Preserving affordability for future home buyers

Vashon Island has one, as does Orcas Island and Lopez Island – but not Bainbridge Island. Despite having similar affordable housing challenges, Bainbridge has not yet tried a community land trust, which puts a home’s land in the ownership of a nonprofit and the house itself in the ownership of its residents.

But if all goes according to plan, Bainbridge will have 17 units built with the CLT model in the next couple years. To learn more about the island’s effort to establish a CLT on Ferncliff Avenue, read my story below.

But even with 17 units, Bainbridge will be far behind its less-populated island cousins.

On Vashon, a CLT has permanently preserved about 100 housing units. That number is growing as the Vashon Household CLT develops new projects, some of which include acres of open space and green-built homes. The above photo depicts a plan for one of Vashon’s future CLT developments. For more information on this and other Vashon CLT projects, click here.

For more information on the 57 CLT units on Orcas Island, click here. To read about the 20-year-old Lopez Islnad CLT, click here.

And for a good example of how a CLT works, here’s the Washington State Housing Finance Commission’s timeline of one Bellingham CLT home:

Fall 2003: Kulshan CLT helps a qualified purchaser buy a $151,000 home. The purchaser contributed $1,510 (1 percent) to the down payment and KCLT subsidized the remaining down payment gap of just under $50,000.

Fall 2005: The owner moved away, which triggered a resale of the property. A family of four acquired the three-bedroom house for $111,000 (it was appraised at almost $190,000). At that low price, the new owners were able to qualify for a mortgage without a subsidy. The first owner netted about $8,000 after the sale.

Bainbridge Embarks on New Affordable Housing Effort
By Tristan Baurick

It’s a tried and true method for preserving affordable housing in several Washington towns and cities. But, as of yet, the community land trust model for housing remains untried in Kitsap County — that is, until a Bainbridge organization breaks ground on a new downtown Winslow project in the coming years.

“We’re the first on the block,” said Bainbridge Housing Resources Board Director Carl Florea. “We’ll be the only ones in Kitsap, but hopefully we can work with people in other communities to make this happen outside Bainbridge.”

The HRB will begin hosting a series of small group orientations about the housing project and the community land trust model that will guide it. CLTs, which originated on the East Coast in the early 1980s, offer qualified buyers a below-market price on a home and equity on their investment while preserving the home’s affordability for the next buyer.

About a dozen CLTs have cropped up in Washington communities, including Vashon Island, Leavenworth, Seattle, Bellingham and two in the San Juan Islands.

Most CLTs are in areas struggling with similar affordability problems to Bainbridge, where many working-class families are priced out of the island’s housing market.

HRB plans to build approximately 17 homes on a donated Ferncliff Avenue property by 2011. A short stroll from the Winslow ferry terminal, the 6 acres will feature resident-owned homes on trust-owned land.

With $100,000 raised largely from private donations, HRB hopes to generate the bulk of the CLT project’s budget from grants.

HRB is modeling the project after the nation’s first CLT. Established in Burlington, Vt., in 1984 when home prices were soaring, the CLT now houses 2,500 people and works with other communities to develop CLTs across the country.

In Burlington, the trust owns the land beneath the homes while the residents own the buildings and reap the equity when it is resold. Purchase prices remain low because the land value is removed from the equation.

As with most CLTs, homeowners sign agreements ensuring that the homes will remain affordable for future low-income buyers.

Orcas Island developed the first Washington CLT in 1989, and the idea quickly spread to other San Juan Islands.

The 17-year-old Vashon CLT has almost 100 residential units built or under development. Its latest project features homes clustered around a common green surrounded by 15 acres of preserved open space. The homes have purchase prices far below market value, ranging from $165,000 to $180,000.

Florea helped establish the Leavenworth CLT in the late 1990s. Then a pastor at a local church, Florea noticed that many suitable starter homes were taken off the market by retirees from wealthier communities and buyers seeking a second home.

With median home prices over $800,000, cutting housing costs down to a range affordable to teachers, firefighters and other working professionals has been tougher on Bainbridge than in Leavenworth, Florea said.

Previous affordable housing projects on Bainbridge, including the city’s repealed affordable housing ordinance, didn’t specify that a home must remain affordable after its first sale. Residents often moved in at a low price but sold at the market rate.

