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Four years ago, members of Peace Presbyterian Church in Eugene, Oregon, decided to do something about the severe lack of affordable housing in Lane County. The congregation had dwindled to 20-some members, but the church still had to maintain a 3.5 acre property with 9,000 square feet of building space.
This led them to reach out to our nonprofit, SquareOne Villages, to propose selling the vacant half of the property to be developed as affordable housing. The partnership was a win-win. The sale would provide the small congregation a financial lifeline, while creating a legacy aligned with the church’s mission. And we would be able to complete the land acquisition process on a flexible timeline, without having to compete on the private market.
The original plan was to partition the property into two separate legal lots, with the church on one and the housing on the other. However, splitting the property would trigger costly land use measures, requiring us to finance a future public street connection. To avoid this expense, the church generously offered to sell SquareOne the entire property, with the understanding that the congregation would lease back part-time use of the sanctuary building.
As a result, our plans for Peace Village doubled to 70 units, making it SquareOne’s largest housing development to date. We used this as an opportunity to demonstrate the merit of combining a limited-equity cooperative with a community land trust. This hybrid ownership structure has significant potential for building housing that is more equitable and permanently affordable. But the model faces barriers to accessing existing subsidy and incentive programs tailored to either rental housing or single-family homeownership, that are holding it back from realizing its potential.
Evolving a Shared Ownership Model
SquareOne had been experimenting with a shared ownership model since our organization was founded in 2012 as a grassroots effort to build Opportunity Village. The project still exists today, providing shelter to about 45 to 50 adults at a time in simple tiny homes. City-sanctioned, non-congregate shelter sites have become more commonplace. But it was a radical idea at the time, particularly because of its self-governance model, with community meetings and an elected council that provided the day-to-day management, following the likes of Portland’s Dignity Village and Seattle’s SHARE.
With a tightening housing market, we quickly found there were few opportunities to transition from a place like Opportunity Village into permanent housing. And while we continued to consult with other groups looking to start up similar shelters, our organization shifted to focus on developing more accessible housing to transition to after leaving shelters, based on a similar “village” model.
When we pivoted to housing development, we adopted a community land trust (CLT) model to protect the long-term affordability of our developments. The natural progression of the informal self-governance model implemented at Opportunity Village within existing real estate law was a housing cooperative—where resident-members share an equal voice and vote in how their housing is operated and managed.
Our first two developments, Emerald Village and Cottage Village, were organized as leasehold co-ops, where our CLT retains ownership of the entire property and leases it to a co-op composed of all residents. And in 2019, we received a grant to further research and develop a transition to resident ownership by forming limited-equity co-ops (or LECs) that would own the buildings of future developments.
In comparison to rental housing, we found LECs provided significantly greater stability and control to residents through security of tenure and democratic governance. They were also more accessible and less risky than single-family homeownership.
While the classic community land trust model is an effective tool for making single-family homeownership more accessible for low-income households, each household must qualify for an individual mortgage, which is out of reach for many. In a limited-equity co-op, the co-op holds a blanket mortgage on the property. Each member holds a proprietary lease with the co-op, giving them exclusive rights to a specific dwelling unit, and pays a monthly carrying charge to the co-op to cover all operating costs and debt service of the housing.
The CLT also addresses a shortcoming of the LEC model, where members may be enticed to convert to a market-rate co-op after affordability restrictions expire to cash out their shares. In the 1960s and ’70s, for example, an estimated 60,000 LEC units were created with financing under HUD. But over the decades, many LECs have become market-rate. A partnership with a CLT provides an extra layer to protect the long-term affordability of an LEC, while also providing ongoing support and technical assistance to the co-op. And by creating an umbrella entity under which multiple LECs exist, there are opportunities to take advantage of economies of scale that may not be possible with individual co-ops.
We were first introduced to this ownership structure by a 2014 paper by the Lincoln Institute of Land Policy. But it cited only a handful of entities that had put it into practice in the U.S. We were most impressed with the work of Lopez Community Land Trust, and visited Lopez Island in Washington state to learn more about the series of small-scale LECs that they began in the 1990s. Shortly thereafter, in 2021, we opened a small-scale LEC of our own, a middle-housing infill development called C Street Co-op with six members.
Peace Village Co-op
The land from Peace Presbyterian Church provided an opportunity to implement this model at a much larger scale. The church sold us the entire property at a below market price. In exchange, SquareOne leased back part-time use of the church building over 25 years for a nominal fee. We developed plans for 70 homes, with a mix of studio, 1-bedroom, and 2-bedroom units. Once construction was complete, we sold them to Peace Village Co-op for the price of the construction loan plus the deferred developer fee.
Applications for the 70 available units were open for three weeks in September 2023, during which we received around 150 qualified applicants. To join Peace Village Co-op, each member must purchase a $5,000 membership in the co-op, which serves as their equity in the housing. Because Peace Village is a limited-equity co-op, the price at which a member can sell their membership is limited to a 3 percent per year increase over the price they paid, plus any improvements made. This keeps the buy-in cost low and preserves affordability for future members.
