CLTs Go Commercial

The idea of turning the community land trust model into an economic development tool is attracting growing interest, but there are still a lot of unanswered questions about how it would work.

In San Francisco’s Japantown, many of the businesses that give the storied neighborhood its cultural theme are on month-to-month leases with an absentee landlord. In post-Katrina New Orleans, entire neighborhood commercial strips lie vacant or contain only salons and furniture rental stores. In Albuquerque, stakeholders in the Arbolera de Vida development have turned away a charter school, but now have to figure out what they do want as they plan on the non-residential portion of their 27-acre site.

These sorts of problems are not new. But what is new is an increasing interest in adapting the community land trust model of shared equity homeownership to address economic development goals like these. In a residential CLT, the trust retains ownership of the land and sells the home, retaining any initial subsidy for the next homeowner through shared-equity resale restrictions that balance affordability and asset-building and maintaining a stewardship interest in the home. These ideas of an ownership stake, community control of land, and retaining subsidy have a clear appeal beyond housing — but those looking into it are realizing just how many unanswered questions there are out there about how the model will have to change to make that leap.

Japantown

Japantown, San Francisco, is one of only three Japantowns left in the country. Its collection of Japanese and other Asian shops and restaurants in a central mall (a result of 1960s redevelopment) and surrounding streets are what set it apart from “any other neighborhood,” says Bob Hamaguchi, a retired Bank of America real estate executive who staffs the Japantown Task Force.

The task force is renewing a neighborhood plan developed in 1999, hoping this time to get it officially adopted by the city. In the original plan, a single line suggested that a CLT model be considered to preserve the businesses that give the neighborhood its cultural character. The Ford Foundation, which has a multiyear initiative to support the shared-equity concept, gave them a grant to work with Vermont-based consultants Burlington Associates, who have deep expertise with shared-equity models, to conduct a feasibility study.

It’s clear to a lot of folks in the neighborhood that preserving Japantown’s cultural assets and history “is going to rest on having a stake in the ownership,” says Hamaguchi. They are interested in thinking of a CLT model to purchase the privately owned portion of the mall, which is surrounded by a city-owned parking lot and has a city-owned park within it.

There are several complicated questions to answer. What would be the legal stake the CLT would have in the property, given the complicated existing ownership — deed restriction? air rights lease similar to residential CLTs’ ground leases? What entity would have sufficient equity to take on the development?

But there are also questions about the heart of the model. “What is shared equity to me?” says Hamaguchi. “That’s going to be the challenge.” The goal is to give the cultural businesses “some sort of long-term stability.” The CLT looks to be a good way to do that, but, he worries, “if you provide below-market rent on a long term basis, you are affecting surrounding businesses and property owners,” giving unfair advantages to your tenants and negatively affecting the value of others’ properties. (Unlike residential, commercial properties are assessed based on income generation potential.) What’s a fair way to pass along the subsidy to the next leaseholders? “We can’t give the mall retailers windfall profitability,” Hamaguchi says. He wonders if some sort of profit-sharing arrangement would work. “We want to encourage investment. We want them to prosper, but not at the expense of the community.”

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