Ohio City and Tremont respond to calls for more affordable housing
by Marc Lefkowitz, The Land
(Plain Press, April 2021) A new land trust on Cleveland’s near west side has a mission to increase permanent, affordable housing in the midst of a hot housing market.
Ohio City and Tremont West Development Corporation have teamed up to form the Near West Land Trust. The two nonprofit community development groups have plans to build 40 new, single-family homes on vacant lots scattered throughout the Ohio City, Clark-Fulton, Detroit Shoreway and Tremont neighborhoods with a starting price of $150,000. That’s quite a savings compared to the price of similar, market-rate housing that, lately, has been going for eye-popping prices.
“In Tremont and Ohio City, housing values are skyrocketing,” observes Tom McNair, executive director of Ohio City Incorporated (OCI). “We think it’s important to make sure the neighborhood has options for a diversity of housing.”
The sales price for single-family homes in Cleveland rose 17.7% last year, according to real estate firm, Redfin. Zooming in on the near west side, the average home price of $200,000 in 2020 outpaced the suburbs.
The land trust’s first project will be a 1,000- to 1,600-square-foot, single-family home that will go up this spring on a vacant lot at 1902 W. 50th Street. It’s a lot that cost the land trust nothing because it comes from the Cleveland Land Bank, an entity the city created to hold vacant land until a developer is ready to build on it. By comparison, new construction of a 1,607-square-foot townhome with three bedrooms in the same ZIP code is listed by Howard Hanna for $456,500.
According to a press release from the land trust partners, “The Near West Land Trust will create and preserve permanently affordable homeownership opportunities for low- and moderate-income families. Housing will be provided for individuals and families in the 60-120% range of Areawide Median Income, which translates to a family of four making less than $61,000 annually, for example.”
What makes the land trust different is that it creates permanently affordable housing. The trust acquires the land and maintains permanent ownership as prospective homeowners enter into a long-term, renewable lease instead of a traditional sale. When the homeowner sells, the family earns only 35% of the increased property value. The remainder is kept by the trust, preserving the affordability for future low- to moderate-income families. Additionally, they must sell their home to low-and-moderate income individuals or sell their home back to the trust.
As the near west side continues its steady march towards gentrification, this allows a portion of the properties to remain within reach of moderate-income homebuyers.
“While we welcome everyone in our community of all backgrounds and income levels, preserving affordable housing is a top priority,” says Ward 3 Cleveland City Councilman, Kerry McCormack. “I’m proud of the work that has been done to leverage public land, and can’t thank Ohio City Inc. and Tremont West enough, to establish structures like the land trust that will produce quality, affordable housing for our community.”
A new path to affordability
If there’s a caveat to buying a new $150,000 house within walking and biking distance of the West Side Market and the tree-lined shops on Professor Avenue, it’s that the land trust holds title to the land and leases the land back to the homeowner. The purchase price is more affordable because the homeowner is only buying the house, not the land. A land trust acts as a brake on the profit that can be made on the property; the tradeoff is more people can afford to buy a house in a more diverse neighborhood.
“If you’re building $150,000 houses around $50,000 houses, I don’t know where the value proposition is,” McNair says, “but if they are surrounded by $300,000 houses, and you have all of those amenities, like access to a healthy trail system or access to the riverfront, it’s why we think this is the right place for a land trust.”
According to the press release, the first new home at 1902 West 50th Street will be 1350 square feet, with a full basement, and will be built to Energy Star standards. It will qualify for the city’s 15-year tax abatement. Local builder Knez Homes is the construction partner. Gap financing for the project is being provided through the City’s Housing Trust Fund, as well as Enterprise Community Partners, whose seed funding helped to make the Land Trust possible.
There are over 225 community land trusts in the United States, according to Grounded Solutions, an Oakland, CA organization working to promote land trusts.
Second chances do happen
Marge Misak is a consultant to some of these land trusts, including the Central Ohio Community Land Trust in Columbus. Misak was also the founder, in the mid 2000s, of the now-defunct Cuyahoga Community Land Trust on the Near West Side of Cleveland. Misak ended up securing a land lease and conventional mortgage on a small number of properties. The Near West Land Trust is assuming the assets of the Cuyahoga Community Land Trust: a 4-unit, multi-family building on West 45th Street and six, single-family homes that are located in Ohio City and Detroit Shoreway from the original land trust’s caretaker, Cleveland Housing Network.
