Dallas Eyes Community Land Trusts as Option For Permanent Affordable Housing

Houston touted its Community Land Trust as an innovative solution to lead the nation in affordable housing. The plan fell short, funding was slashed, and bureaucracy got in the way, according to a comprehensive report in the Texas Tribune last month.

But Houston didn’t have Linda McMahon, president and CEO of The Real Estate Council, leading the charge. 

McMahon and TREC hired Grounded Solutions, a nationally recognized expert in Community Land Trusts, to assist in the planning and creation of a “backbone organization” to support the housing model. They’ve held a few informational meetings and believe there’s local interest. 

The infrastructure is in place, McMahon told CandysDirt.com. The rest is up to the community. 

Eligibility requirements and a step-by-step process for application are posted under the CLT tab at dallashousingpolicy.com. 

What’s a Community Land Trust?

There are more than 225 Community Land Trusts in the U.S. 

The CLT model was originally devised by civil rights leaders and Black farmers to create permanently affordable homes. 

The “classic CLT” is generally a nonprofit organization with a defined service area, corporate membership, and a tripartite board of community members, leaseholders (homeowners), and public stakeholders. 

In simple terms, an individual owns a home, and the CLT owns the land. A ground lease ties the improvements and the land together, and a low price is locked in initially and at resale, so residents can stay in their communities long-term, explained Thor Erickson, an assistant director of Housing and Neighborhood Revitalization for the City of Dallas. 

“The research around the country shows that a person buying a CLT property is one who is buying an affordable unit in a community or neighborhood that they want to invest in for the long term,” Erickson said. “That’s quite a few people. The CLT model allows for some cost savings in the purchase, but the resale is restricted to ensure it’s always affordable. If the family who first bought it wants to move, they can, but that home has to be reserved at an affordable price point for the next buyer.”

So why hasn’t it caught on locally?

Erickson said he believes it is catching on, but it’s a lengthy process. 

“I don’t think it’s that no one is interested,” he said. “This is new. This requires a few different ways to approach the selling and marketing of the property. It requires you to have a board in place and some bylaws specific to the program, per our state legislation. That technical learning and getting ready to do it is what people are going through right now.”

The City of Dallas approved an ordinance a couple of years ago allowing the creation of CLTs, “and then nothing happened,” McMahon said. 

“We think this is an important vehicle for the creation and preservation of affordable housing, so we spent the last two years working on alternatives in order to encourage CLTs to be formed,” she said. “It is new for Dallas, but it has proven successful around the country. Anything new is met with skepticism. Follow along on our process. We hope to have the business plan and organizational work done this year.”

Creating a Community Land Trust in Dallas

While Houston operated its program with city funding, that’s not a requirement, McMahon explained.  

“It would be helpful in the future if the city would help provide some level of operating support to the CLT backbone organization, but at this point, we are working on developing this without city funding,” she said. 

Erickson added that “there is no funding, per se,” the construction operates like a regular home build.

“An affordable home builder would secure funding through any other means that they’re receiving to produce other affordable units,” he said. “They’re going to apply to a bank for construction loans or to us for gap financing through our [Notice of Funding Availability]. Those funds would be available for a CLT property the same way they would be for an affordable home property. There’s no difference there. Land acquisition is the same. Operating expenses of the nonprofit itself are covered through their business plan, whether they have philanthropy funding or sales or proceeds of real estate to help fund the organization.”

Grounded Solutions and TREC officials have given a few local presentations to potential stakeholders, and Erickson said some local neighborhoods have expressed interest. 

“It’s a matter of who’s ready to take on something new for our market to offer this opportunity,” Erickson said. “One of the main groups we’ll refer people to is Grounded Solutions, a national CLT technical adviser. They help communities form boards and technical operating business plans in order to successfully run a CLT.”

Where it gets interesting, Erickson explained, is the resale formula. 

“They know how much they may be able to sell that home for, and each year they know how much they have to pay in property taxes because the property taxes are based on that resale formula,” he said. “Usually you’ll see CLTs pop up in neighborhoods where there is more market pressure on the horizon. Property taxes are set to grow. By having CLT properties in place early, you can preserve those units because you’ve already locked in the resale formula as well as the property tax rate ”

What Went Wrong in Houston?

Houston “wanted to lead the nation in long-term affordable housing,” so it allocated $60 million to the CLT after Hurricane Harvey in 2018. As housing prices jumped, low-income residents were able to stay in their family homes.

“But [Houston] leaders slashed its funding by half as bureaucracy bogged down the program and enthusiasm dwindled,” according to Lucy Tompkins’ Feb. 20 report in the Texas Tribune. 

“Despite its goal of creating more than 1,000 permanently affordable homes in five years, the land trust has only 136 homes in its portfolio so far,” the report states.

Now city leaders want to redirect the money to other housing initiatives. 

Dallas is taking a different approach, McMahon said, to ensure an active, sustainable program with lots of participation. 

“Dallas needs to support the concept that this structure of a hub organization with neighborhood-led CLTs is the right structure for Dallas,” she said. “This is totally different from the approach that Houston has taken.”

Erickson agreed that it’s a “good option.”

“It takes someone who is willing to take on a new model, and that’s where we are right now — getting folks ready to be that first person out there,” he said. “Any time you do something new, there are a lot of eyes on it.”