Affordable Housing Partnerships that Work
This country needs more affordable homeownership options. And more communities are looking to the long-established Limited Equity Cooperative (LEC) and Community Land Trust (CLT) models to provide a permanently affordable way to provide homes for low and moderate-income individuals and families. But how do these models work to provide housing ownership and stability? Who controls the decision-making, and how do you get them financed and developed?
Transcript (starts at 1:29)
Liz: So with that said, let's get started. I'm going to hand things over to our host for today's conversation, Mary Griffin. Mary is Executive Director of the Cooperative Development Foundation, and she's the architect behind the foundation's Affordable Housing Initiative. Mary, take it away.
Mary Griffin: Thanks, Liz, and welcome, everyone. Hope you have a nice afternoon, morning, wherever you might be. As Liz just mentioned, I'm executive director with the Cooperative Development Foundation, which for folks who don't know, we were established in 1944 and we're a national nonprofit with a mission to promote and develop cooperatives to improve economic opportunities for all. Through our funds, fiscal sponsorships, and fundraising, we make grants and loans that foster cooperative development domestically and abroad, across all sectors, including affordable housing, care needs of seniors, and food security.
In response to a growing interest in shared ownership models as helpful solutions to our housing crisis that we're experience in this country right now, CDF launched earlier this year an affordable housing initiative. The goal of the initiative is to educate communities and decision makers about opportunities for resident- and/or community-owned housing that can help provide not only permanently affordable housing, but also advance racial equity, civic engagement, health and financial well-being, and other community defined goals. As part of a series of webinars, today we are discussing community land trusts and limited equity or affordable housing cooperatives, and how they work together.
First, we will hear brief presentations from our three speakers, and then we'll move into a moderated discussion and, as Liz just mentioned, will be followed by 15 minutes of Q&A with the audience. So please welcome our speakers.
First we have Chul Gugich, whose principal policy and legislative research and applications with LaSar Development Consultants. He has 15 years of experience in affordable housing development and community building, most recently at Abode Communities, where he worked as acquisition manager, and LIHTC and other development projects throughout the state. And prior to that, as project manager at a Community of Friends, a Los Angeles based organization focused on assisting those experiencing homelessness and living with mental illness. Before coming to Los Angeles in 2016, he spent nearly a decade in New York City as project director of New Cooperative Development at the Urban Homesteading Assistance Board or UHAB, which is a multidisciplinary nonprofit specializing in limited equity housing properties and community land trusts.
Next is Adam Malone, director of stewardship at the Douglas Community Land Trust in Washington, DC. Adam serves as, as I said, director, and earlier he served as vice president of the Affordable Housing at City First Homes, where the Douglas Community Land Trust was incubated. And prior to CFH, Adam worked as an attorney at Bay Area Legal Aid in San Francisco, where he represented residents and resident associations in efforts to preserve affordable housing developments and worked with community land trust throughout the San Francisco Bay Area.
And third, we have Roberto Carlos Garcia-Ceballos. He Is co-director of the Fideicomiso Comuitario Tierra Libre or FCTL. He is a community cultural organizer and strategist based in Los Angeles, Tongva land. He was born in Mexico City and raised in San Jose, California. He has co-founded two community based organizations, FCTL and Community Power Collective, that collectively build collective land stewardship, engage in community power building, and cultural vitality. And with that, I'll turn it over to Chul. Thank you.
Chul Gugich: Thanks, Mary. Welcome, everyone. It's good to see you all. Just looking at folks introducing themselves in a chat, and it's really cool to see the breadth of experience and regions that everyone's coming from today. So we wanted to start with some level-setting and some definitions of common terms that you're going to hear throughout the presentation today. For folks who aren't totally familiar with these community based ownership models that we'll be talking about, hopefully this slide is helpful to you.
Again, this conversation is centered around community based ownership structures of both land and housing and how direct participation by community members and missional partners can create opportunities to provide for a wide range of communities needs. So let's start first with some high level definitions of the common terms that we'll be using.
So community ownership here at the top refers to entities or properties in which residents and community members lead in both governance and ownership. And the two examples of those we'll be touching on most heavily today are community land trusts - which are nonprofit organizations whose primary mission is to develop and steward land and properties for the benefit of lower income community members - and limited equity cooperatives or LECs, which is legally designated affordable housing, collectively owned and operated by its residents - sometimes referred to as shareholders - who commit to reselling their units under a limited-equity formula. So in other words, LECs have regulated caps on how much you can resell your housing shares for. So again, our conversation we'll focus primarily on CLTs and LECs today, but we wanted to include the cartoon there on the left here just to illustrate that buildings that are located or constructed on top of community land trust aren't limited to just housing. They can include other community services like essential services, retail, public parks and community gardens. Next slide.