“In many ways and in many places, this is how affordable housing is being created,” says Misak.
Then and now, she believes a land trust helps keep housing prices stable. Back then, the Cuyahoga Community Land Trust launched just before the housing bubble burst, fueled by subprime lending, leading to the foreclosure crisis that started in 2008 and lasted for years.
And yet, since 2006, there has been a steady climb in housing values in Ohio City and Tremont, reflecting an influx of homeowners who were reinvesting in the area, followed by an influx of private developers building half-a-million-dollar condominiums and townhomes.
The Near West Land Trust would like to build at least 10 new, affordable homes each of the next four years, says Ben Trimble, chief real estate officer for OCI. The land trust’s building costs will be subsidized in part by gap financing provided by the city, he says, with the remainder covered by a construction loan from Erie Bank. Some existing houses will come into the land trust from Tremont West purchasing and rehabilitating the properties.
Since the land trust owns the land, it is not reflected in the sales price. “Depending on how you value the land, at least 30% (comes off the cost to the homeowner). That is $80,000 to $100,000 (that comes) off the cost.”
A down payment on diversity
The Near West Land Trust will seek direct financial support from Cleveland and the federal government through its Housing Trust Fund, McCormack says, to cover construction costs going forward. Cleveland does not have a dedicated fund or bond aimed at creating more affordable housing like some cities, including Columbus and Washington, D.C., where the city established a $100 million bond issue for affordable housing. Currently, subsidies are aimed broadly at development.
“My frustration is we continue to subsidize what we call market rate; but it’s subsidized market rate because most new development is offered TIFs (tax increment financing) and tax abatement,” Misak says, explaining the public subsidies offered to private developers of new properties. “Land trusts usually have grants to help cover the cost of construction. We had city funding which came from (federal) HOME funds.”
The main source of funding that Cleveland has to meet the needs of low- to moderate-income renters and homeowners is the federal Community Development Block Grant program. Tens of millions of dollars a year from the program are competitively awarded to the city’s community development corporations and also allocated to city council people for their ward funds. In addition, the city receives grants, like those that supported a $5 million commitment to its lead safe fund. The city and Cuyahoga County offer rental assistance using federal CARES Act funds.
“The city is primed to begin a more systematic approach to affordable housing,” says Mark McDermott, Vice President, Ohio Enterprise Community Partners. Enterprise provided the Near West Land Trust a grant for its startup costs and staff support. “Is there room for the city to have a set of equitable housing policies? Absolutely.”
The city has started the process, including its recent review of its tax abatement policy. The study concluded that tax abatements should be capped where the private market is deemed to be reasonably strong.
Land trusts are one tool to counterbalance the profit motive of the private market, McNair says, especially when there’s little incentive to build affordable housing. The long-lasting nature of land trust properties is an advantage over other tools like inclusionary zoning, which requires private developers to set aside a certain percentage of affordable units. Those units can and often do expire after a set number of years, says Misak. She cited the case of affordable housing units that were built in Montgomery, Maryland, reverting back to market-rate housing in recent years.
“Other affordable housing models put a subsidy in at the beginning, and the property reverts to sale as market rate,” explains Trimble. “A land trust is a model that presupposes you have a responsible organization.”
Meaning, the land trust must act as steward of the property agreement from one owner to the next, which could take years.
“It retains it as a community asset and at the same time is enabling buyers who wouldn’t be able in that market to be there,” McDermott says. “A lot of people think that the Cleveland market is affordable, but the fact is we have many working families who are priced out of markets here. Often, it becomes an issue of racial equity because these neighborhoods are becoming less diverse than they have for decades. This is a great solution to that.”
Editor’s Note: The author of this article, Marc Lefkowitz, is a writer and sustainability consultant in Northeast Ohio and the former Director of the GreenCityBlueLake Institute. This article was produced and provided to the Plain Press by The Land. The Land is an online newsletter that reports on Cleveland neighborhoods and inner ring suburbs. To subscribe to The Land visit www.thelandcle.org.