Community Land without Grants and Debt
Funding Ecovillage Neighborhoods with Community Shareholders
By Olivia R. Williams, Ph.D., writing for the Ecovillagers Alliance
“Community control of land” sounds straightforward, but in practice it can be limited, fleeting, or difficult to achieve due to high property costs and the social, legal, and financial challenges of collectivizing property ownership. As a Ph.D. student studying the inequities of urban development, I was drawn to the community land trust (CLT) model for its roots in the Civil Rights Movement and the founders’ intentions to decommodify land and provide for community ownership of property in a permanent way. When I dove into my Ph.D. research on CLTs in 2014, I was bright-eyed and bushy-tailed about the CLT model’s potential. I imagined CLT neighbors sharing back-yards, eating community meals, and making creative decisions about how to use vacant lots in their neighborhood.
Instead, when I asked homeowners in CLTs¹ about their CLT “community,” they said things like:
[O]nce people are in their house, given that most people who go into their houses are couples with children, working — almost by definition — low-income jobs, […] I think the “community” part, once they’re in the house, is mostly in name.
And even when the CLT staff tried to foster community involvement, they had a hard time doing it. Another CLT homeowner said:
They tried to generate a homeowners’ kind of committee, and people just don’t want to do it […] and I get it because the goal isn’t to be on the committee. It’s to have your home, and once you have your home you’re done and so why would you do something more?
What was going on? How did a model for community land ownership and local democracy become so diluted that “community” was hardly part of the process at all anymore?
In short, the CLT movement has gone the way of mainstream community development, from grassroots organizations to professionalized nonprofits dependent on external grants, where their funders are focused more on the production of housing than local democratic control of land.²
The CLT movement offers a warning to those of us seeking to change the way land is owned, developed, and stewarded at a large scale. It’s worth it for me to go into detail about how CLTs work and the shortcomings of the model’s design, in order to offer an alternative model funded by community shareholders called the community land cooperative (CLC).
Community Land Trusts and their Pitfalls
CLTs are nonprofit organizations that own land in perpetuity and keep prices affordable for the use of low-income people. CLTs can be used for commercial land, multi-family rental housing, housing cooperatives, urban farms, community centers, playgrounds, or any other use the board sees fit. Most often, however, CLTs are used as a vehicle for affordable home-ownership, where the land is owned by the CLT and the house is owned by an individual.
A qualifying individual (typically a moderately low-income person with a decent credit history) can purchase a CLT house at a price significantly below market value. The homebuyer gets a special mortgage for the house minus the land, and they pay a small lease fee to use the land under their house as if it were their own. The CLT stewards the property long-term,making sure that it stays in good condition — though the home-owner is responsible for most maintenance and repairs — and that the next homeowner qualifies for and understands the terms of CLT housing. When the homeowner is ready to sell to the next moderately low-income person, they get the equity they put in plus a portion (typically about 30 percent) of the increase in value of the home. CLTs therefore allow homeowners to build some equity while keeping property permanently affordable, according to the resale formula, which is enforced by the groundlease.
Most, if not all, CLTs face a common financial problem: the monthly lease fees (for the land) paid by CLT residents to a CLT organization are so modest — typically $25-$50 per month — that they cannot sustain the organization. Theoretically, there’s a point at which the number of housing units would be enough to sustain the CLT on lease fees alone, but the number of houses required to sustain the organization (the “magic number” as some have called it) may be well into the thousands, and few CLTs have reached it. So if the CLT wants to sustain itself as a CLT, it has to bring in external grant money. Most grants available to CLTs are from the US Department of Housing and Urban Development (HUD) or foundations focused on affordable housing, so CLTs then must grow by continually acquiring land and adding housing to their portfolios to bring in the grant money.
The focus on grant-writing and housing development means that CLTs often become highly professionalized affordable housing organizations, with staff-focused operations and boards that prioritize the involvement of lawyers, housing developers, and sometimes public officials and funders. The increasingly competitive nature of most grants and the high price of land and housing development means that CLTs sometimes struggle to make ends meet. Most CLTs find they are better off supplementing their affordable housing projects with a more profitable side venture, so they also become a developer, lender, realtor, or other service provider to help pay for the CLT. This process leads the organization toward even greater professionalization, even if it helps ease the burden of the need for grant income.
