Affordable Housing Preservation Models
Summary
While much of the strategy to address the housing crisis hinges on production, preservation through acquisition and rehabilitation is also an important piece of the puzzle for many reasons. Acquisition and rehab can make units affordable, once purchased at market value, on a cheaper per unit basis than new construction.1 Structural impediments, like the bottlenecking of Federal Tax Credit resources and the CA State deprioritization of “Low-Resource Areas” reduce the ability of many geographies to compete for affordable housing production. Preservation can expand the number of affordable units in locations where production is not feasible.
The following are a few housing preservation models that may be considered:
A. Community Land Trusts: Community Land Trusts (“CLTs”) function by dividing ownership of land and buildings, holding the land in trust to eliminate its vulnerability to land speculation while dividing ownership of buildings among resident-owners who steward the property over the duration of their tenure living there. They keep housing affordable during hot markets, and keep maintenance consistent during down markets.
B. Limited Equity Cooperatives: Limited Equity Cooperatives (“LECs”) pursue a similar price stabilization objective and function by pooling resources among coowners and sharing the responsibility and equity that develop from use and management of the property over time. A resale formula determines the limits on the price of sale that keep the units affordable over time, and also determines the equity that participants accumulate.
C. OPA: Opportunity to Purchase functions by granting tenants or mission-driven nonprofits the right of first offer and right of first refusal to purchase a property at the market price when it is offered for sale. When the purchase is made through the support of government funds, or when a purchase is made by a missiondriven organization, the affordability requirements can be structured into either the deed, the lease, or other enforceable documents. Various affordability preservation frameworks can be combined – for example, a Community Land Trust lease is already an optional feature for affordability preservation under the EPA OPA (see Section 14.26.120.E.2 of March 1, 2022 draft Ordinance).2 1 See James Yelen, “Preserving Affordability, Preventing Displacement,” Enterprise, 2020, available at:
https://www.enterprisecommunity.org/sites/default/files/2021-07/preserving-affordability-preventingdisplacement.pdf. 2 Section 14.26.120.E.2 of the draft March 1, 2022 Ordinance states: Permanent affordability standards shall remain in force in perpetuity or for no less than ninety-nine (99) years and be renewable. The standards shall be evidenced by one of the following:
1. A restrictive covenant placed on the deed to the Residential Property that runs with the land and is enforceable by the City against the purchasers and their successors;
2. A Community Land Trust lease, which is a ninety-nine (99)-year renewable land lease with affordability and Owner-occupancy restrictions; or
3. Affordability covenants in land leases or other recorded documents which run with the land and are enforceable.