This article comments on some of the key legal corporate and contracting aspects of forming community land trusts in both rural and urban environments. Our next edition of “Housing Matters” will comment on the issue of permanent affordability and on some of the property aspects affecting community land trusts.
The buzz surrounding the concepts of community land trusts may now be moving from enthusiastic ideology to reality as the interest and number of potential schemes begin to reach a critical threshold – 14 were referred to in the Housing Green paper but there are many more being considered. In part this has been assisted by increased attention offered by national homeless charities, by the Housing Corporation and the department for Communities and Local Government.
The motivations behind establishing rural community land trusts are generally to create permanent affordable housing in order to secure and promote balanced local communities; whereas the motivations behind establishing urban community land trusts are in part to secure permanent affordability of housing but also, in some cases, to help in the regeneration of the local area.
The focus to date has been on the delivery of affordable homes. In time schemes may incorporate community amenities, facilities or services including, potentially, energy, transport and waste services.
What are community land trusts?
Part of the mystery surrounding community land trusts is that there is no single definition of what they are and there are calls from some quarters that there should be a broad definition established as to what they are. The recently published Housing and Regeneration Bill does not create a statutory definition; although, it is possible that a definition may feature in any grant funding conditions or, possibly, in a further draft of the Bill.
There are, though, certain characteristics common to community land trusts - such as land being held by the CLT to provide access to permanently affordable housing, that they are established as “not for profit” bodies and that they are responsive to local community needs and democracy in terms of their ownership and board arrangements.
There are two principal models which have been developed to date. The first is where a community land trust receives land and develops affordable housing in accordance with the terms of a Section 106 Agreement. The community land trust will then typically offer a range of mixed tenure including rent, some form of shared ownership or equity purchase and for sale. Appropriate controls (see below) are incorporated within the for rent and shared ownership/equity purchase properties to ensure they remain permanently affordable. The for sale units are typically developed to help reduce the overall scheme costs.
The alternative model (referred to as the “mutual home ownership” model) involves the formation of both (i) a community land trust to hold the community land in trust; and (ii) a “mutual co-operative”. The community land trust would then grant a lease in favour of the mutual cooperative. The residents interested in and eligible for the housing under the scheme would become members of and have an equity stake in the mutual co-operative. Occupancy by the residents would be through the mutual co-operative granting the residents a contractual lease.
Up to now, where government funding has not generally been available to CLTs, the cost of acquiring a suitable site for development has often been a major stumbling block. In certain instances, land may be made available at reduced or nil cost by the local authority, but the pressures of the need to achieve best value and the fact that CLTs are not RSLs have militated against this.
One of the surprising aspects of community land trusts is the willingness by members of communities and/or local charities to donate land to community land trusts. When taken with some of the proposals being supported by local authorities, there is clear evidence that community land trusts are able to open up new development opportunities for the local community.
The Housing Corporation has announced that community land trusts will be able to bid for social housing grant as part of the National Affordable Housing Programme 2008-11. If successful, this will contribute greatly to the ability of community land trusts to acquire and develop land. At present, any applications for grant by a community land trust must be via a registered social landlord. However, we understand the Housing Corporation may be developing separate funding criteria for community land trusts. One aspect of the Housing and Regeneration Bill that may adversely affect the take up of community land trusts is that if social housing grant is provided to community land trusts, they will be regarded, like registered social landlords, as non-profit housing providers and, as such, subject to the full regulation of OFTENANT.
Reducing the risk
In addition to acting as a conduit for grant, a number of CLTs in the process of being established are seeking RSL partners to form strategic alliances with them for a number of reasons. These include:
- Utilising the RSL’s expertise in developing affordable housing for the CLT, rather than the CLT having to negotiate and supervise the contractor itself.
- Engaging RSLs to provide housing management services.
Most community land trusts are deciding to incorporate as either industrial and provident societies or as companies limited by guarantee, although there is always the possibility of community land trusts being incorporated as community interest companies. The debate on the appropriate corporate form is often a distraction though to the more important issue of establishing an appropriate democratic framework to ensure that the community land trust properly represents the interests of wider community and of those parties with a vested interest in the success of the community land trust.