Denver resident Charlene Taylor found herself in a bind after her daughter died in a car accident in 2020 while in the middle of a home sale.
Her three grandchildren, who ranged from 13 to 21 years of age at the time, needed to find a new place to live and Taylor’s one-bedroom apartment was way too small to host everyone.
After obtaining assistance from Denver for a few years for an affordable townhome that allowed the family to stay together, Taylor and her oldest granddaughter, Chantie, purchased a home in Montbello last month through the Elevation Community Land Trust. (ECLT)
“You feel safe when you own. You don’t have to worry about the rent going up on you. You pay your mortgage and you do what you are supposed to do,” Taylor said.
A community land trust pools private and public funds, using the money to acquire real estate assets, typically homes. Community land trusts, which got their start during the civil rights era, are becoming more popular in Colorado and other states where housing affordability has evaporated.
ECLT is Colorado’s largest community land trust. It launched in 2017 with $25 million in private donations and backing from Gary Community Investments, the Gates Family Foundation, the Bohemian Foundation, the Colorado Health Foundation, Northern Trust and Mile High United Way. It currently is in a campaign to raise another $50 million.
Community land trusts, which are nonprofits, buy both new homes as well as older ones and then refurbish them. The ownership of the land is split from the physical home, with the land typically held for 99 years by the trust. That allows the home to be sold at a steeply discounted price to a qualified buyer.
In the case of Taylor, she and her granddaughter purchased a five-bedroom, three-bathroom home in Montbello for $315,000 — a big discount from the market rate for that neighborhood.
“Although it is a more complicated process, our homes are well below 40% off,” said Tiana Patterson, ECLT’s vice president of social impact & wealth equity.
But she acknowledges the program is not for everyone. To qualify to participate in Elevation’s program, a buyer must make 80% or less of the area median income, which works out to $78,500 for a household of four people in Denver. Taylor qualified on her pay working at King Soopers, combined with her granddaughter’s salary as an entry-level public school teacher.
Buyers must also qualify under traditional mortgage underwriting standards. ECLT works locally with about 10 lenders familiar with its model, Patterson said. The trust also partners with providers of down payment and other assistance, including the city of Denver, which allows buyers to stack resources and achieve ownership.
Unlike affordable housing programs that disqualify participants once their incomes get too high, buyers aren’t capped at how much they can earn in the future. And unlike government grants and vouchers that are gone once they are spent, community land trusts create a more lasting solution to housing affordability.
Homeowners pay a land-lease fee of $100 a month and unlike tenants are responsible for repairs and upkeep. They retain full control of their homes, with the exception of major renovations, which ECLT must approve. Owners also can’t rent out their homes.
Where’s the catch? A key condition of working with a community land trust is that the buyer must agree in advance to share future appreciation in a home’s value according to a pre-determined split. That is designed to keep the homes in the trust’s portfolio permanently affordable. But it can also limit the equity gains that contribute to a household building its net worth.
Patterson said some community land trusts set the split as high as 90% to 10% in their favor. Elevation splits 75% to the trust and 25% to homeowners. Some of that simply reflects the deterioration that structures face over time. Land, which is what the trust owns, typically gains in value over time, especially in tight real estate markets like metro Denver, while buildings age and need upgrades and tend to lose value.
The split is fundamental to the community land trust model. By retaining most of the appreciation, a home can be passed on to another buyer at a lower cost. The trade-off is one that consumers need to weigh before deciding if the land trust model is right for them, said Rodger Hara, owner of Community Builders Real Estate Services and an affordable housing industry consultant.
For example, parents might want to downsize a home after their children grow up and move out, only to realize they can’t pull out enough equity to buy their next place at a market rate unless they have been disciplined enough to invest any savings in other assets.
“The shared-equity arrangement and the permanent affordability feature that limits the amount of equity that can be realized by a buyer will someday create a hardship for that family as their circumstances change,” Hara said.
For Nate and Marie Evans, the question facing them was more immediate — how to find a place in Denver that was within their budget and big enough for them to start a family.
“We were looking at other ways to do housing rather than putting money into rent and feeling like it wasn’t going anywhere. We were both making around minimum wage at the time,” said Nate Evans.
Ownership seemed way out of reach, but that didn’t keep Nate from an “obsessive” search of Zillow listings so they could escape smaller condos and apartments in the 850-square-foot range. Then he ran across listings from ECLT that seemed too good to be true.
The qualifying process was more complicated than going the traditional route, and Nate estimates he put in 50 to 60 hours across multiple months to get approved. But the diligence allowed the couple to close on a 1,600-square-foot townhome in the Indian Creek neighborhood in the summer of 2021. They paid $225,000 in a market where similar properties run for $350,000.
“It was a beautiful townhome at a cost that you can’t find anywhere else. We felt like we struck gold with it. There was no other way we would have been able to find a place without the pathway Elevation provided,” said Marie, who got pregnant shortly after moving in.
The pregnancy and the purchase aren’t unrelated. Nate said having space allowed the couple to move forward with their plans to have a child. It also has helped him to have enough financial breathing room to focus on a nonprofit called Denver Gap Year, which allows high school graduates unsure of what to do next in life to find purpose and direction.
ECLT currently owns the land on about 200 homes and has another 500 to 600 in the pipeline as it moves toward its goal of holding 1,000 homes in its portfolio, said David Ogunsanya, vice president of real estate at ECLT. The properties are concentrated in Denver, Aurora and Fort Collins, with a focus on preserving affordability in gentrifying neighborhoods, like the East Colfax corridor.
On July 4, the trust rolled out a new pilot program called Doors to Opportunity, which will use $6 million in funds the state received from the American Rescue Plan Act. The program provides between $50,000 to $150,000 in down payment assistance. Rather than buying a home ECLT already owns, participants use a certified Realtor to find a home and can qualify for a mortgage on under a land-lease arrangement.
“I think people will be knocking the doors down,” Patterson said of the new program.
And her hope is that many of them will be people in marginalized communities who have been sold dreams and visions of home ownership, only to end up in “debt traps and dead ends.” That was the case during the housing crash of the 00s, with foreclosures hitting Denver’s northeast and southwest neighborhoods the hardest.
Although its program is open to all who qualify, about 60% of the people who ECLT has helped achieve homeownership are Black, Hispanic or from other communities of color, Patterson said.
