More cities turn to ground leasing to create housing

  • Kor Community Land Trust breaks ground on an affordable cottage development in east Bend. (Submitted photo)

By Haisten Willis Special To The Washington Post

Bend, Atlanta and other cities have community land trusts to make homeownership affordable

ATLANTA — The crumbling neighborhoods stand in stark contrast to the bustling downtown area less than 2 miles away that has become a tourist magnet with such attractions as CNN Center and World of Coca-Cola.

But the neighborhoods — longtime home to a stable population of mostly minority, low-income residents — soon may get a piece of the prosperity nearby. A national revival trend is bringing interest from more affluent groups, including investors, to Atlanta.

It’s a mostly welcome change but brings with it all the anxiety associated with gentrification.

“We’re seeing new people become interested in the community, and even though there has been a high rate of vacancy in the area, what you don’t want to see is displacement,” said Eloisa Klementich, president and CEO of Invest Atlanta. Among the city’s responses is a ground-lease program designed to protect what Invest Atlanta describes as “legacy residents” who want a path to homeownership in their neighborhood but can’t afford a mortgage.

Through the Atlanta Land Trust, homebuyers using the ground-lease program purchase only the house itself, leasing land from the city at $1 annually on a 99-year ground lease. If the home is sold at a later date, the owners keep any appreciation on the structure, while the land remains in the city’s hands in perpetuity.

The concept is under review in big cities such as Atlanta and metro Miami, plus small and mid-size areas, including Chesterfield County, Virginia; Tacoma, Washington and Bend, where Kôr Community Land Trust uses a similar model to create more affordable housing. Proponents say it lowers costs, increases neighborhood stability, creates pride of ownership and builds equity over time.

The Invest Atlanta houses will have target price points from $135,000 to $160,000, significantly below the city’s median home price of $275,000, according to the Atlanta Realtors Association.

Including down-payment assistance, the houses could be available to those earning between 60% and 80% percent of the area median income.

Not only do residents purchasing ground-lease houses pay less in upfront and monthly costs, but they won’t pay property taxes on the land and won’t be subject to the price fluctuations that often accompany renting.

Vincent Yao, a Georgia State University Urban Studies Institute professor, points out that ground leases are also the norm in parts of Europe and Asia and that the added costs of land greatly increase the price of homeownership for Americans.

“Land typically accounts for a significant portion of the cost,” Yao said. “In some places, the land costs more than the structure.”

Ground leases can be an effective method of creating affordable units, he said.

In Virginia, Chesterfield County — near Richmond — has launched a program called the Maggie Walker Community Land Trust, which closed on its first home earlier this year.

“The land trust was awarded a $500,000 grant to put nine houses under contract for homeownership,” said Dan Cohen, director of the Chesterfield County Community Enhancement Department. “The land trust will sell the house to a resident; the resident has an equity interest in the house and can sell it when they want to go.”

Chesterfield’s program is the first in the Richmond area, population 1.2 million, and second in Virginia. The ground-lease program targets buyers making 80% of area median income or below.

“The market in Chesterfield is quite hot,” Cohen said. “The median home price is around $250,000, so to take that down $80,000 by removing land costs makes it much more reasonable for somebody to live here. …At 80% (area medium income), your target market becomes nurses, teachers, police folks.”

Reaction from neighbors for or against the program has been muted. Most don’t realize the involved houses are under a ground lease rather than a traditional fee-simple model.

“There’s no visual identifier that this is a land-trust house,” Cohen said.

The city of Bend, with a metro population of 175,000, has a ground-lease program through Kôr Community Land Trust, a nonprofit. The group plans to place fives houses under ground leases in its first round.

“A lot of the folks we’re providing homeownership opportunities for are public service workers,” said Amy Warren, co-founder and executive director of the land trust. “We depend on them to make our community and economy function. Allowing them an opportunity to put roots down through homeownership and stable housing is a lot different than putting a family in a rental unit.”

She said Kôr is helping provide homes for teachers, builders, servers and maintenance workers. Bend has a median household income of $52,471, with a median home cost near $470,000. Warren said she recently pulled income data for local school system employees, which is public record, and found that many would qualify for a home through the program.

Kôr will charge around $50 or $60 monthly to lease land for each home, plus a separate homeowners association fee. The long-term plan is to offer 25% of homes to those at or near area median income, and 75% to low or very-low income earners.

“We’d like to keep doing this as long as there’s a need, which I don’t see going away any time soon,” Warren said. “The biggest challenge is the search for land, because land has such a high value.”

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