Trust (CHT), we will tell the story of how this CLT came together, its key goals and the policies which seek to achieve them, and how the trust operates both financially and from the perspective of an incoming and outgoing household. We will then conclude by discussing the extent to which the CHT aligns with RJ objectives of sharing land rents among the community, and consider lessons from the CHT model for aspiring CLTs. 

The Story of Champlain Housing Trust

Back in 1983, the pressing need for affordable housing in Burlington, Vermont led to over fifty community members gathering in a conference hall for what would become the first official meeting of the Burlington Community Land Trust (BCLT). BCLT was founded on the core vision that housing should be a basic right and not a commodity to be bought and sold for speculative profit. Principally, this was to be achieved by the trust retaining ownership of land, while selling houses to low-income families on a 99-year lease and with controls in place that would keep housing perpetually affordable. A core pillar of the trust was to institutionalize democratic leadership, with their board consisting of three different types of important members including three types of residents: homeowners, renters and co-operative housing members. One third of the members of the board includes homeowners or renters who live in the CHT homes. Another third is the representatives of CHT’s general membership: people who live within CHT’s service area and heavily support their mission, but do not live in a CHT home. The last group is made up of officials from the public sector within the municipal government of the CHT’s three-county service area.

 Under the then mayoralty of Bernie Sanders, the City of Burlington became the first municipality in the US to help fund a land trust, giving BCLT $200,000 for the provision of affordable housing. Outside of the funds granted by the city, the BCLT began to gradually expand operations with grants, donations, and loans. Grants and loans included some Community Development Block Grants (CDBG), Burlington Employee Retirement system, a match loan from the Burlington Savings Bank, low or interest-free loans from church groups and socially responsible investors, and donations and support from a wide range of sources, including banks, businesses, churches, and realtors. By May 1987, the BCLT received a grant from the city’s CDBG program to augment its property acquisitions, supplemented by a $1 million credit line from the Burlington Employees Retirement System. The BCLT thus became the first community land trust in the country to get a loan from a pension fund. By mid 1989, the BCLT had over $3.7 million in assets balanced against $2.8 million in liabilities (Soifer 1990).

In the summer of 1984, BCLT proceeded to purchase its first house which was sold to Kathy Neilson, a school librarian with two children. The home was a vacant single family home and was presented during a public meeting in the local library where Neilson became intrigued into buying the first home that would represent the BCLT model. Neilson volunteered as the first owner so she could secure a house in which to raise her two children. After some negotiations with the Vermont Housing Finance Agency, the BCLT board was able to create a mortgage product for resale-restricted homes on leased land. Neilson  and her children were finally able to move in 1985. 

Over the 1990s BCLT started to develop properties for non-profit community organizations, expanding into larger community development projects to help transform blighted properties into a community of neighbors. By 2004, BLCT had helped develop 320 single family homes and condominiums, with assets worth around $20 million, an operating budget of nearly $2 million, and 31 staff members. Many of their homes were built on Burlington’s waterfront, providing affordable housing in an area historically available only to the wealthy. The city of Burlington also requires 25% of all waterfront developments to be permanently affordable compared to 15% for the rest of the city, bringing many discounted properties into the trust. BCLT has also expanded their efforts to include artists’ co-ops, retail outlets and office spaces for nonprofit organizations. The rest of the properties were acquired in the trust’s Old North End neighborhood with its highest concentration of low-income housing in VT. 

Towards the end of 2006, BCLT merged with the Lake Champlain Housing Development Corporation, together forming the Champlain Housing Trust (CHT).  Today, CHT has properties across three counties in northwestern Vermont: Chittenden, Franklin, and Grand Isle. CHT stewards over 2,500 apartments, 650 single-family shared equity homes, 140,000 sq. ft. of commercial space and five housing cooperatives. With over 3,000 properties, CHT remains the largest community land trust in the US.

CHT Goals & Policies to Achieve Them

At the core, CHT’s goal is to provide permanently affordable, not-for-profit housing to low-income residents of Vermont. “We strive for no economic displacement,” explains Brenda Torpy, Lead Consultant at CHT. This is achieved through a combination of subsidized access to CHT housing, a shared equity model of homeownership, and deed restrictions which keep housing affordable for subsequent generations.