So how do CLTs and LECs work together? In ideal cases, they work together with shared common goals and under a wide range of housing, typologies and ownership structures, which we'll start to unpack on the following slides. But from a high level, there are a number of benefits to community based ownership structures, including maintaining housing affordability. So in a typical structure, a CLT entity may own the land, and an LEC entity may own the housing, both with a shared purpose of maintaining affordability in perpetuity. And under this arrangement there are two guardrails that kind of protect the long term affordability of the housing.
One is the type of housing itself, which is usually governed by a legally enforceable regulatory agreement that's recorded against the property, and that regulatory agreement restricts the housing units to low income residents. And then the other guardrail is the CLT charter or bylaws, which restricts the use of land specifically to affordable housing or again, in other contexts, two different community-serving uses.
And there are many benefits to this type of arrangement, but just a couple include community governance and participation, where community members are involved in decision making processes. Both the CLT and LEC entities are governed by boards of directors, which make all of the key decisions regarding the use and upkeep of the land and the housing. And another benefit is advocacy and resource sharing between the CLT and LEC board members and the folks who live in the housing. These can be shared skill sets and shared networks between the two boards, including technical expertise and coalition building, which can often result in powerful political and legislative outcomes. Next Slide.
So the next few slides are examples of actual CLT and LEC projects where the two have successfully been combined into cohesive housing models under government sponsored programs. And some of these are just meant to illustrate the breadth of what's possible in terms of the housing typology and the land use and the strategic partnerships that can be formed between CLTs and LECs. And they're all meant to apply principles of land and housing de-commodification, which is kind of what all this is moving us toward.
So this first slide is of a project called the Ridgewood Bushwick Project. This is a 17 building, 89 unit, scattered site LEC which will sit on top of a community land trust. It's located in Brooklyn, New York, in an area that has undergone a very dramatic period of gentrification. And it's being developed under a joint venture between two community development corporations based in New York: the Urban Homesteading Assistance Board, where I used to work, and RiseBoro Community Partnership, which is a Brooklyn based organization.
These properties, which are nearly fully occupied, were formerly distressed HUD buildings. So these were federal buildings and underwent a set of full-gut renovations. The restricted affordability levels here are up to 80% of household area median income, although the majority of the in-place households were actually much lower than that. Under the City of New York sponsored co-op conversion program, all extremely low income households - so those are households at 30% of AMI and below - are guaranteed a tenant based Section eight voucher, which allows the LEC to realize more income to help pay for operational expenses.
And the two kind of very remarkable things about this project are that it's being funded wholly with state and federal grants. So there is no conventional mortgage debt saddling this project, which which allows the LEC to maintain a very low affordability, and the share price for legacy tenants - meaning the lease holders who were there when the properties first entered the program - is a mere $250. Next slide.
And this project, Rolland Curtis Gardens, is actually not a limited equity co-op, but I thought it was useful to include here as an example of how kind of a more conventional type of affordable housing project can be partnered with the community land trust to achieve affordability outcomes in a different context. So Rolland Curtis is a new construction, 140 unit, transit-oriented development project, conventionally financed with low income housing tax credits or LIHTC, which is currently how the majority of affordable rental housing in the U.S. is developed. The development partnership here was between a Abode Communities, which is an established nonprofit developer based in Los Angeles, and Trust South L.A., which is a small community-based organization that operates the community land trust in South L.A..
The history of this project is probably the most important thing to note, because it kind of illustrates how a community-based organization can partner and work effectively with a more traditional developer of affordable housing. So this land where Rolland Curtis was built, was previously developed with very old, aging, low-scale, affordable, multifamily housing that was fully occupied by low income residents. And the land was actually purchased after the affordability covenant on those units expired. And it was bought by one of the largest market rate developers in Los Angeles.
The site, as you can see, is right next to a metro rail line and within a few blocks of the University of Southern California. So it was an incredibly valuable, valuable piece of property from a redevelopment standpoint, and very appealing to this market developer who purchased it. So the developer bought the property with the intention of redeveloping it into market rate housing. But under the guidance of Trust South L.A., the tenants organized themselves and eventually forced the developer to sell the property, and then formed a development partnership with Abode Communities, which then in turn developed it into 100% affordable housing with community service and retail, and a federally qualified health center, which you can kind of see in the photo there, sitting right behind the light rail in the middle of the photo.