The membership price was established based on what our anticipated target population (households earning 30 to 60 percent of the area median income) could afford. SquareOne also fundraised to start our own revolving loan fund. Loans finance up to 80 percent of the cost of a membership ($4,000) at 6 percent interest, paid back over 5 years. While most households purchased their membership in full, SquareOne provided financing to about one third of the initial residents.
Housing co-ops are less common in the Pacific Northwest, and so it is extremely difficult to find lenders for the type of larger individual share loans that may be possible in places like New York City and Washington, D.C. Until new financing options are made available, this constraint requires keeping membership shares low and instead having a larger blanket mortgage held by the co-op.
Monthly housing costs at Peace Village—including utilities, mortgage payment, maintenance, reserves, insurance, and all other operating costs—are just $450 to $750 per month, meaning that households earning just 30 to 40 percent of the area median income can operate affordable, resident-owned housing at cost, without any additional ongoing subsidy. Achieving these affordability levels requires significant one-time upfront capital funding to reduce the amount of debt on the housing.
SquareOne retains ownership of the land under the housing via a 99-year ground lease relationship with Peace Village Co-op. The ground lease fee helps to cover overhead costs for the CLT and direct staffing to provide training and support to the co-op. We’ve found this support to be particularly important in the first year or two of operations, since many members may not be familiar with running meetings or establishing budgets.
Designing for Community (and Affordability)
Community design can help a co-op thrive. Our “village model” fosters community cohesion by balancing modest personal spaces with a variety of indoor and outdoor common spaces. Parking is kept to the perimeter so that the space between homes becomes a medium for casual social interactions.
Our initial developments included detached tiny houses accompanied by a larger common house. With Peace Village, we aimed to achieve higher density with attached townhomes and flats. Our floor plans range from the smallest—a 260 square foot studio with a 140 square foot sleeping loft—to the largest, a 788 square foot two-bedroom townhome. Alternating roof lines and color were used to visually break the buildings into individual homes.
Common facilities can add significantly to the per-unit cost of development. Because of the church conversion, existing buildings on the property (including community gathering spaces, a kitchen and dining area, and an office) could be easily retrofitted to serve as the common house. This provides a space large enough for all co-op members to meet or share a meal, do their laundry or get mail, and store bikes or other common tools.
The initial residents arrived in December 2023, and set up a Discord channel to communicate and get to know one another. Within a month, they were using the platform to organize community potlucks and game nights in the common house, submit requests for help from neighbors, and announce offers of extra furniture or other resources. They’ve organized committees on specific topics such as gardening, accessibility, communication, and emergency preparedness. And they will soon be electing the co-op’s seven-member board of directors.
Overall, Peace Village strives to offer a form of cohousing that is more affordable. In place of the traditional cohousing structure of selling homes as condos, the CLT-LEC model makes community-based housing permanently accessible to those who may not be able to qualify for (or want) a mortgage.
Financing and Scaling Up
The Peace Village development was completed for $11.4 million, or $160,000 per unit. By comparison, other housing developments built in Lane County between 2020 and 2023 that were financed by LIHTC—the Low-Income Housing Tax Credit program—came in at an average cost of $370,000 per unit. In the planning stages, this gap left us feeling like we must be missing something or doing something wrong, but the development was ultimately completed on schedule and on budget.
The smaller than average unit design accounts for some cost savings. But we also designed for long-term affordability, using high quality building materials, and for deep energy efficiency, with homes that use half the amount of the energy as a similar sized home built to standard code. Thus, we believe the cost savings can be largely attributed to avoiding the complexity of traditional financing sources.
Subsidized affordable housing is dominated by LIHTC. An outside-the-box project like Peace Village would not fit the mold without making compromises on a number of fronts (e.g., delaying resident ownership until after year 15 when the tax credit investor exits).
Instead, Peace Village came into existence through relentless advocacy and fortunate timing. We were able to achieve our affordability targets with nontraditional equity sources, including $4.3 million in direct funding from the American Rescue Plan Act and $2 million awarded directly by the state legislature to develop a “Shared-equity Affordable Homeownership pilot program.” The innovative concept also attracted $1.6 million from donors and foundations. These one-time sources are not easily replicable. But at 70 units, Peace Village may well be one of the larger housing developments achieving under 60 percent AMI affordability levels without LIHTC, providing a case study to remind us that financing affordable housing doesn’t have to be so complicated and expensive.
Because of the simplified project financing, the development required no consultants, attorneys, syndicators, or tax credit investors. And because much of the subsidy was provided directly and upfront, the construction loan did not need to be taken out until the end of the project. So rather than paying interest to a bank, our nonprofit actually earned interest during construction that was able to be invested back into the project.
Furthermore, the CLT-LEC model results in an end product that provides greater control and stability to the residents. Housing is owned by the local community—rather than a private tax credit investor. And long-term affordability controls are in place that allow a subsidy’s value to go much further than with a LIHTC development.
