Nonprofits May Buy Affordable Housing Through Land Trusts
New York's Westchester County is beginning an experiment to keep affordable housing affordable. A land trust designed to preserve affordable housing, including tax credit sites, in perpetuity, is being devised in Westchester, says Rosemary Noonan, Executive Director of the Housing Action Council, an affordable housing advocacy group. The trust is to be called the Westchester County Land Trust, she adds.
How the Trust Works
The trust expects to set up a bank consisting of land parcels donated by towns, villages, and cities within the county. The land, which will remain the property of the trust, will be rented out to housing developers through 99-year leases. By leasing a parcel, a developer will gain the right to build affordable housing. The developer will own the building, but not the land it is built on. Upon expiration of the lease, ownership of the land will revert to the trust.
The plan is modeled on ancient principles of English land law, in which certain estates could not be sold, because they were entailed (requiring that the land be passed from father to eldest son). However, land could be leased, and often was, for lengthy terms, so that the possessor could build a dwelling on it.
Why Some Residents Object
The 99-year lease scheme is being adapted in New York State for the purpose of retaining affordable housing, including tax credit sites, in Westchester County, Noonan says. The problem is that residents of subsidized housing face higher costs when their homes go to market rate, she notes. Residents of these subsidized housing units are facing higher rents and mortgage payments, she adds. Concerned that they may be unable to pay, they fear losing their homes.
For example, Ms. T, a resident at the Whitney Young apartment complex in Yonkers, N.Y., is paying 30 percent of her salary ($1,300 monthly) for a three-bedroom, two-bathroom unit that she shares with her three sons, aged 18-26. As a result of the rent increase, she will be required to pay an additional $300 a month in rent. As in the case of Ms. T's unit, price caps were removed from 240 properties in the county, with 4,000 more to come in another 11 of its communities.
Using a 99-year lease as a method of stabilizing rents is a new idea. Joseph Apicella, an executive with Cappelli Enterprises, a Westchester County developer, considers housing trusts to be an intelligent way of dealing with local businesses. But leasing land for 99 years and letting developers or residents own only the building, not the land itself, will require a long educational process for lenders, buyers, and developers, he says.
Alternate Solutions
Officials in other parts of New York State have been finding alternative ways of dealing with the affordable housing crisis. In Brooklyn, officials have been helping nonprofits to add housing units in dilapidated neighborhoods. For example, in mid-June, Habitat for Humanity, which creates housing for low-income families, began construction of 41 affordable condominiums in three four-story buildings on Atlantic Avenue, in the Ocean Hill—Brownsville area of Brooklyn.
How it works. The units will be filled by families earning between 45 and 80 percent of New York City's area median gross income (AMGI)—that is, a household income of $35,450 to $56,700 for a family of four. Once a family is deemed eligible, Habitat for Humanity will assist it in securing a 30-year mortgage with payments of approximately one-third of their monthly income. The sales price of these Brooklyn condos will also be based on income. They are expected to fetch between $70,000 and $160,000. A family that has resided in a unit for at least 15 years will be permitted to sell it at market rate.
New York City officials are lending a helping hand in the Brooklyn project as part of Mayor Michael Bloomberg's vow to create 165,000 new affordable housing units in the city by the year 2013.
Westchester Affordable Housing Not So Affordable
Westchester County also wants to increase the supply of affordable housing, including tax credit sites, but is going about it in a different—some say radical—way. The 99-year lease scheme is a new model of ownership for Westchester, says Noonan. Creating and implementing a land trust will be complex, she adds.
In Westchester, “affordable housing” refers to homes that sell for $160,000 to $185,000. Homes in that price range are hard to find. A family that earns 80 percent or less of the county's median income can qualify for affordable units. The family is required to pay no more than 30 percent of its monthly income, including utilities. That is equivalent to an income of $77,200 annually, and a rent or mortgage payment of $1,930 monthly.
Even middle-income earners in Westchester County can't afford to buy a home there, Noonan says. Thus, workers such as firefighters, police officers, and sanitation workers, who provide towns, villages, and cities with essential services, can't afford to reside in the very communities they serve, she notes.
Consequently, because of the dire need to create and preserve affordable housing, including tax credit development, going the route of nonprofit purchases through land trusts is a viable, if not welcome, alternative, she adds.
Insider Source
Rosemary Noonan: Executive Director, Housing Action Council, 55 S. Broadway, Tarrytown, NY 10591; (914) 332-4144; rnoonan@affordablehomes.org.