Probably the most important thing to note, other than the massive increase in density and the creation of new affordable units, was the 48 original low income households that were threatened with displacement by the market rate developer, all retained right of first return, and most are now still permanently housed in the new units. Next slide.
And then also in Los Angeles, we just wanted to highlight a recent programmatic development in L.A. County that provided funding to a network of five local community land trusts. And they also are focused on development of limited equity co-ops. So within the last four and a half years or so, the county of L.A. provided $14 million in public pilot funds to the L.A. County CLT Partnership Program. And the history of this program includes a very deep level of advocacy and engagement from a network of five CLT Coalition members, all operational within L.A. County, and then also in partnership with a large group of mission-aligned housing advocates. This group formed a proactive response to increases in speculative real estate investment in low income communities in L.A..
So the partnership program, which ultimately was voted into existence by the county's Board of Supervisors, dedicated $40 million for the acquisition and rehabilitation of small multifamily properties, which were currently unsubsidized but affordable housing, or sometimes referred to as CUBA, which essentially refers to housing that is unregulated and therefore considered market-rate, but with in-place rents that are affordable to low income households. So ultimately, the CLT Coalition collectively acquired 11 separate properties totaling 43 units, and through the program restrictions preserved affordability in those units, which had an average area median income of 49%.
In the plan eventually for these properties is to convert them into limited equity housing cooperatives. Currently, they are considered deed restricted rental, affordable housing. But again, the five CLT coalition members who acquired these properties are working on converting those units into LECs. Next slide, please.
And then just a shameless self-promotion here. We wanted to include a slide with a QR code that will direct you to a link where you can read a report on this program. So if folks are interested, go ahead and scan the QR code. And the report here gets more into the summary of the programmatic history of the L.A. County pilot program, the outcomes, and we also make some recommendations on how to expand and scale up the program here in L.A. And you're going to hear more about this from Roberto later on in the presentation as he's one of the members of the five member coalition. So that does it for me, and I'm going to hand it off to Adam.
Adam Maloon: Hello, everybody. Thank you again for coming out this afternoon. So I'm Adam Maloon. I'm the director of stewardship at the Douglas Community Land Trust. We're a nonprofit organization centered on racial and economic equity. So we are set up in the traditional community land trust model. So we have a tripartite board. So that's one third of the board is reserved for lessees, lessee members. That would be people that live or work on CLT property, general members who live, work, or are connected to DC, which is our service area in some some way, you know, recognizing that folks have been displaced and they deserve to come back to live closer to the community that they've created and are a big part of. And then the third is for public representatives. So these are folks that have relevant technical expertise and who we fully intend to put to work using that expertise for the purpose of the CLT. And these are all voted in by a membership. So I really endorse the traditional CLT model, as it has a really great basis in the community. Next slide, please.
So folks always want to know how to get properties into CLTs, right? So our portfolio includes, I like to say, just about one of everything - which makes operations, we'll say, interesting, engaging. Never a dull moment. So we run the run the range from rental, including LIHTC, limited equity co-ops, condos, individual condos, and some single family homes, with a variety of types within those tenure types. So ways you can get properties into the land trust. And I'll remind everybody that the traditional model is improvements or buildings sitting owned by the operator or resident and sitting on top of CLT land, that is then leased back to them and includes the restrictions that we all hold very dear and are the purpose of why we are doing these things.
So to put those properties or these uses on top of CLT land, I encourage everybody to be opportunistic. I know a handful of massive CLTs, and so the rest of us really need to be flexible in how we acquire properties. And so this is a list of different ways to bring it in. So look for your cities or municipalities, NOFA proposals that come in, even if you don't have cash to lend, make sure you know the points and how these NOFAs are allocated, how the winners are selected. Because a lot of times that includes permanent affordability, and developers - especially of ownership units - they are out after they sell everything, and they like having partners that have experience selling shared equity properties.
For example, the Housing Land Trust of Sonoma County just gets handed keys by developers for their IZ program and they're the ones that go about the sale process, finding qualified buyers to get into the homes. And the developers actually really appreciate that because they don't have to work in an area that they're a little bit unfamiliar with. So be aware you can join a partnership team without necessarily having to put cash in. You know, if another nonprofit is changing their focus, you can have them assigned in D.C. with the Tenant Opportunity to Purchase Act. And I know a number of other municipalities are looking at this, too. I think Berkeley recently passed, or is adopting something similar, which is great. You don't have to necessarily find a willing landlord to sell the properties if the residents are interested in putting it into a land trust. There's charitable or bargain sales, as I mentioned before, and then for those CLTs that are also serving as a developer, you guys are developing it yourselves and bringing it in that way. Next slide, please.