As a result, less than half of the 37 units created under the ordinance remain affordable, according to city planner Brent Butler, who is incorporating aspects of the CLT model into a draft of a new housing ordinance.

“Community land trusts make sure that the hard work and energy we put into creating (affordable housing) doesn’t get lost in the market,” Florea said.

“It stays affordable, even after the (first owner) decides it’s time to move on.”

Florea hopes to gather input at the upcoming CLT orientations that will help guide the Ferncliff development and dictate whether it will focus on single-family, rental or condominium units.

The information gathered from potential buyers will also help HRB obtain grant funding, a key part of the project’s budget.

Once in place, Florea believes the project will have “a rippling effect” beyond Bainbridge, possibly leading to CLTs in other Kitsap communities.

“It used to be that when you crossed the bridge everything got affordable,” he said. “Not anymore, not even in Poulsbo. All over Puget Sound and the I-5 corridor, land is becoming a high-cost commodity that’s out of reach of many working people.”

The Bainbridge Housing Resources Board will host a series of community land trust orientations in the coming weeks. The orientations have limited capacity and require a reservation. For more information, call (206) 842-1909.

12 thoughts on “Preserving affordability for future home buyers

  1. Land is a high-price commodity because of government regulation (GMA).

    Consider a recent headline in USA Today. The most affluent city in the United States is Plano, Texas. Highest income and lowest poverty rate. San Jose, California ranks second.

    The average house price in Plano is approx. $260,000. In contrast, the average house price in San Jose is approx. $740,000. Now why would housing be THREE TIMES CHEAPER in Plano when the average workers earns MORE than those in San Jose.

    Ahhh. California heavily regulates land and restricts the supply. Texas does not.

  2. Houses do not appreciate. Homeowners may make improvements to them, but unless they are substantial, they seldom are enough to offset the depreciation, which a May 2006 Federal Reserve Board study pegs at 1.5% per year. (And the improvements they make seldom increase the value by as much as they cost, with the possible exception of adding a 2nd bathroom to a home with only one, and perhaps the addition of a deck.)

    So I am puzzled that in 2 years a homeowner made a profit on their home. What actually happened was that the land under it appreciated, and the CLT permitted the seller to take that appreciation with them. Very generous, and it will certainly help a bit when the seller is trying to get a start somewhere else. But it is actually CLT value that left town.

    I think the CLT model has a great deal to recommend it, but at the same time would encourage those who care about housing affordability, economic justice, sprawl, long commutes, cost of living and promoting healthy local economies to investigate the ideas of American economist Henry George.

    The implementation of his ideas, as expressed in his landmark book Progress and Poverty (online at the dot org), would provide a sustainable community with widely shared prosperity, which would be better than the three-tier system that the CLT produces (landowners, homeowners and renters).

    To Mike’s comment, land becomes valuable when many people want to use it. Not all that many want to live in Plano, and many want to live in San Jose. California’s Proposition 13, by holding down property taxes, particularly for long-time owners, has driven up the *price* of land to the point that many people have excessively long commutes and little leisure or money left to enjoy their higher wages. Plano may have high wages, for at least a few people, but it lacks the amenities that cause people to flock there. That leaves land prices low. Some big California landholders have contributed somewhat to the low supply of land in that state. Land speculation, even under the guise of “open space,” is not a good thing.

  3. Tristan,

    In all your research, has anyone offered a definition of “affordable?” Affordable for whom?

    I once heard a speaker from Aspen talk about their affordable housing project designed to make it possible for ER doctors to live in Aspen and staff the local emergency center during ski season. They didn’t have a plan for shop clerks, waiters, bartenders or police officers.

    In the BI context, what does affordable housing mean? Does it mean more affordable than Suquamish, or Poulsbo, or Kingston? For the same money, would someone get as many bedrooms, bathrooms or a yard?

    Are we trying to upgrade housing for existing residents or are we trying to stimulate growth by attracting folks who couldn’t live here otherwise? Are we talking retirees or workers? Both?

    Dig a little deeper. Be a reporter. Your editors and readers will love you for it!

  4. BI has no money, BI is borrowing money to fix and maintain infrastructure, so let’s spend even more of our borrowed money to reseach another dead end project. Of course there will be private donations and grants, but the city will have to hire people to write the grants, accept the applications, maintain and managed the affordable housing. And since funding is from using grants, the grants have rules of who gets to live there. So I bet alot of workers in downtown Seattle would love some affordable housing that is just a ferry boat away.