Here’s how this is achieved in practice. CHT’s rental units are typically offered at rents which are priced such that a household earning 60% of the median income for that area would be spending less than 30% of their gross income on rent. These rents are only increased if CHT’s operating costs rise, for example because of an increase in utility costs. Rents in subsidized units are often adjusted for the income levels of households which apply. Federal subsidies are deployed to help fund these developments and keep rents affordable, for example through the Low Income Housing Tax Credit (LIHTC) and housing choice vouchers.

Low-income households which are interested in buying into CHT must demonstrate that they have a stable income and a credit score of over 660, plus some savings. If these criteria are met, CHT will typically help prospective buyers with their down payment and offer an affordable (below market rate) price to buy a home. Technically properties are sold on a 99-year leasehold, however in practice these leases never reach their expiry date. CHT will often help potential buyers access subsidized loans, and will provide financial education, for example around improving their credit scores.

Having entered the trust, homeowners must pay a stewardship fee of $45 per month to the Trust, sometimes referred to as a “ground lease fee.” In addition, there is a sliding-scale membership fee which ranges from $1 to $50. Together, these fees help the Trust remain mostly self-sufficient with respect to operating expenses. Thanks to Vermont legislation, property taxes are reduced by around a third for deed-restricted properties like those at CHT. Homeowners must, however, pay all transaction fees associated with buying or selling their house.

When homeowners decide to depart from CHT, they are allowed to on-sell their house, but can only keep a portion of the money from sale. Specifically, CHT’s resale formula allows them to keep their initial down payment, plus any equity they have generated by paying down their mortgage, plus the value of any improvements they have made to the house through renovations, and plus 25% of any increase in their property’s land value during their tenure. Recognizing increasing land values are largely caused by the community at large, the remaining 75% of this land value uplift is retained by the Trust. This method of land value capture provides a pool of funds which can be redeployed to maintain affordability for the new incoming homeowner. There is a balance between enabling the homeowner to have secure housing and build a modest amount of wealth, while also preventing the rampant speculation that we see in the private market and which puts homeownership out of reach for so many households. 

Resale formula used at CHT. From here.

CHT from the Perspective of a Household

To return to the example of CHT’s first resident, Kathy Neilson, when she bought her house it was thought to be worth $55,000 on the open market, but was sold to her family at the discounted price of $42,000. BCLT also helped her to secure a low-interest mortgage from a local bank. While the subsequent details are unknown, if Neilson had taken a $32,000 loan, invested $10,000 into capital improvements on the property, and subsequently sold it for $150,000, she would have been entitled to retain $70,000 of this resale, per the following formula:

Homeowner’s share of appreciation (HSOP) = 25% x [$42,000 x ($150,000 – $55,000)/ $55,000] = $18,000

Resale price = HSOP + Initial Purchase Price + Renovations = $18,000 + $42,000 + $10,000 = $70,000

Between 2003 and 2008, there were 200 homeowners who departed CHT, after having lived there for five and a half years on average. After the resale formula had been applied, their average capital gain from homeownership was $12,000, providing a modest return on investment, but far less than is typical for the private housing market. Approximately half of all departing homeowners apply for some credit for having made capital investments (maintenance) on their home, with the average credit being nearly $6,000 and about two thirds of CHT sellers go on to purchase in the private market.

Financial Position of CHT Today

So let us take a deep-dive into the nuts and bolts finances of how a land trust like Champlain Housing Trust operates. During the 2021 fiscal year, CHT brought in $37m of revenues and gains, just under half of which came from rents (including both rental properties and stewardship fees, supplemented by 10% from property management fees. These ongoing revenues are typically deployed to cover overhead operating expenses such as property management, staffing and overhead, resident support programs and financial counseling. Conversely, programs to expand CHT’s operations and add new properties to its portfolio typically require lump-sum support from private grants or targeted state funding. Grants comprised one-third of CHT revenues in 2021, including support from the Vermont Housing & Conservation Board to purchase specific properties in Williston and Shelburne. Likewise, the New England Federal Credit Union gave CHT a $1m grant to help support BIPOC households into homeownership.

