The Community Land Trust

The Community Land Trust

Thus far, we have been discussing the traditional Land Trust, built on the Illinois model.  However, there is a second type of Land Trust, and any discussion of Land Trusts would be remiss without a mention.  Today, we'll be looking at the Community Land Trust.

What is a Community Land Trust?

A community Land Trust is is a non-profit organization that focuses on preserving community amenities for the locals.  Some Community Land Trusts focus on conserving land, open space, or other natural resources, while others focus on maintaining and developing community assets like affordable housing, gardens, parks, or playgrounds.  Other trusts focus on preserving farm land, and protecting it from being converted to housing developments.  The trust acquires land on behalf of the community and retains it, in trust, for perpetuity.  It then can lease the land, develop the land, or protect the land from ever being developed in any way.

In 1992, the US Federal Government codified the Community Land Trust in The Housing and Community Development Act.  (https://en.wikisource.org/wiki/Housing_and_Community_Development_Act_of_1992/Title_II#Sec._213._Housing_Education_and_Organizational_Support_for_Community_Land_Trusts.) This Act says “The term ``community land trust´´ means a community housing development organization that is not sponsored by a for-profit organization; that: acquires parcels of land, held in perpetuity, primarily for conveyance under long-term ground leases; transfers ownership of any structural improvements located on such leased parcels to the lessees; and retains a preemptive option to purchase any such structural improvement at a price determined by formula that is designed to ensure that the improvement remains affordable to low- and moderate-income families in perpetuity.”

In 2011, there were approximately 242 Community Land Trusts, containing over 10,000 housing units.  82% of their residents had incomes over 50% below the local average.  (http://community-wealth.org/strategies/panel/clts/index.html)

What is a Conservation Land Trust?

A conservation Land Trust operates similarly to a Community Land Trust, but it's sole purpose is to protect land in its natural state, to protect land from development and urbanization, and to protect natural resources.  These may be small, local organizations or huge, International conglomerates. 

Perhaps the best known Conservation Land Trust is The Nature Conservancy. Often times, Conservation Trusts acquire land through donation.  The land owner will deed the land to the Conservation Trust in exchange for a large tax break.  In some jurisdictions, developers may donate land to a Conservation Trust in order to receive “credits” that allow them to develop other land in the same locality.

How Do These Trusts Benefit a Land Owner?

There are many reasons a land owner may choose to participate in a Community Land Trust.  Some of these are outlined below.

Financial Incentives

Many people choose to join these types of trusts for financial reasons.  First, there are huge tax incentives that come with donating land to a trust.  Second, there may be financial reasons to sell part of ones land to a trust.  Often, that serves the purpose of buffering ones land from development while still being able to enjoy the use of ones land.  This is especially true of farm land in rapidly urbanizing areas.

Sometimes, land is purchased with the intent of rezoning.  If the rezoning fails, especially if it fails due to public uproar, selling the land to a Community or Conservation Trust allows an investor to recoup the money outlaid.  It is often the best way to avoid having a perceived “useless property” in ones portfolio.  

Many times, a Trust will make an offer on a property just to protect its future use. In these cases, the Trust may pay above what one could get for the parcel on “the open market.”

Many localities are now offering developer incentives for donating land to trusts.  In many locales, a developer may receive incentives in another area for donating a parcel to a trust.  The developer may donate parcel A in order to receive concessions on Parcel B.  In some areas, that may mean increased density.  In others, developers receive permission to clear land for conserving different land.  

Finally, donating part of ones land to a trust may result in lower property taxes for years to come. Your donation may include an agreement that allows you to still “use” the land.  However, since you no longer own it, you will no longer be taxed on that portion of the land.  

Protection of Future Land Use

Many land owners choose to protect their land through a conservation easement. This is a legal agreement between the owner and a Land Trust that permanently limits uses of the land in order to protect its conservation values.  In most cases, the owner retains his ability to own, use, and sell this land, as well as pass it down to heirs.  

The terms of each conservation easement are individually negotiated.  However, they must include some sort of public benefit.   Benefits are simple, and include such things as preserving views, preserving access to waterfront, protecting wild life and/or its habitat, historic preservation, or even something as simple as protecting public space.  

Conservation easements can include provisions for future use.  For example, you may negotiate the future right to subdivide the parcel, or even to convert a portion to housing.  However, if you want to ensure your future heirs don't cut down all the trees on the Southwest corner, you can protect the future life of those trees with a conservation easement.  You can use a Conservation Easement to prevent your heirs from paving paradise to put up a parking lot.

Protect a Community

Many people are lamenting the affluenza epidemic that is attacking America.  Cities are rapidly gentrifying, and the middle class is rapidly being squeezed out of many places.  Many of our service workers can no longer afford to live in the areas they serve.  A lot of folks want to protect their communities from over-gentrification. The Community Land Trust is a fantastic way to do so. Community members can form trusts to buy up land and prevent it from being sold to the highest bidder.  

Habitat for Humanity is one of the largest organizations built on this model. However, Local Community Trusts are being established across the country every day.  These trusts benefit the community in many ways.  They offer opportunities for first time home-buyers, and allow young people to establish themselves in communities they could not otherwise afford.  In addition to protecting areas, trusts can help revitalize them.  Trusts often buy up properties in blighted neighborhoods with the goal of making that area vital again.  They provide housing for teachers, firefighters, and veterans.  And in many cases, they allow people to stay in the area in which they grew up.

Philanthropy

Many people like leaving some sort of legacy.  Establishing a community trust is one of the more affordable ways to do so.  While an individual might not be able to afford to have their name on the wing of a hospital, they may be able to leave the community a park.  While the Carnegies may have left a legacy of libraries, Mr. Jones may choose to donate a small pocket park to his community. Future generations will remember him when they play under the trees in Jones Park.  And though the donation may be made for vanity purposes, the donor will still reap a myriad of financial benefits from the donation.

Summary

This week, we learned about Community and Conservation Land Trusts.  These are a specific type of Land Trust, set up to promote the public good.  But although charitable in nature, these types of trusts still financially benefit the donors in many ways.

Next week, we'll continue to examine the Community Land Trust.  Future posts will talk about how these land trusts are being used across the US, and about how you go about setting up or contributing to one.

Here at the Law Offices of Heath D Harte, we truly believe in building communities.  Real estate is an important component of community building and revitalization.  Effective real estate investors know how to build their own net worth while investing in the local community.  We believe ALL types of Land Trusts can help an individual become successful with Real Estate.  As your portfolio grows, you will need to balance your tax liabilities.  Using Community Land Trusts, you may increase your own bottom line while growing your community.  

Many Land Trust courses only focus on using the Illinois Model to grow your own net worth. However, the judicious use of Land Trusts can balance your investment properties with investments in the community itself.  That, in turn, will help your other community investments to grow in value. One type of Land Trust can grow your investment in another.  This is why it is important to be aware of both types.

As always, we invite your comments, questions, and general feedback.  Please use the comment form below, or connect with us on Facebook, Twitter, and Google+ using the links in the sidebar.  And as always, we are here to help you with all of your Land Trust  and Real Estate Law needs.  Please visit us at HarteRealEstateLaw.com or HarteLawOffice.com, or contact us and let us know how we can help.