#173 Spring 2013 — Redevelopment

Community Land Trusts Have Renters Too

CLTs can and should include their renters, not just their homeowners, in governance and wealth-building.

Photos Courtsey of Cornerstone Corporation for Shared Equity

Renters in properties using the Renter Equity SM program build equity in a special account through shared responsibilities, participation in governance and on-time payments.

community land trusts and renters. Image shows man at picnic table

Photo courtesy of Cornerstone Corporation for Shared Equity

“Our renters are our assets and the community’s assets,” says Roger Markovics, a board member and community organizer for the Albany Community Land Trust (ACLT), in Albany, N.Y. “They’re long-term, engaged residents in their neighborhoods.” ACLT reserves one of three resident seats on its board for a tenant in order to promote leadership and accountability to renters’ priorities.

It also partners with United Tenants of Albany, a local direct service and advocacy organization.

While community land trusts (CLTs) are best known for their provision of permanently affordable owner-occupied housing, their portfolios of affordable rental properties are expanding. According to a 2011 survey of approximately 100 CLTs conducted by the National CLT Network, roughly two-thirds of residential properties in CLTs’ portfolios are rentals. As the demand for well-maintained affordable rental housing continues to escalate, and as fallout from the Great Recession imposes stricter qualifications for mortgage loans, more CLTs may diversify their holdings to include rental housing.

In interviews with leaders and staff from 22 CLTs with rental housing, Maxwell Ciardullo found a mixed picture of CLT efforts to promote renter engagement and development. Some CLTs — like the one in Albany — are making concerted efforts to organize and empower their tenants and to provide opportunities for tenants to build savings and improve their lives, but many others are not.

Renter Engagement

CLTs are nonprofit organizations that remain permanently vested in the housing they directly or indirectly develop. CLTs retain ownership of the land underlying the buildings so the land use serves the community. The land is then leased at a nominal price to lower-income homeowners or renters, but is sometimes used for commercial or recreational uses. Regardless of the land’s current or speculative value, CLTs create, preserve, protect, and promote community assets for residents who are marginalized by the private market and its patterns of capital investment.

Beyond providing permanently affordable homes and property assets that serve the community’s interests, hallmarks of the CLT model include: (1) access to successful wealth-building for lower income households, (2) resident engagement, and (3) tripartite governance. Tripartite governance means a board composed of one-third public representatives (such as government officials, professionals with relevant expertise), one-third CLT community members (dues-paying members from the broader community within the CLT’s service area), and one-third leaseholders (residents of CLT properties).

Ciardullo found that staff of CLTs who had recently grown their rental portfolios often acknowledged inadequate planning and implementation for incorporating new renters into their existing governance structure. Some CLTs had no renter representation on their boards, and a few officially deemed renters ineligible for leaseholder board seats. CLTs without renter representation tended to contract out property management, leaving the CLT’s own staff considerably removed from tenants.

Affordable housing practitioners and community organizers have long reported that supporting engagement and organizing among renters is more challenging because renters often face more obstacles in their personal lives. As Rebecca Buford, the executive director of the Lawrence Community Housing Trust in Kansas, explained, “Renting parents often have very full schedules.” A manager from another CLT, Champlain Housing Trust (CHT) in Burlington, Vt., stated that “some renters have had such bad experiences that an affordable, well-maintained CLT apartment is a relief.” In these cases, it’s no surprise that renters prioritize rest and recovery over engagement.

Other research has found that renters move more frequently and report less attachment to their neighborhoods than homeowners. This is likely because renters often live in neighborhoods that have been disinvested from by private lenders as well as by local, state, and federal governments. Renters also typically have lower incomes than homeowners. Therefore, their scarce resources are prioritized according to their greatest needs, which may not include nonprofit governance.

It’s important to note, however, that provision of high-quality, affordable, and stable rental housing by CLTs — often located in neighborhoods with community assets — already addresses some of these documented barriers for renter participation. So while various practitioners perceive that renter participation is less viable because renters tend to be less “stable,” this is not an adequate explanation for weak renter engagement among many CLTs.

Luckily, some CLTs — despite challenges — are implementing proactive practices to engage renters and provide them with opportunities for participation in governance and leadership development. In the case of the Durham Community Land Trustees (DCLT) in North Carolina, some of the first CLT residents and leaders of the organization were renters. Unlike many CLTs, the CLT in Durham does its own property management, which allows it to maintain a closer relationship with its tenants. Selina Mack, DCLT’s executive director, estimates that her staff interacts with 90 percent of DCLT’s tenants monthly. Says Mack, “A lot of our tenants are long-term tenants. They’re just as invested in the community as our homeowners are. And because they have at least a monthly relationship with us, it’s just easier to communicate — about community events, voter registration, whatever is coming up.” A consequence of this organizational commitment to tenant engagement is a high rate of renter participation in community events and DCLT trainings.

To institutionalize the voices of renters, other CLTs, such as ACLT and CHT, have reserved board seats specifically for their tenants. Both of these CLTs amended their bylaws to include renter board positions once their rental portfolios had grown to a significant size.

Some newer CLTs are anticipating the need for renter-focused leadership development and participatory planning. Jane Place Neighborhood Sustainability Initiative (JPNSI) in New Orleans identifies renter participation as central to its mission. As Kate Scott, a JPNSI board member explains, “The neighborhood is under a lot of development pressure. We fear that it is going to push out long-time renting residents, so we really want a structure that is going to allow people to participate in what’s going on, make decisions for themselves, and be able to stay in the neighborhood.” Scott went on to explain that local neighborhood associations tend to cater to homeowners and marginalize renters’ concerns, echoing an all-too-common occurrence within neighborhood associations across the United States.

