Leeway sought on ground rents

Baltimore Sun reporter

Community activists are urging Marylandlawmakers to allow nonprofit groups touse ground leases to provide affordablehousing, a move that some say will return aground rent system marred by abuses in recentyears to its intended purpose.

A House committee is set to hear testimonytoday on a bill that would exemptgroups called "community land trusts" fromsome provisions of laws the General Assemblyadopted in 2007 in response to an investigativeseries by The Sun.

The trusts would have to be housing organizationsand couldn't be structured asfor-profits.

The newspaper found that some groundrent holders had levied large fees and seizedhundreds of homes of residents who hadfallen behind on payments, in some instancesover minimal debts.

Many homeowners and legislators alleged that someground lease holders abused the nearlythree-century-old system to take homes thathad risen in value through gentrification.

Abill banning the creation of new groundrents was the first piece of legislation Gov. Martin O'Malley signed after taking office.

Legal experts say the new bill, sponsoredby Virginia P. Clagett of Anne ArundelCounty in the House and Jamie Raskin ofMontgomery County in the Senate, will preventabuses from resurfacing by prohibitingcommunity land trusts from chargingground rent. But they said it is difficult to anticipateevery possible consequence or loophole.

The bill is needed, supporters say, to carveout an exception to a law, first adopted in thelate 1800s, that enables homeowners to buyout ground leases even if no ground rent ischarged, said James J. Kelly, an assistant professorat the University of Baltimore Schoolof Law Community Development Clinic.

Without exempting community landtrusts from those redemption powers,homeowners could sell their subsidizedhomes on the open market, Kelly said. Thatwould make it impossible for the land trustto control land prices, he added.

Acommunity land trust could transfer itsinterests in a lease only to another landtrust, which would be bound by the lease'sterms, Kelly said.

Also, the lease or the trust's bylaws mightgive residents "veto" rights on such a transfer,he said.

Cities over the past 25 years have usedcommunity land trusts to separate the costof houses and land, using government subsidiesto sell homes at below-market prices tothose who qualify. In return, the homeowneragrees in writing to sell the homeback to the land trust or to another qualifiedbuyer, at a capped price, said Karen Blandford,executive director of the Maryland AssetBuilding and Community DevelopmentNetwork Inc., a supporter of the bill.

A formula in the lease would enable thehome's seller to receive a "fair return" on theinvestment, said Kelly, the UB assistant professorwho is active with Charm City LandTrusts.

A nonprofit group in Garrett Countywants to use a community land trust to develophousing for resort workers on landthat the county has offered it near DeepCreek Lake.

"We want to keep the character of workforce housing indefinitely by taking theprice of the land out of the equation," saidDuane Yoder, president of the GarrettCounty Community Action Committee.

The Greater Baltimore Board of Realtorshas asked for an amendment to the bill tomake it clear that if a community land trustfolds, the ground lease could be extinguishedthrough the state Department of Assessmentsand Taxation.

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