CLTs, while arguably flawed, do important work in the context of rapidly rising land and housing values. They take property off the speculative market and hold it in perpetuity for low-income people. No developer can snatch up a plot of land once it is part of a CLT portfolio. No real estate giant can develop that corner into luxury condos. The neighborhood around a CLT parcel may become desirable, pricey, and gentrified, but the CLT-held land will remain affordable and accessible.
This function of CLTs is what gets organizers and activists excit-
ed about the model, and for good reason. The acceleration of land and housing costs has displaced countless individuals and communities, especially in the cities with the most employment opportunities. While rising land values are especially pronounced in urban markets, the pattern of land speculation is playing out everywhere and will continue to worsen, even in markets that seem affordable at the moment. Today’s urban land discussions are a warning to everyone: there is a need to secure both urban and rural land for community control before the real estate giants snatch it up.
But creating widespread opportunities for genuine community control is not going to happen through CLTs. CLTs can take land out of the speculative market and develop affordable housing, but their dependence on external institutional sources of funding make goals of community control, and even mixed-use development, difficult to achieve, since foundation and government funders tend to be most interested in encouraging CLTs to de-
velop housing as quickly as possible. Financing the development of affordable commercial space, for example, can be more logistically challenging and financially risky than developing housing, so most CLTs don’t even try. Similarly, keeping CLT land “undeveloped” for the use of community gardens is not a lucrative use of valuable property, so that idea is often nixed by CLT boards in favor of more housing.
Building affordable housing as prices rapidly rise is not bad, to be clear. But neighborhoods are so much more than housing. To radically change the way decisions are made about what we want our neighborhoods to be — and to create and maintain community-owned institutions and common amenities that are accessible — requires independence from external funders.³
The Promise of Community Land Cooperatives
For the reasons just described, Ecovillagers Alliance has been developing⁴ a model for collective land ownership based on equity, where all residents rent and own at the same time. At the neighborhood level, a community land cooperative (CLC) would buy parcels in a neighborhood (aiming to find them as close together as possible, adding parcels as they become available), and rent out residential and commercial space to members at democratically determined prices based on the cost of living. Every renter would buy one voting share to direct the CLC’s development and management through Sociocratic governance.⁵
Members could also opt to buy equity shares to fund property acquisition and improvement. Equity shares are the engine that make this model run. Community-based equity means CLCs don’t have to appease funders for grant money to buy property, and don’t have to go into debt to finance property development either.
Still, the CLC would need a lot of investors to be able to pay cash for property. For this reason, Ecovillagers Alliance proposes that all neighborhood-level CLCs within a region operate as subsidiaries of a regional cooperative that non-residents can also participate in by buying equity shares.
The regional cooperative would operate as a real estate investment cooperative (REIC) that exclusively supports CLCs by providing development capital, incubation of new CLCs, administration of membership, accounting, legal services, etc., and networking opportunities between CLCs. Sociocratic decision-making would ensure that each CLC has direct representation to and from the REIC, and each CLC will maintain as much autonomy as possible over local matters. Having a regional body of support will furthermore help ensure the longevity of local efforts to cooperatively own land.
Importantly, the REIC acts as an investment vehicle for people who want to pull their money out of ethically-questionable markets and invest in affordable, sustainable, democratic land stewardship. Rent from residents and commercial tenants in the CLCs will return dividends to the equity shareholders, tenant- and non-tenant-owners alike, providing an economic return on their investments. Unlike a publicly-traded corporation, the REIC disallows speculation and secondary-market trading of shares, determining their face value democratically, based on the cost of living and inflation, so an equity share will remain about as easy to buy in the future as it is today. Rent prices will be determined similarly, within each CLC based on local conditions, so that rents don’t surpass community members’ ability to afford them. Non-tenant shareholders will also be limited to one voting share each in the REIC, and their participation in local CLC decision-making will be limited by Sociocratic rules for representation.⁶ Therefore, capital will flow into neighborhood development from non-residing members, but control over local matters will remain predominantly local.
The rent coming in from residents and commercial tenants of a CLC will go first to maintenance and stewardship of the property, and then dividends will be returned to equity shareholders, who may or may not live in the CLC. A percentage of every shareholder’s dividend will be retained for a “resilience fund” for each CLC to invest in projects like solar panels, rent subsidies for the lowest-income members, or related ideas to promote long-term sustainability, within parameters set by the REIC.