So keys for success in a CLT, or LECs generally: this is not rocket surgery, right? So it starts off with the foundation that they come with. Is an acquisition well-planned? And whether or not it was planned the best back when it was acquired, can you improve on the governing documents and the budgets? How are they going? Are these sustainable? Budgets definitely have to be checked in on after after a couple of years as prices kind of fluctuate. And we all know that most of the residents, they have a fixed or very slowly growing income. So need to keep an eye on that.
Committed residents, both as members and general members of the co-op, and board members. The more committed they are, the easier everyone's job is, the faster you can get done, and the more wide ranging activities you can include. And then the last bit is the long term stewardship or technical assistance. And we'll go into that in the next slide.
So I'll remind everybody that operating a multi-family housing is a business. There are landlords that do this, or management companies, at least they do this for a living. And you have to maintain the physical, financial, and legal aspects of these of these businesses, of these properties. And underlying all that - that's in the market-rate context - those needs don't substantially change when in a LEC environment. So limited equity co-ops have all those same needs.
And then I encourage you to think about what kind of team a for profit venture has, and what kind of kind of team a LEC has. So we often end up putting these folks in the position of running a multimillion dollar business in their spare time. These are low income folks that have a lot of work and family commitments. And so the remaining time to do the things necessary to maintain their building and maintain their home, they have to budget that really, really carefully. So having a partner that can take on this long term planning, that can backstop everything that serves as the information repository - both institutional and actual document retention can be an issue, especially with the older LECs - and making sure that everybody's communicating and meeting the deadlines that the LECs need to meet as businesses and as housing providers. Next slide, please.
And you know what? What does this partnership look like? I think LECs and CLTs are terrific together because you have a built in steward or technical assistance provider just committed from go. You can build in payment for that TA through land lease structures. If you're in part of the development you can build that in, you can cover cost staffing costs that can be pretty significant sometimes, depending on the the rest of the team.
So LECs: you put money in initially, you are providing subsidy and a 99 year commitment. And as part of that, there's also that normative connection to the building and to the people. And they recognize that compliance is a huge part of this, and something that is really difficult to get folks to do. Board members do not like being the bad guy and having a team member who's willing to be the one to push the board and the members to take unpopular positions, such as increasing carrying charges by 2% a year. That is often needed to cover costs. But that is a huge difference, a huge amount or a substantial enough amount for some folks that really impacts their family budgets. So being aware of that and really pushing the board to do what they need to preserve all the housing in general.
You know, having a support network for these board members. You will have the same folks over and over again. It's important to build depth within the co-op and provide a support network, both other co-op leaders as well as third parties that you can refer to them. As you find competent people, hold them close. And I see I have worked with a number of people here on the call. I'm glad to see you all tuning in. And, you know, hold those competent people close and treat them well so you can keep them as part of the team and as part of the LEC task force.
And then I really can't overstate how helpful social events are. It is a little bit harder to show KPIs when doing this, but I will tell you I have found out the most about people who are breaking covenants, trying to rent out their units, not by traditional kind of check ins, but by gossip that I have talking over popcorn or ice cream cones. People warm up to you and they share stuff. And that is very, very relevant as they get to know you, and things like that. And it also provides an opportunity to address the material needs of your members, and to offset maybe the 2% increase in carrying charges by signing them up for an energy savings program. .
And work with your agencies because we've at least been able to negotiate an exemption for income certification for some of these programs because they've already been income certified. And all they have to do is sign a couple documents and they're set up for ongoing utility payments, which is really great, and really frees up their capacity, and shows the connection of how a CLT can help them and the LEC. Lots more to discuss. Happy to address them in the Q&A section. And without further ado, I'll hand it off to my colleague, Roberto.
Roberto Garcia-Ceballos: Hey everyone, I'm going to be talking about the organizing aspect of acquiring a building through CLT, and I'm specifically going to be using a case study, which was shared earlier, around the CLT pilot program in the county of L.A.. So I'm the co-director of Fideicomiso Comuitario Tierra Libre. We're a five year old community land trust in Boyle Heights in East L.A. We were actually incubated in an affordable housing developer that's local to the Eastside. And it was really to expand the tools, and the way we developed affordable housing in the neighborhood in ways that it was more engaging with our membership. It gave more decisionmaking to the organizing bodies that we were working with. And at the same time, we felt like there needed to be a shift in affordable housing, and in the way our community members are part of the development of not just housing, but how folks control their neighborhood.