Property management represented more than half of CHT’s $26m in expenses during 2021, plus an additional 27% dedicated to operating expenses on other consolidated properties. Stewardship and homeowner support programs represent 9% of expenses. Reflecting CHT’s limited ability to actively conduct novel real estate developments, these expenses comprised only 4% of outgoings in 2021.

Turning to financial position, CHT had nearly $200m of assets in FY2021, half of which was land and buildings. Partial ownership of homes within CHT via the shared-equity program comprised an additional 18% of assets, with 12% being notes receivable, likely loans to residents. CHT had $100m of liabilities, almost all of which was long-term debt, leaving the Trust with a net financial position of $95m.

Affordable Housing through Shared Ground Rent

Champlain Housing Trust has been very successful in providing permanently affordable housing to residents of Vermont. It has helped expand access to homeownership for families who earned on average 30% less than the median household in the area. Affordability has even improved over time, with the typical home offered by CHT becoming affordable to households earning 54% of area median income, 5% lower than in 1988. Even through the global financial crisis, foreclosures have been rare, and very few units have been sold out of CHT’s portfolio. As of 2022, these affordability benefits are being shared with 670 homeowners and 2,540 households in apartments, nearly 500 of whom were previously experiencing homelessness. 

CHT homes have remained affordable over the long-term.
Lands in Trust, Homes that Last

All of this has been achieved by having CHT retain a share of the increase in property values, recycling this value to enable affordable access to subsequent generations of homebuyers and tenants. Indeed, CLTs emerged from precisely this vision: that affordable and inclusive communities could thrive where ownership of their land was retained in community trust, with a ground rent used to fund municipal infrastructure and social services. We share this vision at Resource Justice, where we study ways in which the earth’s resources can be used for the benefit of everyone in the community. We therefore proceed to suggest some ways in which the policies of CLTs such as CHT could be amended to draw closer to realizing this vision, while also expanding the volume of affordable housing on offer. However, we acknowledge that the usefulness of these suggestions will depend on realities on the ground for any given CLT, and do not intend to suggest that one size fits all.

One option is to have the stewardship fee, which is currently a fixed $45 per month for all households, be adjusted so that it is more of a true ground rent. Ideally this fee would be higher for properties in better locations (places where market rents are higher) and distinguish between apartments and standalone dwellings, to better reflect the location value that the community land is providing to each type of household. Likewise, while $45 is quite typical, CLTs could consider raising the average ground rent to be closer to the full location value being produced by each parcel of land. This would have two key advantages. First, it would give the CLT a larger stream of funds with which to pursue social objectives. For example, these funds could be used to expand community support services, or to help CLTs to add to their portfolio of properties without having to wait for lump-sum financial support from public grants and private philanthropy. CLTs could consider offering some dwellings to households earning middle-to-high incomes, while charging much higher ground rents. These revenues could be used to  even greater levels of affordability for the remaining low-income households. However, we acknowledge that current policies may prevent CLTs from following this path, as they often rely on grant programs which contain strict requirements that the grant only be used for the provision of affordable housing to low-income households. Second, higher ground rents help to suppress the up-front sale value of a property, simultaneously reducing the size of mortgages that households must take when joining the CLT while also contributing to the goals of keeping properties permanently affordable.

With the housing crisis continuing to escalate, there has never been greater need for innovation with creative housing models that can provide permanently affordable housing. Many such models will involve finding ways to capture land rents and deploy them for social purposes. As we have seen, Champlain Housing Trust provides an excellent example in this regard, demonstrating the way in which communities can retain ownership of land and use deed restrictions and shared equity programs to prevent real estate speculation and instead provide affordable housing to current and future generations of residents.

“In Burlington, Vermont for twenty-five years, the Champlain Housing Trust has been doing what it promised to do.” – John Emmeus Davis & Alice Stokes

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