With Austin voters about to decide whether the city commits $250 million to increase the local supply of affordable housing, a real estate research group has come out in strong support of cultural land trusts as a tool to prevent rapid escalation of land prices.

The Urban Land Institute Austin recently released an extensive white paper compiling research on land trusts and recommending wider use of them as a preferred solution for acquiring land for immediate or future development, with rental or sale prices pegged to around 60 percent of an area’s median family income.

While listing benefits such as neighborhood stabilization, increased opportunities for working families, and predictable, if modest, returns for participating organizations, the paper promotes land trusts as a way to preserve affordability with minimal government aid, saying: “CLTs help alleviate the affordable housing conundrum without ongoing subsidies. The community invests in a one-time, self-sustaining property asset that creates permanently affordable housing that is attainable today and affordable for future generations.”

The paper’s research identifies four demographic groups that would benefit from greater availability of housing protected by land trusts: more than 24,000 households living below the poverty level; more than 83,000 low-wage workers; more than 68,000 low-income families; and more than 66,000 moderate-income families.

Another aspect of land trusts that helps preserve affordability is their ability to greatly reduce or eliminate the property taxes on the land containing a home. With land prices in Austin increasing rapidly, yearly property tax increases can quickly make a home unaffordable for middle- and low-wage workers.

“We’ve lost the ability to deliver housing at an affordable price point as labor and material costs continue to increase, and so land price is kind of the last place to get some control on cost,” said Michael Wilt, chair of the ULI group that researched the paper. “It’s never too late to begin addressing this, and if the one thing that is really pricing people out is the property tax bill, then placing the land in a trust is a creative way to solve that.”

If the affordable housing bond is passed by voters, Wilt said the city should look to the activity centers outside the urban core that were designated in Imagine Austin and begin acquiring land in those areas to ensure housing can remain affordable when those regions start growing.

“You get into those areas early because right now the land is available, and you can get land banked that puts you ahead of the curve,” he said. “The closer-in lots to the urban core are the ones that are scarce.”

City and cultural leaders have in the past year shown interest in using land trusts as a mechanism to preserve both affordable housing and spaces for use in music, arts and other creative pursuits. The paper stresses the importance of getting buy-in from local taxing entities and getting them to agree to forgo their normal property tax rate to ensure a low tax rate.

The growing interest in land trusts has brought lots of phone calls to Mark Rogers, executive director of the Guadalupe Neighborhood Development Corporation, which has more than 100 rental units and more than a dozen homes at affordable rates, thanks to their being owned in a land trust structure.

Rogers said Austin leaders, as well as visitors from Houston, San Antonio, La Grange and Dallas, have asked how to set up land trusts so they can grapple with their own affordability issues.

He echoed Wilt in promoting the property tax shield as the biggest advantage for preserving affordability, but said organizations creating land trusts need to be properly capitalized to fund the very slow growth of income generated by the properties.

“The toughest part is when people want to establish them from scratch, because thankfully we’d already known about managing rental units when we went to a land trust structure and knew what to expect,” Rogers said. “With land values as high as they are, as soon as you develop a home, without some kind of a break the taxes are more than the low- and middle-income buyer can handle.”

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Photo by Adriano Aurelio Araujo from Campinas, Brasil (Downtown Austin – Texas) [CC BY 2.0], via Wikimedia Commons.

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