And so we founded a community land trust five years ago, it was incubated at the East L.A. Community Corporation. And now for the past three years we've been an independent 501c3, and part of our growing process has been learning to organize tenants and build the right partnerships here in the city of L.A..
So I think for us, one of the biggest learnings has been just working in organizing tenants. And so for us, it's just really important to do outreach. For us, finding ways to connect with tenants and people directly impacted by the housing crisis, and having them become leaders in our organization is really important. And so the first step is finding them. And so during the pandemic was actually when we became an independent organization. And one of the things that we realized is that we needed to just jump into direct services. At that time, we did a lot of food distribution. We we looked for grants to be able to help people cover the rent or any other expenses.
But then one specific thing that we saw over and over again was the selling of buildings in the midst of the pandemic in there. And for us, it was a really uncomfortable and gross experience to see the transactions that were happening, and the immediate displacement that the new owners were attempting on the previous tenants. And so for us, it was really important to figure out what buildings were being sold in our neighborhood. And so we went to our allied brokers and asked for lists of buildings that were being sold, or pre-foreclosed, or foreclosed on and we went and started door knocking at these folks' doors. And really the first immediate thing was for them to be able to receive resources specifically around knowing their rights, and then inviting them to join our our biweekly meetings to learn more about the situation that was happening in the building, because a lot of folks were experiencing immediate illegal evictions that were happening.
And that's where we really - in these meeting spaces - really talked to them about forming tenant associations in their buildings. We create a space that directly communicates to them. And so we have a bilingual tenant meeting that's ran in Spanish and it's facilitated in Spanish, and the interpretation is done in English for for English speakers. And we really try to keep it oriented to the community. And there's been moments where we've had to do direct action. And so actually the introduction of my presentation is actually a picture of a family that we helped win an immediate eviction, where folks in the community were ready to do civil disobedience of not letting these families get evicted. Luckily, we were able to stop the eviction at the courts. But, you know, it's like that direct, immediate response to what folks are experiencing.
And then, most importantly, we have capacity building. And so we train tenants around alternative models. We have folks join our membership. So our CLT is a membership organization where folks pay $25 to be a member or do 12 hours of volunteer work. And we really train them to be organizers in the community. We train them to be stewards of land. And specifically we are actually building the capacity to train them to assess the ability to buy their buildings as a tenant association.
And so we do this work specifically because we learned a lot in the last three years. And specifically one of the things we learned from is acquiring a building. So Fideicomiso Comuitario Tierra Libre is part of the the L.A. CLT Coalition. It's a coalition of five organizations that are in relationship to each other, and that we're actually building infrastructure. So we're not just a coalition that works on policy or campaigns, but we actually try to build out the infrastructure that's needed in our neighborhoods throughout the city and the county of L.A.. And so for us, it's really important for us to fundraise together, to share resources, to learn from each other's acquisitions and developments.
And so we have an array of actual infrastructure where we're consistently assessing policy, assessing our shared practices of development, and really thinking of what else is needed. And so one of the things that we worked on was the CLT pilot program, where we were able to win $14 million from the county of L.A.. And while while we were working at that level of coalition on the ground, Fideicomiso and Community Power Collective, which is another organization, and Little Tokyo Service Center were working on actually thinking through of the acquisition of buildings. Like I said, it was a horrible thing to see in our neighborhoods, where we're in the middle of a pandemic and buildings were being flipped. There is still aggressive owners, there are corporate owners as well that are aggressively trying to evict, and gentrify our neighborhood. And so for us, we had to come up with a strategy. And so that's where we came up with the door knocking strategy. And so while we were working on winning the $14 million, we were out door knocking.
And so as folks being on the ground, we were able to identify the Simmons building as our first acquisition. And so we bought it with a little bit less than $2 million. But while Little Tokyo Service Center and Fideicomiso were working on the closing and buying of the building, Fideicomiso and Community Park collective, which is another community based organization here in Boyle Heights, was working on building relationships with the tenants. So this is like between January and April, and by May we acquire the building and then we immediately put together a meeting with the tenants and introduce ourselves as the [indecipherable] organizations, and really share with them our aspirations of really stabilizing the building with them and long term figuring out a stewardship or a collective ownership model where we would work with them.
By June, we have community events. We bring cultural workers in to work with us. We have block parties, summertime, and really it's trying to build that relationship that is needed with the tenants. If you'd go to the next slide.
And so between last year and this year, we've focused on building a stable monthly meeting where all three organizations participate, and building relationships and trust with the tenants. We create the space to continue to do more in-depth training around who our organizations are. And then specifically in these meetings, we incorporate our tenants and decision making around the rehab of the building and also continue to build awareness. And this is a really hard task as a community land trust, or as an affordable housing developer, of being the one who advocates and pushes them to build tenant association, and really practice their tenant rights on us, as a part of what that relationship is.
