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Community land trusts make their pitch

Community land trusts make their pitch

When longtime renter Ben Peterson first saw the listing for a small two-bedroom rowhouse in Frederick, the 36-year-old was struck by the price, which appeared within his grasp even though a career in nonprofits left him with only moderate income and savings.

That deal, it turned out, was precisely the point.

Peterson's home, which he purchased in August for about $154,000, is one of the first in Maryland to be sold by a community land trust — but several groups in Baltimore hope there will be more.

Activists in Baltimore are working to create at least three new community land trusts, nonprofits that develop or oversee affordable housing and other community assets such as playgrounds, parks and gardens. The organizations retain some stake in the homes they sell with ground leases and agreements that may split any price appreciation between the trust and the buyer or cap any resale price. The idea is to keep the homes affordable for the next buyer.

"This is a new model," said Rachel Kutler, an organizer at the United Workers Association, an advocacy group for low-wage workers that has convened a roundtable on housing issues since 2013.

In McElderry Park, Charm City Land Trust Inc. closed on its first house last month, a Luzerne Street foreclosure that Wells Fargo sold to the group for $1.

The trust, which got its start 16 years ago acquiring vacant lots in the neighborhood, is looking for funding and talking to contractors about renovating the house, with the hope of selling it next year, said Ayrika Fletcher, a real estate attorney and board member who helped start the group during her days as a community organizer.

The Northeast Baltimore Housing Initiative is working on a business plan for a community land trust and also hopes to acquire a couple of properties to sell to income-qualified families next year, said the Rev. Ty Hullinger, a member of the group who oversees three Roman Catholic parishes in Northeast Baltimore, including St. Anthony of Padua.

In Park Heights, Will J. Hanna II of the New Park Heights Community Development Corp. also has founded a nonprofit with similar goals.

Advocates say land trusts are a way to bridge the gap between two parts of Baltimore's housing crisis — the struggles faced by the city's many rent-burdened or homeless families and the neighborhoods hurt by an abundance of vacant and foreclosed housing stock — without ceding control of communities to investors.

"We know we have to start small," Hullinger said. "We're going to have to prove ourselves."

The groups face questions about their financial viability — as well as doubts about using such programs in a city where many neighborhoods continue to experience population decline, less because of pricing pressures than because of disinvestment, and concerns about safety or poor schools.

Chris Ryer, president of the Southeast Community Development Corp., said he thinks the idea is worth exploring but that he has reservations.

"I'm not sure it's the right fit for Baltimore," he said. "I hate to put a homeowner, especially a low- or moderate-income homeowner, in a situation where they can't capture the equity in their house that every other American does."

"You've got to focus on the quality-of-life issues and the things that make good neighborhoods," he added.

James J. Kelly Jr., a clinical professor of law at Notre Dame Law School, helped start the Charm City Land Trust more than 15 years ago when he lived in Baltimore and worked at the University of Baltimore Law School.

Kelly said he also was initially skeptical about starting a land trust in Baltimore, but said a community-led model is important, given Baltimore's history of urban-renewal projects that displaced residents, especially residents of African-American neighborhoods.

Land trusts have "always been about community democracy to some extent and direct community control, even in areas where, quite honestly, gentrification isn't a presenting issue but the fear is quite understandable and justifiable based on people's historic experiences," Kelly said. "That's another reason why the land trust model should be thought of sooner rather than later."

More than 200 community land trusts exist across the United States, representing more than 10,000 rental and for-sale units, according to the National Community Land Trust Network. The idea has been gaining attention nationally as rising rents prompt concerns about gentrification.

Community land trusts tend to be associated with places such as Boston, where they've been used to preserve affordable pockets in pricey housing markets, or resort communities, where second-home buyers skew housing markets, paying prices that year-round residents cannot, Kelly said.

They're most effective if started when land is still cheap, especially if rents are expected to rise, as is the case in many cities today, said Susan M. Wachter, a professor of real estate at the University of Pennsylvania's Wharton School and co-director of the Penn Institute for Urban Research.

"It's an extremely important model, especially in cities that are on the cusp or in neighborhoods that are on the cusp of becoming not affordable," she said, citing the long-term nature of the model. "This should be taking off now. This is exactly the right set of circumstances."

Until 2010, when the General Assembly changed state law, community land trusts couldn't really exist in Maryland, a holdover from the rules governing ground leases.

Advocates for community land trusts have faced lingering suspicion related to a history of abuses of ground leases. A 2006 investigation by The Baltimore Sun found some investors were trading the leases and sometimes using small unpaid rents as a way to seize homes.

The organizations also face questions about whether they have the money and staying power to achieve their goals.

Julia Day, deputy commissioner at Baltimore Housing, said the department is open to the idea and helping groups find properties that might be suitable for land trusts, but she was more hesitant to commit to funding.

City Councilman Bill Henry, who organized a council hearing on the trusts last summer, also said he likes the idea and the way it secures permanent affordability, but given the limited funds available for community development, he isn't sure giving funds to a land trust is best policy.

"I would love to see the city take a larger role in more community development across the board. Should we specifically fund land trusts over funding more traditional community development corporations? I don't know that I could make the case for that," he said. "They're new for us, and we're just kind of trying to wrap our heads around them."

If the community land trusts move forward, the groups will face other challenges.

It takes time to find buyers who meet the income limits and have the financial wherewithal to take on a mortgage, said Jennifer Minnick, director of the Frederick County Affordable Housing Land Trust, cited as Maryland's first up-and-running affordable housing land trust. In Frederick County, prospective buyers had to earn less than 80 percent of the county's $107,000 median household income.

Some potential buyers were put off by the resale limits, she said. It varies by land trust, but in Frederick's case, the homeowner earns only 40 percent of the home's appreciation — a split that allows the land trust to subsidize the next buyer.

Appraisers and lenders were wary, too, she said.

"I've had to do a lot of community outreach to get folks to understand the benefits of the program," she said.

Peterson bought the second of two homes sold this year by the trust, an affiliate of Habitat for Humanity that also received county support to get started. The trust has two more homes under contract and expects to reach an agreement on a third this month, Minnick said.

Peterson, who works at the Humane Society and earns about $40,000 a year, said land trusts were new to him, and he was uncertain at first about some of the restrictions the agreement entailed but decided the opportunity was too good to pass up.

"I didn't think I would ever possibly be able to purchase a house," he said. "I'd recommend it to anyone who's in a similar financial situation as me."

Charm City Land Trust board member Gary Dittman, pastor at McElderry Park's Amazing Grace Lutheran Church, said the organization is still working out the details and he knows there are many challenges — especially since his group hopes to sell the home for far less than those in Frederick County.

But he said he hopes to prove that McElderry Park — not far from the Johns Hopkins medical campus and other more affluent parts of Southeast Baltimore can flourish, while keeping its longtime residents.

"To me, we have the most unique possibility to be a truly mixed-income, walk-to-work neighborhood. We could be a stellar model of that," he said. "The climate right now is ripe."

nsherman@baltsun.com

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