Imagine a community support programme that saw two-thirds of Carlton public housing residents entering the private housing market every five years. What if this programme also meant children from the estate did better in school? And their parents were themselves returning to further education and becoming more active citizens engaged in their community?
Is this possible? It’s happening all over the United States with a model of resale-restricted, shared-equity housing. In a country spending billions of dollars on bailing out struggling home-owners, where the foreclosure rate is 3.3%, community land trusts offer affordability and security instead, with a foreclosure rate of 0.5%.
John Davis of the Lincoln Institute of Land Policy describes how it works:
“This is a mixed-ownership model where a non-profit, community-based organisation holds the land and sells off the house. So the home-owner has clear-title to the house and a 99-year lease for the land under the house. . . . They have the same rights of security, legacy, autonomy; they can do with the house what they want, they can pass it on to their children.
Dr John E. Davis
“However, when it comes time to sell the home, they must re-sell back to the community land trust at a formula-determined price that is typically below market value. The land trust re-purchases the house, then re-sells it to another low- or moderate-income home-owner.
“The seller gets back their original down-payment, gets back the proportion of their mortgage they’ve paid off, gets back whatever capital improvements they may have invested in the home and they get a piece of the market appreciation, but they don’t get all of it. All of the public investment — most of the appreciation — stays in the house to lower the price for the next buyer.
“[Vendors] do not take as much equity as a market-rate home-owner would take out of the home in a rising market, but they do leave with far more wealth than they brought to the deal in the first place . . .”
There are 240 community land trusts in the US, currently making a million homes affordable in perpetuity. And, unlike first home-owner grants, the model is designed to grow.
“What we’ve learned in the United States is that if you allow [first-home buyers' grants] to be pocketed by the home-owner when they re-sell their home, then you’ve helped one home-owner with one infusion of US$24,000 or $30,000. The next time around, you don’t have an affordable home and you’ve got to repeat that subsidy and this time at a higher level. We don’t want to see public investment bleed out of the sector.
“With shared-equity home-ownership, the public investment — or a private charitable donation — is locked into the housing. That investment stays in the housing forever. It is recycled again and again with every transfer, so that the price of the housing remains affordable in perpetuity. That house never again goes back on the market and sells for its full market price. The public investment stays in the house at the same time that the seller is able to take some equity out of the deal when they re-sell . . .
“This is a very fiscally conservative, very prudent way of using public dollars to expand the stock of permanently affordable, owner-occupied housing.”
In 2006 the United Nations said we have a “serious, hidden national housing crisis” here in Australia. Under international law we are obliged to use our “maximum available resources” to realise progressively the right to adequate housing for everyone in Australia, irrespective of income. The UN says ‘enabling strategies’ by government may be preferable to direct construction of new public housing. Could community land trusts be the answer?
Listen to Richard Aedy’s interview with John Davis (17 min.) on ABC Radio National, with more details of the different variations of the model and a how-to manual on his website.