    Better choices. The real estate market is adjusting on its own. Take a good look at how many condos and homes are for sale. At some point someone is going to have to reduce the price in order to pay off their construction loans.

    Even better choice, offer low interest mortgage’s and allow buyers to choose a home that they want to live in and blend into the community instead of have to live in “the affordable housing” This has been extremely successful in markets accross the US with less costs to the community.

  5. Beverly: The Housing Resources Board is not a part of the City. It’s an independent nonprofit. The HRB will write the grants, accept applications, and maintain and manage the housing.

    So, your concerns about the City are not concerns that apply to the HRB.

    Also, HRB has a strong preference for providing its homes to people who already work and contribute to the Island but cannot afford to live here. It’s doubtful that the 17 homes they’re building on Ferncliff will get flooded with a bunch of Seattlites. It’ll probably be the teacher who educates your kids, the store manager that sells you your clothes and the fire department medic saves you from cardiac arrest.

    For CSOB, I think what is considered “affordable housing” and who HRB is trying to help are the professional working people (like teachers, managers, medics and police) who can’t find places they can afford on the Island. So by affordable, its affordable for a family making $60,000 or $70,000. It seems the idea also is that busboys and T&C checkers and baristas will rent rather than buy.

  6. KellyAnn,

    Before moving home to Bainbridge, I spent a few years in a small town that tried buying/building affordable housing. We all thought it was a great idea to make it possible for teachers, managers, medics and police to live in town. The City applied for state and federal grants. Bought and refurbished a wonderful, historic building. Then, when it came time to open the doors we learned two disappointing things.

    First, the teachers, managers, medics and police liked living out of town. They wanted more bedrooms, bigger yards, and some privacy/anonymity when they went to the grocery store. Second, the state and feds required residents in the affordable housing project to sign a lengthy document proclaiming themselves as unable to buy appropriate housing on their own. The town’s teachers, managers, medics and police had too much self respect to do that, so the project was filled by people who came from 30-50 miles away and were more than happy to fill out the government forms. The few who had jobs commuted the 30-50 miles away so they could live in the very desirable, beachside own.

    I hope somebody is asking the teachers, managers, medics and police what they want — and asking the grant givers what they will require before we go down the same path.

  7. csob, your experience is not parallel to what is happening on BI. In your project, the city managed it – applying for grants and buying the property. And you said that it bought “a” building. Were the units condos? for rent? both? Did the units have more than one bedroom? Okay for some single folks or people without children, but this project clearly could not serve average income people with a family.

    With the Ferncliff property on the other hand, first of all the land has been donated to the nonprofit Housing Resources Board (NOT to COBI) by a very generous private citizen. This takes that huge cost out of the home-owning equation.

    Secondly, the Housing Resources Board wants to work with the city and get support from this city on this project, AND it is an independent, non-profit entity. The city could support this project by paying for utility hook up for example. Whether that would happen in its current financial situation is a discussion for another column. The point is that HRB is not COBI.

    HRB will apply for grants and loans from other organizations that specialize in this field.

    There will be houses with yards. There may even be a community pea patch. There will hopefully be paths that connect the residents to other neighborhoods. Some houses will have one bedroom, but many more will have 2, 3 and even 4 bedrooms. Some houses will be stand alone, some will share walls with neighbors. HRB has hired an island architecture firm who has experience in building communities of mixed income to collaborate on this project to make it beautiful and make it an asset to the Island. In past projects, one cannot tell from looking at the homes, which home owner makes more than another.

    Folks wishing to live in houses in the Ferncliff project will qualify for mortgage based on their incomes. They will be buying the home on land owed by Housing Resources Board.

    Many of these potential home owners have lived on the island all of their lives. Were they buying a home 20 years ago, they would be able to buy the land and the home sitting on it. We all know the insanity of real estate prices over the last 2 decades.

    These home owners will be as dignified as their neighbors who own their homes and the land on which they sit. Where we live and how we pay for what we have does not lend us dignity; we have dignity by how we conduct our lives.

    Your comment concerning “self respect” and “appropriate housing” feeds into the idea that somehow people who earn less money than others and receive loans for which they qualify based on their income are somehow less dignified. THIS IS AN UNTRUTH. Money does not equal dignity. We determine our self respect, not others

  8. Good Idea but have you asked the teachers, police etc. if they would live there. I doubt it! If so, post the results survey to support you plan.