To combat renters’ experiences of marginalization, CHT supports resident associations in many of its multifamily housing developments, which include a 330-unit apartment complex, two mobile home cooperatives, and five housing cooperatives. “We work to provide the structure and opportunity for even more resident control,” says Michael Monte, CHT’s chief operating and financial officer. CHT has a full-time employee who supports these resident associations, and CHT is currently pursuing funding to establish additional resident associations and to create a support group for leaders and members of the various resident associations for peer learning.

As these cases illustrate, some CLTs are finding innovative ways to prioritize and support renter participation within their communities. Similar practices could be adopted by other CLTs to better promote inclusion, participation, and leadership among renters.

Renter Wealth-Building

Lower-income households and people of color experienced significant financial losses during the foreclosure crisis. In addition, the backlash to the crisis has resulted in more stringent mortgage loan qualifications, further limiting the potential for wealth building among these households. This is an important time to explore incorporating financial development and opportunities to build assets into the provision of rental housing.

This is related to renter engagement as well. Participation among renters in community-building or governance activities may be more likely when CLTs offer accompanying financial savings or wealth-building programs. Incentivizing financial planning and savings promotes financial security and residential stability for renting families. And many CLT practitioners cited that longer durations of residency among renters increased their likelihood for participation and engagement with the CLT.

Nevertheless, building financial development or savings programs into affordable rental projects by CLTs and CDCs is difficult. Ciardullo’s study found CLTs that recently developed rental properties had trouble breaking even and capitalizing reserve funds for ongoing property maintenance. Almost all of these CLTs used Low Income Housing Tax Credits (LIHTC) to finance their rental development. Since the housing crash, practitioners reported increased competition for LIHTC awards, which was placing added pressure to propose “doing more with less.” Organizations “don’t want to have properties continuously needing resubsidization,” Monte explained. Therefore, building additional tenant services and financial incentives into rental projects proves challenging. Nonetheless, some are pulling it off.

Paying rent and building wealth are commonly understood to be mutually exclusive, but some nonprofits are finding creative ways to merge the goals. One strategy used by some CLTs and CDCs are individual development accounts (IDAs), which match renters’ savings to help them eventually step into homeownership. Greg Finzell and Jaime Jones of the Rondo CLT in St. Paul, Minn., are designing a lease-to-purchase program for lower-income renters that will be combined with an IDA. They report that 80 percent of people contacting the Rondo CLT cannot qualify for a home purchase loan. Rondo has structured its lease-to-purchase program, therefore, to accommodate renters who may need more than a lease-purchase program’s typical three years to become mortgage-ready. The IDA will complement this extended rental period. By providing a supported and long-term pathway into homeownership, Rondo CLT hopes to give more renters the chance to realize potential financial gains from home owning.

New Ideas

There are also some programs outside of the CLT world that are focused on renters’ financial development that CLTs with increased rental units might want to explore.

Renter Equity SM is a “participatory property management system.” Developed under the leadership of former executive director Margery Spinney in 2002 at the Cornerstone Corporation for Shared Equity in Cincinnati, Renter Equity allows renters to earn as they fulfill commitments to pay rent on time, attend monthly meetings and perform work assignments. Renters living in developments that are a part of the program are required to participate in the resident association (which makes decisions about the day-to-day operations of the property) and help with grounds maintenance and other activities.

In return for resident contributions, Cornerstone manages and capitalizes tenant equity accounts. After five years renters are vested in up to $4,137 of accumulated earnings in their tenant equity accounts and may begin to make withdrawals. After 10 years, renters have the potential to earn up to $10,000. Additionally, Cornerstone promotes residential stability and savings by offering low-interest loans to renters as an alternative to high-interest payday loans.

The Renter Equity program encourages long-term tenancy. Cornerstone reports 96 percent occupancy over the past ten years and less than 10 percent turnover a year in their 60 units. Spinney and current executive director Rob Sheil are confident about the reliability and success of the program. In fact, Cornerstone has given development partners reserve funds to cover costs associated with vacancies; however, occupancy has been so consistent in Renter Equity housing that reserve funds end up capitalizing renter equity accounts instead. “It helped our partners close the deal. And we could do that because with Renter Equity we were sure that the project would operate without losses,” Spinney acknowledged.

Cornerstone is currently strategizing how to build a Renter Equity Bank that could provide their innovative property management system to affordable housing developers throughout the country. Spinney thinks that CLTs and the Renter Equity program seem like “a really good fit since both aim to create permanently affordable units.”

Like Cornerstone, the Credit Builders Alliance (CBA) is also strategizing a new financial program that will enable more low-income residents to build wealth. Its pilot program allows renters in public and nonprofit affordable housing developments to build their credit through the on-time payment of rent. According to CBA, over 50 million people have little to no documented credit. Renters are less likely to have established credit since rental payments, unlike mortgage payments, are not traditionally tracked by credit rating agencies. The program is partnering with large housing developers that will report rental payments to the credit rating agencies, along with providing financial education for tenants. The pilot program is being evaluated to ensure that the benefits of building one’s credit outweigh the potential risks of harming one’s credit if life events result in delinquent or missed rent payments. For the majority of tenants who regularly pay rent on time, the program will help them build a solid credit history, enabling them to access loans in the future.

CLT practitioners are constantly taking on greater challenges for higher-impact outcomes, such as permanent affordability, community control of land, and the prevention of foreclosure. CLTs have successfully crafted an alternative homeownership model with better outcomes than those offered by the conventional market. We call upon CLTs to build on that tradition and innovate and implement models that also enable their lower-income renters to experience the benefits of leadership and asset-building.


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