And so, at the moment, starting this year, so at the current time we've actually had tenants on our board for the community land trust, which is a really important piece of our decision making process as an organization. And we've actually relocated some of the tenants temporarily as we're rehabbing the building, which they were all part of helping us decide on - how the rehab was going to happen. And then we're also starting to engage what co-op conversion is. And so we're we're starting to bring in training. We're starting to develop our tenants around really starting to envision themselves as collective owners.
And so long term, what's really important is that we want to see the transition of our partner, our senior partner - which is a little Tokyo Service Center - transition by giving 100% of the ownership to the building, splitting the land, and then continuing to work with our tenants. And we see that the conversion to the ownership model is actually going to be a longer process, and that for us, that is the intention. And so for us, we understand that it is a long term process, but it's something that we, since the beginning, really kind of thought through and wanted to apply.
Lastly, I think a lot of policy was built around this as well in organizing. And so one of the really cool things about the grant agreement for the CLT pilot program, is that we incorporated the ability to convert the building into a co-op - we have that option in our grant - and that we received a 100% grant funding where we didn't have to bring in any other subsidy, and that the only other additional subsidies that we've had to bring in, or financing, has been really to complete the rehab.
Just a little bit about the Simmons building, it was probably the the lowest cost per unit, but it had the most deferred maintenance and conditions that any of the other buildings had. And so once we opened the walls, and through all the permitting process, those expenses went up. Those are even conversations we had to have with our tenants, and really deciding what was the scope of work that we were able to accomplish collectively. And so if we could go to the next slide.
Just based off all this on-the-ground organizing in the last five years, these are things that we've learned, and what type of ongoing support is needed. And I think when I talk about ongoing support, I really think about infrastructure. And so L.A. County and the city of L.A. historically hasn't had the infrastructure to build out community land trust, or any form of alternative housing, regarding like housing cooperatives. And so for us, these are some of the constant things that are coming up. And then I'll talk about one way that we're trying to address these things.
And so the first one is acquisition rehab program. So we have this pilot program, but prior to that, there wasn't anything at the county or the city of L.A.. And so for us, it's really difficult; we're working with tenants, we're supporting tenants, we're stabilizing and preventing displacement through illegal evictions, or attempts to evict tenants and displaced tenants. But what's the next step? How are we long term going to stabilize, and how do we then take control of the building from these owners and landlords that have no interest in really stabilizing our community? And so we see that the Tenant Opportunity to Purchase Act is one of those opportunities that could really help us. But then we also need a funding source regionally to support us. We need regional infrastructure to support tenants, and building housing cooperatives, and housing alternatives. So we need a hub or we need a space that really brings the resources of building the legal framework, co-op formation, even conflict resolution, and consolidating the financial products that are available for tenants.
And so we like to refer to New York as one of those specific infrastructures that we need here in L.A.. Not them specifically, but that sort of infrastructure organizing our housing department, and moving them to trust alternative housing models. So there's so much skepticism and unwillingness to work with CLTs or housing co-ops. And there's this really strong belief that they don't work without any self-criticism around not putting in the infrastructure, and the legal framework, and the policies that are needed for these models to have flourished in the last decades. And so we want to make sure that there's need - really how that education in the housing department, and the county development departments.
And then the last thing is resources for building the capacity and assets of facilities and other community ownership organizations. So, you know, if there's foundations out there, these type of organizations need funding for staff, resident capacity building, and grant capital to advance acquisitions and specifically flexible, low cost patient capital, tailored to each stage of the CLT acquisition process, but also for the co-op process. And so in Southern California, and specifically L.A., it's a financial desert when it comes to the financial products and resources that are needed to really build up this at scale.
And so just to kind of briefly touch on this, you know, I said what's needed and what are we doing about it? And so last year we passed a ballot measure called Measure ULA through the United to House L.A. Coalition, which was drafted by homeless service providers, affordable housing, nonprofits, labor unions, and tenant organizations. And it's really to raise about 800 [million] to 1 billion dollars a year to be used towards new social housing programs. And what we mean by that is - and I'll talk a little bit of what that looks like - but the way the ballot, or the way the policy would work is that any time there's a real estate sale or transfer of a property that's over $5 million, there would be a 4% tax on it. And if it's a property over $10 million, there would be a 5.5% tax on it. And this would immediately help us solve a lot of the issues that I talk about, and the way the revenue is distributed in the ballot is that 70% of the funds would be used towards affordable housing. Of that 70%, 22.5 would be used for alternative housing models. So affordable housing developments that incorporate housing cooperatives, tenant councils, just bodies of decision making, 22 to 22.5% would be used for multifamily affordable housing. 10% would be used for acquisition rehab.
