Commons-based legal institutions for affordable housing

For the next few posts in the new Shareable series on "Law: The Invisible Architecture of the Commons," I will focus on concrete examples of how citizens are building commons-based legal institutions that improve access to affordable housing. In this piece, I'll compare the structures of three central types of commons legal institutions:

  • Community land trust
  • Housing co-op/condominium
  • ​Permanent real estate cooperative

I group all of these under the umbrella of "commons legal institutions" because each exemplifies, in different ways, a central feature of the commons as described in the previous piece: namely, decommodifying access to a common goodby taking homes permanently off of the speculative market. Community land trusts, housing co-ops/condominiums, and permanent real estate cooperatives pursue this aim through different variations of the following three components: strong democratic governance built into the legal structure,the guarantee of permanent affordability of housing over generations,and engaging citizens in community-driven development of housing.

1. Strong democratic governance

A core aspect of all three housing commons — community land trusts, housing co-ops/condominiums, and permanent real estate cooperatives — is that a commitment to democratic governance is built into the very fabric of their legal design. In all three, governance takes place through a democratically elected board whose members represent the key constituencies and are responsible for making all major decisions concerning financial and legal issues, overseeing budget and maintenance, and creating rules regarding the use of individual and common areas. For community land trusts, there is typically a tripartite board structure written into the "Articles of Incorporation" or bylaws, consisting of one-third each of residents, community members, and local technical experts. The controlling purpose behind this design is to allow for grassroots, community-driven development of housing collectives in relation to their larger community.

By contrast, housing co-ops/condominiums typically have a board governance structure, reflecting a distinct orientation toward ensuring that the residents of the communities are represented. Meanwhile, the permanent real estate cooperative, a newly emerging community development financial institution, operates cooperatively through a democratically elected steering committee. However, these cooperatives operate less like housing cooperatives, and much more like community land trusts , but without the management of specific properties. While they are a fledgling institution today, the role of permanent real estate cooperatives in the future might be to act as incubators for Community land trusts and housing co-ops/condominiums. Permanent real estate cooperatives are aimed at capital-raising campaigns to invest in their communities as opposed to capital-driven campaigns that are focused on development of urban areas. This is becoming more and more important as urban areas increasingly face the threat of becoming hedge cities, creating speculative bubbles in housing prices and driving the price up for everyone, as a result of real estate investing gone global.

2. Affordability over generations

Arguably the most important feature of these commons legal institutions is that once housing is taken off the speculative market, it stays off the market, not just for one generation, but sustainably over many generations. This means that there are features built into the legal and financial "DNA" or "institutional design," which ensure affordability over the long term. The primary aspect of this design are legal restraints on transfer at below market rate that ensure subsidy retention. Put simply, the absence of restraints on one's ability to sell at market value, can allow the first generation of buyers of a community land trust or housing co-op/condominium to benefit from the subsidy received from the community land trust itself or from the city or state without passing it on to the next generation.

Moreever, community land trusts and limited equity housing cooperatives/condominiums have restrictions clearly expressed in their Articles of Incorporation and/or bylaws that the transfer of "ground leases" must be made at below market value. This is further reinforced by agreements made between the buyer, community land trusts or HC, and designated loan provider, which outline the terms of the subsidy retention (this is where the subsidy stays with property) or subsidy recapture (the subsidy is made to the individual and must be repaid).

Studies have shown that community land trusts combined with limited equity housing cooperatives/condominiums are far more successful in maintaining permanent affordability than limited equity housing cooperatives/condominiums alone because they provide important stewardship guidance as well as technical and financial support necessary to survival over the long haul. Studies have also shown that people who own homes through Community Land Trusts are ten times less likely to default on their mortgage.

3. Community-driven development

Community land trusts are endowed with greater resources because they act as a large umbrella organization for a number of different limited equity properties. Their staff and governing board exist for the support and development of those properties. One of the unique features of community land trusts is their ability to leverage resources and constituencies into political power. In fact, the first community land trust, New Communities Inc. in Albany, Georgia, was created by African-American farmers as a vehicle for furthering the aims of the civil rights movement. This legacy persists today and has gone global: The residents of London, England, one of the more recent places to adopt the community land trust model demonstrate the potential of these organizations as centers for political organizing through the creation of the East London Communities Organisation.

During the bidding process for the 2012 London Olympics, this group convinced the city government that the Olympics should not only benefit London businesses, but the very residents being pushed out by the astronomical costs of housing. As a result, after four years of activism, community organizing, and political maneuvering, the first 23 families moved into the East London Community Land Trust. This served as a successful pilot that sparked the approval of several other Community Land Trusts in London.  

Permanent real estate cooperatives like NYC REIC appear poised to take on such a similar role — leveraging their capital raising capacities into political power to influence important decisions regarding urban planning of the cities they call home. The commons legal institutions of today, like community land trusts and permanent real estate cooperatives are being used as important vehicles for building community solidarity in the fight for social justice.

Header image by Tom Rumble via Unsplash

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