    Again you require paperwork to apply, they are labeled as living in the affordable housing and it still is not a location and type of home of their choosing. I had the opportunity, in another community, to utilize an affordable housing choice. The amount of paperwork, the detail of what had to be provided about my job, my income, my life, plus the rules surrounding the ownership were complex at best. I chose instead to live 30 minutes outside of the community with no rules, in a lesser property, and took in a roommate to make ends meet. The final result, I made money on the property, lots. An opportunity I would not have had in the affordable housing.

    And I finally you stated no dollars were to be paid from the city, except now you want the city to assist with funding of utility hookups. What next will you want the city to assist with?

  9. JKS—now I’m confused. Heretofore the reason most often stated to justify an affordable housing program is that it would allow people who can’t afford to live on the island (e.g. teachers, police and fire officers) to move here and be part of the community. Now you are saying that “Many of these potential home owners have lived on the island all of their lives.” If so, what advantage does an affordable housing program offer either them or the community?

    If they are already living here they presumably are renting, since it isn’t likely a current homeowner is going to opt to move and live in an affordable housing project. Even for a current renter, buying a unit in such a project means giving up the biggest advantage home ownership provides: the ability to build equity, especially in a rising housing market. As the example given in the above article shows, artificially restricting the sales price meant that the homeowner netted only $8000 versus the $40,000 he would have received from a market price sale. This is money the homeowner could apply when buying his next property; without it he is going to find the housing market has run away from him, leaving him the choice of renting or of finding an another affordable housing program to buy from.

    While individual circumstances and desires enter into his decision, our renter would likely be better off continuing to rent if he wishes to stay on the island. If he wants to own, it would make sense for him to find a market priced home he could afford (either on or off island), buy it without the strings an affordable housing project would attach, and build the sort of equity that would allow him to remain in the housing market.

  10. You are making an assumption that is not true for everyone, Dave, when you say “…buying a unit in such a project means giving up the biggest advantage home ownership provides: the ability to build equity, especially in a rising housing market.”

    It used to be that people wanted a home so they had their own place.
    Many people who are renting don’t want an investment – they want a home of their own. They want to live in a place where they can paint the rooms any color they want. They want to plant a garden in their yards with the security that they will be able to pick the crops and see the flowers bloom.

    The homes on Ferncliff will be a neighborhood of people who were given an oppportunity – the one shot they could get – at home ownership. The community of Bainbridge Island will get to keep a little of the diversity that is quickly disappearing.

    Beverly, your experience is not everyone’s experience. For some people completing paperwork – a one time thing for a mortgage application – is worth the work. People living in rent assisted apartments have to go through the financial paperwork annually to prove that they still qualify for the apartment.

    I’m glad you are happy with your decision to move away from your community. Did you have kids you had to move from one school district to another by any chance? I imagine depending on roommates to suppliment your mortgage payment had complications of its own.

    Your comment, “…they are labeled as living in the affordable housing and it still is not a location and type of home of their choosing,” is one that I personally am unable to understand. The homes on Ferncliff will be a new neighborhood, just as North Towne Woods, or Commodore, or Blakely Estates, or Stetson Ridge are neighborhoods. And, call it a hunch, but I don’t think you’ll have anyone complaining about being able to walk to the ferry or to downtown or the fact that the homes will be new construction.

    Lastly, the city will be presented with a number of ways that it may participate. It very well may not participate at all. That’s to be decided by COBI.

  11. JKS,

    “It used to be that people wanted a home so they had their own place.” That was then, what makes you think your vision is “now?” Pensions are history. People have to make and save enough in their working life to fund their “golden years.” Beverly asked a great question. Has anyone bothered to ask the favored demographic if they want to live this utopian, profit-free village — with or without its pea patch?

    “The homes on Ferncliff will be a neighborhood of people who were given an oppportunity – the one shot they could get – at home ownership.” The one shot they could get unless they choose another place to live just a few miles away.

    Believe it or not, I wish the HRB well. I hope this extraordinary gift of land and the evolving concept for turning it into desirable, affordable housing working professionals is a great success. I love eating crow.

  12. csob, only a few days after public announcement of HRB’s home ownership classes for this new neighborhood, the classes are filling. I’d say there’s plenty of interest in this community for the opportunity to own a home.

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