So the work that I just talked about and 10% of that would be used for homeownership, capacity building, and operating assistance. And that 10% is really important because that's the capacity building infrastructure that we need, that I just talked about, where folks are trained. But not just people - but organizations, affordable housing developers, financial institutions also need that education and training, and some of our departments. 30% of the overall funding would be used for homeless prevention - so short-term rental support. Tenant rights education and eviction defense, that's a also really important piece. And then the rest would be used for admin, like costs for the city. And so in a lot of ways, you know, I mentioned what's needed, and we think - and I think - through the United to House L.A. Coalition, these are the response that we have as a community of how we're going to get the support that we want. Thank you.
Mary Griffin: Thank you so much. That was great. I think we got a lot of different perspectives. And I was going into a moderated discussion, but I think we have so many questions and so much interest. To really frame: if you if you all just heard, there's an amazing thing happening now in Los Angeles, and a lot of it is due to the years of the different organizing that's been going on. So they were prepared as a community, land trust, as community building, for this new tax that will provide an estimated over $500 million a year for affordable housing, at least a third of it specifically earmarked for shared ownership housing. So it's a wonderful opportunity to start moving very, very high cost cities into a situation where they can provide permanently affordable ownership opportunities to their residents.
With that, I'm going to start with some of the questions we're seeing here because I want to make sure we cover it. One is - and I don't know if this is for Adam or Chul - but separate from rental income, what are the common sources to fund a CLT's operating reserves? And, Adam, you can maybe ask this: how are you funded as the steward organization? So I think that's helpful for people to know.
Adam Maloon: Yeah, I think we're right in an alignment. I was just typing out an answer, I apologize. I really want to stress we don't want to be extractive when it comes to earned income. So any costs that are paid by tenants that go beyond the operation of their development, question if that's something that you really want to get into, because then you are adding to their cost burden to pay for things. So one, do operation and maintenance reserve - I would recommend specific to the developments - because this also lets folks understand where their money's going to, what it is being used for.
But, contracts with the city - I think Crowd Ground is has a real estate brokerage - there's a ton of different sources for earned income, but really I think city contracts for TA or other activity that is in your wheelhouse is a great way for operations.
Mary Griffin: Okay, great. And another question that came up, which is I think it's sort of interesting, is someone's talking about they represent a group trying to develop a mixed use, mid-rise, senior housing co-op, with extended services, within an equitable transit oriented development. And they exist as two entities, a 501c3 nonprofit that plans to hold the property, and provide the space for and management, and an LEC that will provide affordable housing. They had gone to a local CLT to hoping to find synergies and a possible collaboration. Their representative, an attorney, advised them that it would hinder them to combine the two approaches. She said everything that the LEC and the nonprofit could do, everything the CLT route would do through their own non-profit. This is a great a great issue, I'm sure, and in many instances. So Chul, I'll maybe hand that over to you.
Chul Gugich: Yeah, it's a good question. I mean, in my opinion, a CLT is not always - you know, I think that the representative is correct. A CLT entity as the owner and steward of the land is not always necessary to have, so long as the owner of the land is mission-aligned with the uses that sit on the land - so whether that's a LEC, or a mixed use project, or whathaveyou. In this instance, given the land owner is a 501c3, presumably with a kind of mission-aligned focus, it may be less strenuous to just keep that structure in place rather than layering into the project a CLT, which comes with its own kind of governance - for lack of a better term, bureaucracy. That said, I think there's always benefits to engaging with CLTs, just given their breadth of experience and technical capacities that they can help bring to the project redevelopment. But it's not wholly necessary to have them involved in the actual ownership structure or development of the project.
Mary Griffin: Right. Adam?
Adam Maloon: And I can add to that just real quick. You can always set it up so that you can have joined the CLT later, too. So, you can you can build it out and then, you know, perhaps they're doing single family, and they're not very familiar with multifamily. You know, set it up so that you can have a partner later on too, as you both grow.
Mary Griffin: Another question is that I think people are interested in: what's your knowledge/experience financing CLTs with the business section of mixed-use properties? And this raises another, that I don't know we we hit completely on the head, but how do you preserve that affordability? Where is that affordability preserved across all the buildings in a CLT. So those are two questions. One is about the business section mixed-use properties. And two, are they under an affordability edict? And then how do you preserve affordability for all the buildings? Who wants to take that?
