A new law benefiting California community land trusts (CLTs) was signed into law by the Governor on October 9, 2019. SB 196, a bill sponsored by Senator Jim Beall with support from the California Community Land Trust Network, will allow community land trusts to create more permanently affordable housing to meet the needs of families facing displacement in California’s affordable housing crisis. The crisis has reached epic proportions with thousands of people being displaced around urban centers, and particularly the San Francisco Bay Area.
Mark Asturias, Executive Director of Irvine Community Land Trust, commented on the bill, “California community land trusts will soon be able to take community development efforts to the next level. With the funds freed up by SB 196, we will be able to create even better communities, with more units that serve even more families looking to participate in the American Dream of homeownership.”
CLTs are a proven model for creating affordable housing because they not only make housing affordable for one generation of buyers, but permanently for all future buyers of the same home. That’s because CLTs place restrictions on the resale price of homes, which limit equity appreciation, and preserve units of housing created specifically for people of low and moderate income. In this sense, CLTs grow the initial subsidy created rather than losing it in one generation like in the case of low-income mortgage assistance, where the buyer simply pays back the same amount with interest at the time of sale.
The fact is that in rapidly appreciating real estate markets like the San Francisco Bay area, or around other job-rich urban centers, the amount of money invested in the form of subsidies in 2008-2009 to make homes more affordable, requires two to three times the amount today. This is a point made by Francis McIlveen of Northern California Land Trust who has demonstrated in a study of 40 of their properties that using the community land trust model not only allowed subsidies to be retained, but to grow in value by 1,150 percent!
Francis McIlveen of Northern California Land Trust says, “We are very lucky to have such a dedicated group of folks throughout the state committed to the CLT model, whose advocacy made these two pieces of legislation possible. It has also been a deeply meaningful step to have CLTs receive the same help that other non-profit affordable housing developers have enjoyed ([namely] property taxation & exemptions), because this shows that more and more people in government, and in our communities, are coming to understand the fundamental need for our society to stop treating land as a commodity, and to see it for what it is: the very foundation for our right and ability to live and work in a particular place. If we want to continue to live in community, we must prioritize community uses of the land, hence the Community Land Trust model.”
Through tax exemptions, SB 196 will make CLT housing more financially feasible. SB 196 does this by making the time between acquisition of properties and their sale exempt from taxation as well as applying important tax exemptions on the assessment of CLT property taxes thereafter.
Currently, and despite a 2016 bill providing tax exemptions, the California Board of Equalization and individual tax assessors have continued to assess taxes based on the market value of the property or some other valuation, instead of on the value of both land and housing with affordability restrictions taken into account. As a result, it can be very costly if not prohibitive for CLTs if they are forced to pay taxes during the time the property is being developed. Furthermore, tax assessments based on full market value can make projects financially infeasible for CLTs and unaffordable for those of low and moderate income. Such taxes create extra monthly costs, which must be incurred by the CLT or tenant-owner/renter.
SB 196 will now remove these costly barriers thus easing the creation of permanently affordable housing throughout California.
This post is a follow up to our editorial series on land use and housing policy challenges and solutions. Download our latest FREE ebook based on this series: “How Racism Shaped the Housing Crisis & What We Can Do About It.”