Chinatown Image credit: Ken Lund via Flickr (CC BY-SA 2.0)

Image credit: Ken Lund via Flickr (CC BY-SA 2.0)

In San Francisco’s Chinatown, community activists jumped in when a 21-unit building housing low-income tenants was threatened with demolition. But even after they pulled together financing to buy the building and convert it to a housing cooperative, they faced a major bureaucratic hurdle: persuading city leaders to tax it differently than commercial rental property.

The initial bank appraisal of the property now known as the Columbus United Cooperative came in at $3.5 million. Given San Francisco’s property tax rate of 1.163%, taxes on the building would have been set at $57,050. For the members of the co-op, 80% of whom have incomes below 40% of the area’s median income, that translates to $226 per month per unit, an amount that would raise costs by a third for some residents.

“The tax assessment would be prohibitive to maintaining permanent affordability,” said Rick Lewis of Bay Area Community Land Trust, who worked on creating the co-op. In the end, the property was assessed at $210,000, the aggregate value of the member shares. At the current tax rate, that puts property taxes at $2,442 per year or $9.69 per unit per month.

This kind of conflict over how to appraise and assess community-owned property is one of the next hurdles that need to be addressed as advocates seek to expand the reach of community land trusts (CLTs) and limited equity housing cooperatives (LEHCs). Advocates with the California Community Land Trust Network (CCLTN) have had some success in the state legislature securing tailored tax treatment, and are seeking further gains this year with SB 196, a bill that would provide a tax exemption for CLT homes during the development phase. Authored by Senator Jim Beall, the bill would also clarify the exact method of tax assessment based on the restricted resale prices that typically characterize these approaches to housing.

By pairing both anti-displacement with permanent affordability through long established and successful models like the CLTs and LEHCs, we can offer ways to keep people in high-cost urban centers like the San Francisco Bay Area now but also create pathways to ownership so people can stay for the long run.

These models create permanent affordability through limiting sales to low- and moderate-income buyers and restricting resale prices. In addition to fostering permanent affordability, CLTs have a number of important benefits. They create:

  • ownership paths for all, not just the affluent;
  • collective ownership for a variety of housing stock, from single-family to multi-unit;
  • a safe investment (CLT homeowners are ten times less likely to default than regular homeowners);
  • environmental benefits, since they focus on preservation of existing buildings and take advantage of the economies of scale of the collective purchase and use of resources.

CLTs collectively steward permanently affordable homes for thousands of Californians representing well over $100,000,000 of community assets. With more than 20 groups established statewide and several more emerging, community land trusts are an essential part of solving California’s affordability crisis. Established members of the state CLT network provide important incubation assistance to emergent CLTs in the form of sharing best practices, as well as offering direct technical and capacity building support and assistance.

The CCLTN, loosely formed in 2012, has been successful not only in supporting the incubation of CLTs, but also in passing statewide legislation. In its first year of incorporation, with an all-volunteer staff, the network successfully passed AB 2818, which recognized community land trusts for the first time in state law as non-profit entities having as their primary purpose “the creation and maintenance of permanently affordable single-family and multifamily residences.”

The law also provides for consistent and fair taxation of CLT homes based on their restricted resale prices, a policy that could better ensure the affordability of CLT projects. While CLTs are still encountering some hurdles with regard to its implementation, AB 2818 was a crucial first step.

CCLTN considered pursuing a bill this year extending such special tax assessments to limited equity housing cooperatives, but decided to hold off because it doesn’t have the lobbyists, advocates, and administrative support necessary to successfully pursue such legislation. Many CLTs, especially in urban areas, use LEHCs in conjunction with the CLT model for multi-unit buildings. The tax issue is an important challenge that has significantly affected the viability and scalability of the LEHC model. This may explain why currently there are only a handful of LEHCs across the state and few in recent formation.

One major hurdle the network encountered in this most recent round of discussions about an LEHC bill was the need to educate legislators and their constituents about how the CLT and LEHC models may be important tools to pair with anti-displacement measures in order to provide for long-term affordability. They could be crucial to helping to solve the housing crisis, and advocates intend to vigorously make their case with lawmakers and the public this year.

Saki Bailey

ABOUT THE AUTHOR

Saki Bailey

Saki Bailey is an activist, legal scholar and writer on the Commons. She has published several articles and books. For a full bio and publication list click here.

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