Chul Gugich: I can try to take it in terms of the preservation of affordability on the housing units. That's facilitated through a legally enforceable affordability covenant that's usually placed by a public agency that is a participating financier in the project. So, for example, in the case of the Richard Bushwick Project, that project is funded wholly with public dollars that are accompanied by an affordability covenant. And so that kind of takes care of that. And then, of course, there's also the very critical compliance and enforcement part, that has to live separate from that to make sure that units are actually rented to low income households or income-qualifying households. And then in terms of what the CLT can bring, I think it's fairly flexible. But generally speaking, and Adam should correct me if I'm wrong on this, but the county entities generally have a set of bylaws that restrict the use of the land. So, for example, in a structure where you have a CLT that owns the land and an LEC entity that owns the housing improvements, the LEC leases the land from the CLT, under the terms of a ground lease which dictate the use of the land in perpetuity - it's usually like a 99 year lease term or something that says you can't use this land for anything other than affordable housing or community services or public park or what have you.
Adam Maloon: Yeah, that's right on. The thing I'd add to it is covenants are not self-enforcing. So restate everything in that covenant in your land lease. So. Belt and suspenders.
Mary Griffin: Great. Roberto, I have a couple questions for you, and I'll just give them to you because they're more project specific. What percentage of the tenants did not want to participate? And what about tenants with zero money? That's one. And then a little bit about the temporary relocation, what legal protections did residents have. Where do they go, and who funds that that transition while they're in the temporary housing?
Roberto Garcia-Ceballos: So, when we acquired the building, we had known the tenants for less than a month. And we really were focused on making sure they knew their rights, because we didn't know if we were going to acquire the building. And then the other is just providing direct services that we had at the moment. And so when we acquired the building, there was a level of excitement for our organization to take over, specifically because Simmon's building was in critical condition and it was very apparent in terms of when you walk into the units and you look at the level of neglect that it's had over the years. And so there's 100% interest in participating in decision making around the rehab, and getting to know the organization.
There's a level of mistrust around the the conversion of ownership. And I think for folks, it's really hard to even imagine that. And it's ongoing training that we do. And so when we start having these conversations around conversion, or just learning about co-ops of all sorts, they we have like a 40% drop in participation and sometimes more. And it's the one thing that we are really consistent about is that we've always had an organizer at the building consistently doing one-on-one work, and working with the families. And a lot of the times when folks stopped participating is that they're going through some sort of financial burden.
So I didn't mention this, but out of the 11 buildings, Simmons has the lowest AMI per... And so what we're talking about is the folks are actually day-by-day, in terms of their finances, and have consistently there's been a pattern of folks not being able to pay rent at times. And so I think when we talk about ownership, I think that has a lot to do of how folks are imagining themselves owning a building. And it's a really difficult thing to hold. And I think we're doing a pretty good job at it because, like I said, it's long term. And so for us, it's most important to really focus on the stabilization of the building and really trying to assess how are we really bringing services, and support, and empowerment to our folks.
And so our first step is folks joining the community land trusts. It's not talking about formation, because that gets really scary. And so for us, it's more of like, how do you join this land trust? How do we build committees in the building? How do we decide collectively? Who's available to be the property manager for the building? Those are the decision making, and then looking at the budget together, and then slowly getting them to join the board, and slowly getting them engaged in other aspects of the community land trust. And so for us, that's the work that needs to be done first. And I think in three or four years we could revisit the conversation of what does formation look like, and what is the model we're going to use, based on having had more practice with the tenants.
Mary Griffin: That's great. That's great. Well, we are one minute over time and this has been so great. We debated whether we should have a 90 minute or one hour on this, but you never know. But this one, we probably should have had 9o minutes. But what I want to tell the audience is, yes, the PowerPoint will be available. Yes, the recording will be available. Yes, you can share. Our whole point is to share and get this knowledge out there. And the other thing we'll do is there's been a number of questions, and they're all really good questions. We'll get those put together with the answers. So you have that in terms of the experts and where do you get support. Well, you have some right in front of you. You can check with different groups if you want to go to our cdf.coop/affordablehousinginitiative, we have a report and you can find the four advisory groups we're working with who are all knowledgeable. There's a lot of help out there and we just invite you to to seek that assistance and we're here to help. We're hoping to have another webinar probably, I don't know in how many months, on financing options, because I think that's also of very much interest, top of the mind. But I just want to thank you, and say thank you to our guests, and thank you to Joe and Liz who helped out, and we wish you good afternoon and happy housing.