One of the reasons ecovillages, cooperative housing, and other collective land ownership efforts remain on the fringes in the US is that most of them rely on the capital of their founding occupants. When small groups of dedicated people pool their resources to buy a house or land, they can create inspiring islands of experimentation that show the rest of us what’s possible. However, finding the capital in the first place and getting a group of people to commit to buying a house together can feel like a pipe dream. Even when efforts to collectively buy land are successful at first, they are at high risk for failure without a backstop. In the field of housing cooperatives, close to half of Limited Equity Cooperatives (LECs) eventually demutualize their assets (their owners decide to buy them out at market rate so they are no longer affordable),⁷ and group equity cooperatives (independent group-owned houses) often run into legal and financial hurdles that make organizational sustainability and independence challenging.
The model proposed by Ecovillagers Alliance, with neighborhood CLCs linked to a regional REIC hub, is an economically feasible way to keep community land affordable and community-owned without grant funding and bank loans. It also provides a mechanism to support the development of new community land-owning initiatives, so we don’t have to reinvent the wheel every time. It’s a cooperative approach to land ownership focused on justice and democratic control, protecting against tendencies we see in many organizations, as demonstrated by CLTs, to become narrowly focused, top-down, and professionalized.
Of course, no model itself is the end-all-be-all. Holding fast to our principles and keeping the community in “community land cooperative” will require the dedication of all members. Maintaining a culture of participation and collective support has to be an ongoing goal and practice of Ecovillagers, through social organizing, co-learning, inclusive leadership, and community-building activities, not unlike successful political or labor organizing. Aside from the structural problems with the CLT model, a cultural problem is also apparent in the CLT movement: CLT staff, boards, and advocates have become, broadly, less interested in community organizing and more concerned with brick-and-mortar housing production.
Staying true to our goals to retrofit existing spaces for sustainable, community-owned, affordable, mixed-use, demographically diverse neighborhoods will be made easier by staying economically autonomous by funding development with community shareholders. The community land cooperative, supported by a regional real estate cooperative, offers a way forward. To learn more, visit our website at ecovillagers.org and pre-register for regular educational webinars about the model at www.ecovillagers.org/webinars.
Notes
- This research comes out of a collaborative National Science Foundation Grant based on 124 interviews of a variety of people involved in eight CLTs in Minnesota. The CLTs I’m quoting from here were some of the least community-focused in our research. In my personal interactions with staff of dozens of CLTs across the US, I have seen a variety of ways CLTs have been successful in engaging residents in governance and community events. There is also a persistent group of CLT organizations and advocates who stay true to their values of community control despite the trends in the field. My purpose is not to lump all CLTs together, but to critique the structural problems in the CLT model that led to the lack of community focus in the instances I highlight here.
- For a more detailed account of the loss of “community” in CLTs, see “W(h)ither the community in community land trusts?” by DeFilippis, Stromberg, and Williams in the August 2018 edition of the Journal of Urban Affairs.
- For an enlightening selection of essays about the nonprofit-industrial complex, see INICTE!’s 2007 book, The Revolution will not be Funded.
- As of this writing, the proposed model has been incorporated only in pieces. Legal details and pilot sites are in development for the first CLCs and the first regional Ecovillagers Real Estate Investment Cooperative to be incorporated in the Mid-Atlantic region of the US.
- Sociocracy is a method for making democratic decisions through nested circles, which can scale based on the needs of the organization. First developed for Dutch corporations, it has been widely adopted by intentional communities.
- Sociocracy’s “double-linked circles” allow for cross representation between the REIC and its CLCs, such that CLC residents participate in regional REIC policy-making, and non-residents participate to a limited extent in local decisions.
- This estimate comes a 2016 study by The Urban Homesteading Assistance Board (UHAB) called “Counting Limited-Equity Co-ops.”
I want to acknowledge Joel Rothschild for helping to develop the argument of the article and edits on a draft, James DeFilippis for reading and commenting on an earlier draft, Brel Hutton-Okpalaeke for stimulating my thinking around these ideas, as well as my research team for the years of collaboration on research and writing about CLTs: Deborah G. Martin, Joseph Pierce, James DeFilippis, Richard Krugar, and Azadeh Hadizadeh Esfahani. This research was funded by the National Science Foundation BCS-GSS, grant #1359826.
Olivia R. Williams received her Ph.D. in Geography in 2017 from Florida State University and writes on behalf of Ecovillagers Alliance, the organizing and education initiative in support of Ecovillagers Cooperative.
Originally published in Communities Magazine (Spring 2019).
Reprinted by the Ecovillagers Alliance with permission.