This makes a compelling case for directing more public resources to scale this equitable and cost-effective housing model. Relying on major reforms to federal housing policy feels politically unrealistic, and the LIHTC program is good at delivering a specific product through private-public partnership. But given that our housing affordability problem only appears to be worsening under the status quo, states and municipalities must use their resources to support a second model. While these resources are commonly used to leverage federal tax credits, Peace Village and recent social housing efforts demonstrate that state and local affordable housing investments can achieve a lot all on their own.
Making Space for Limited-Equity Co-ops
Cooperative housing is uniquely challenged in accessing subsidy and incentive programs, in large part because this third option—which falls somewhere between multifamily rental housing and single-family homeownership—was not considered when designing these programs. For example, when Peace Village was being constructed, Oregon had property tax exemption programs for low-income rental housing and single-family homeownership, but we found that LECs did not qualify, even though they were serving the same income demographic with similar or stronger affordability controls.
But cooperatives are not entirely unfamiliar in states like Oregon, where the ROC USA model has been used to convert at-risk manufactured dwelling parks to resident-owned cooperatives. These initiatives have been widely successful in preserving affordable housing. So why not use the co-op model in the multifamily housing sector?
This was the logic we led with in Oregon, where the content of two bills we sponsored was recently passed in the state legislature to advance the development of LECs. In addition to amending the state’s Low-income Rental Housing Property Tax Exemption program to be inclusive of LECs, this housing type can now also qualify for the Oregon Affordable Housing Tax Credit, which can be used to reduce thse co-op’s mortgage interest rate by 4 percent. And the Oregon Cooperative Housing Network, which we sponsor, was assembled in 2021 to continue to advance co-op related interests at the state level.
But LECs still need a regular subsidy program to meet affordability goals. Oregon’s Local Innovation and Fast Track (LIFT) program—which uses state bonds to finance long-term loans that are forgiven if an extended affordability term is applied—could be such a program. But the rules of LIFT’s two tracks (rental and homeownership) preclude a viable path for LECs.
It could be argued that an LEC, which can be characterized as either tenant-owned rental housing or multifamily homeownership, could theoretically fit within both programs but ultimately does not really fit the intent of either. The rental program restricts residents from holding a membership stake in the property. While a leasehold co-op structure offers a potential work-around, LIFT Rental uses the LIHTC compliance manual, in many ways negating the purpose of forming a co-op in the first place. LECs can qualify for the homeownership track, but the program restricts the total subsidy amount to the appraised value of the land plus site development. This limitation assumes a single-family CLT model, and doesn’t provide enough funding for a multifamily property.
We believe there are some simple solutions here. LECs could be exempted from the lot value limitation on the homeownership side since they are multifamily. Or alternatively, an LEC could apply through LIFT Rental (since they are developed and financed similar to rental housing) and then transfer to Homeownership for compliance once construction is complete (since they are ultimately owned by the residents). This would allow Peace Village to qualify for a subsidy of up to $140k/unit—enough to finance the entire $160k/unit development with a single source when combined with a small construction loan. But we have been unsuccessful in getting these adjustments made thus far.
Consequently, our next development—the shovel-ready 52-unit Rosa Village Co-op, following the Peace model—is currently on hold. This leaves our growing organization at a troubling juncture. Do we stay the course and continue to face funding uncertainty? Or do we pivot our next development to align with available subsidy programs?
The CLT-LEC is a powerful model for decommodifying and democratizing housing. Substantial progress has been and is being made on the single-family CLT front, where incentives and lending products have been adapted to accommodate this unconventional ownership structure. But in order to expand access to the growing shared-equity homeownership sector to lower income households, we must also reimagine these programs through a cooperative ownership lens.
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4 thoughts on “Why Combining Community Land Trusts and Limited-Equity Cooperatives Benefits Residents”
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Thanks to SquareOne Villages for their leadership to build affordable housing for the low income population.
With continued advocacy of the village model, let’s anticipate that people and entities with deep pockets and civic minded hearts will contribute funds to perpetuate this alternative housing vision.
I would use the funding options discussed for a baseball stadium to hund this kind of housing
The timing of this article couldn’t have been better! I’ve got a developer interested in doing this exact thing for a small 55+ community in the exclusionary village in which I live.
Since 1984, I’ve contended that low-equity coops (and mutual housing associations) are the key to providing “forever affordable housing” (FAH). Coupled with a community land trust, the concept is even better because the coop owners can’t suddenly try to convert to market rate to cash in on the windfall of rising property values after decades as a low-equity cooperative. (And yes, this has happened.)
Our current system of providing affordable housing is, of course, slightly insane and wildly inefficient since the “affordable” housing goes market rate after subsidies end in 30 years and we have to start all over again with even higher construction costs, requiring even more subsidies. Thank you from the bottom of my heart for this article.
This remarkable model is a bit easier to understand, I think, if you look at the diagram of how all these pieces fit together. You can find it here: https://www.squareonevillages.org/single-post/oregon-legislative-concepts-for-cooperative-housing