| Land trusts get into the 'landlord' market in Seattle - Program can lop $70,000 off cost of home - Land trust procedure gives certain buyers a chance in pricey Seattle market By
JENNIFER LANGSTON She blanched at taking on a mortgage that would have yoked her to a good-paying Mercer Island job as a combination nanny-cook-household manager. Instead, she sunk all she had in a non-profit that promotes cross-cultural awareness.
"My life has been pretty hand-to-mouth because of what I've chosen to do," said Breznau, 30. "Instead of getting a house, I decided to follow my heart." Now, as one of the first beneficiaries of a program that knocks up to $70,000 off the cost of a home for first-time buyers in Seattle, she may be able to do both. In exchange for that financial help, Homestead Community Land Trust will permanently own the land under the house she buys. She'll sign a 99-year lease to use the lot. It's a concept that's been used in 160 cities nationwide to create a permanent supply of affordable homes in gentrifying neighborhoods. The trusts are popular in tourist draws, such as the San Juan Islands or Jackson, Wyo., where resort home prices have left wages in the dust.
The underlying property goes into a trust run by homeowners, prospective buyers and community members, which keeps a home's sale price low forever. In King County, the difference between median home price and what a typical first-time buyer could afford climbed last year to an all-time high of $106,400, according to county statistics. Seattle's new Homestead Community Land Trust program is generally open to first-time homebuyers who make less than 80 percent of the area's median income, or $57,500 for a family of four. Participants also agree to a resale formula that keeps the house permanently affordable for future buyers. Typically, they walk away with a quarter of the appreciation they'd get on the open market. In Seattle, the community land trust -- which three years ago completed a one-home demonstration project in the Delridge neighborhood -- recently netted $790,000 in state and city grants -- enough to add 10 houses. The need in this region has never been greater, according to Homestead Executive Director Sheldon Cooper. People in professions that 30 years ago would have allowed them to afford a modest house have been priced out of the booming real estate market, he said. "It's pretty much a lot of people who are at the heart of our community -- teachers, city employees who are single parents, child care workers, non-profit staff, folks in the service world that do a lot of basic work in our society," he said. The land trust model, pioneered during the '60s civil rights movement to help Southern tenant farmers, differs from conventional housing-assistance programs offering low-interest or deferred loans. In some of those programs, loans are repaid with interest when the houses are sold and that money is recycled to help another buyer. The program may take a small percentage of the home's appreciation, which can generate more money for the loan pool. But homes are typically sold on the open market, which means prices keep escalating and more funding from public or private sources is necessary to keep them affordable. In the land trust model, a one-time investment keeps each house affordable for future buyers. While sellers within the program walk away with less money, subsidies are plowed back into homes, and a cap on the sales price creates perpetual bargains. For a $220,000 home, the land trust might contribute $70,000 and the buyer would assume a $150,000 mortgage. Based on the resale formula, the home after five years would be sold to another land trust member for $165,000. If homes in Seattle continue to appreciate at recent rates, the same home would have sold for $308,000 on the open market. The grassroots group behind the Seattle land trust was started more than a decade ago by people like Esther "Little Dove" John, who foresaw the end of the city's affordable neighborhoods. At the time, she was a musician running a record label and a program through the Church Council of Greater Seattle that brought music to the bedsides of terminally ill patients. Rising housing costs forced her out of two different neighborhoods -- Mount Baker and the Central District. She ended up spending several years bouncing between friends' couches. It took nearly eight years for the volunteer group to get its first Seattle project off the ground. John now heads Homestead's Board of Directors, despite the fact that she makes too much money as a state health insurance adviser to qualify for the housing program. "I've had the experience of being pushed out of communities where I've got family and friends and community ties," she said. "When your housing gets stabilized, so many other things in your life improve as well." Cooper said the democratically controlled trust hasn't decided whether it will take a percentage of a home's appreciation when it's sold to build a pool of money for future acquisitions, since the main goal is to keep existing houses affordable. Adding more homes typically requires a new infusion of cash from public sources, community fund-raising or developer donations, he said. Some experts argue that the limits on resale value make it difficult for land trust participants to make enough money to make the jump to a second home. But communities around the country have found it a useful tool. The concept was pioneered west of the Mississippi in the late '80s, when residents on Orcas and Lopez islands foresaw the day when their children would be priced out of the housing market. The community land trust, OPAL, now includes 50 homes and seven rental apartments on Orcas. It's developed three pedestrian-friendly neighborhoods, with clustered farmhouses surrounded by communal gardens and open space. Over the years, the homes have been occupied by grocery store clerks, a sheriff's deputy, teachers, landscapers, nurses and mail-delivery drivers. Six years ago, the city of Portland, working with a citizens' task force, launched an aggressive effort to begin building permanently affordable housing stock through a community land trust. The city and county there have contributed $2.1 million in funding and donated land to the trust, which now has 37 homes. "Those of us who've been doing this for a while have been just fascinated that Seattle, with such a strong support for housing, hasn't latched onto this," said Lisa Byers, OPAL's executive director. Cooper, who became Homestead's first part-time employee in 1999, said the dot-com boom and growing concerns about escalating home prices made it easier for the group to get needed funding. After helping the group complete its first demonstration project, Seattle's Office of Housing committed $450,000 for the next round of assistance. The trust has also received $240,000 from the state and $100,000 from the Federal Home Loan Bank, Cooper said. One challenge, he said, is that people who would be a good economic fit for the program often don't think of themselves as low-income. And closing a deal often isn't easy -- even with the program's help. Breznau, who runs an annual soccer tournament to build bridges among local ethnic groups, is shopping for homes priced at about $200,000. She's made offers on three, but none has been accepted. She flirted with a big house in South Seattle, which she would have shared with a roommate. Then she became enamored of a nearby cute yellow, 620-square-foot house with a front porch and huge yard. But her bids weren't high enough, or the sellers weren't interested in the longer closing period the land trust program can require. Breznau has concerns about missing out on the region's recent red-hot housing appreciation. But the upfront money allowing her to get into the market seemed well worth it, she said. "If I were looking by myself, I'd probably be looking for a major disaster zone," she said. "When I heard about the Homestead program, I thought maybe I could do this. It just seemed like soon there weren't going to be any homes left I could afford."
TO QUALIFY: Program is open to first-time homebuyers, or someone who hasn't owned a house in three years. Annual income limits: single person, $40,250; family of two, $46,000;
family of three, $51,750; family of four, $57,500; family of five,
$62,100.
You must have a 2 percent down payment and be able to qualify for a loan. You must buy a house in Seattle.
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