Tom Thurston: A Land Trust is bad for Oakland

The City Council is considering measures to address Oakland’s foreclosure crisis. A leader of Urban Strategies, a local community advocacy organization, is making the rounds of the Council members advocating a Land Trust as part of a solution. The proposal is fairly complicated and requires a great deal of money so it’s tempting to believe that it must do a great deal of good. It does not. The Land Trust is an attempt to use the foreclosure crisis as an opportunity to advance Urban Strategy’s ideological agenda of bringing additional deed-restricted scattered-site low-income housing to some of the most distressed neighborhoods in Oakland.

As an East Oakland homeowner, I have seen the effects of the foreclosure crisis, and have seen my home equity evaporate. I know the issues facing this area, having been involved with the Central City East Redevelopment Project Area Committee (CCE PAC) since it was organized in 2003. I am currently honored to serve as the Chair of this Committee.

The measures being considered address the high concentration of foreclosed, bank-owned properties, particularly in Central East Oakland, Elmhurst and West Oakland. The high concentration of foreclosures in these areas has depressed home prices by 60% and more from market high, fueling further defaults and foreclosures. Vacant bank-owned property is subject to vandalism and looting, blighting the neighborhood and further depressing values. The downward spiral must be stopped.

The foreclosure crisis is a credit crisis. Money is not circulating. Home prices are dropping in search of buyers. There is no other solution than to connect buyers with these homes. The question is how government can most effectively assist in that process. I suggest that responsible government first and foremost should focus on attracting and qualifying buyers in order to stabilize prices thereby slow the rate of default.

The Land Trust does not seek to restore this dynamism to the housing market which the credit crisis has taken away. Instead, it proposes intervening in the market as an alternate buyer, and freezing these houses at their current depressed value. If the Land Trust gets the huge subsidies (the last number I heard was $20 million) Urban Strategies is requesting, it would buy foreclosed properties after they have been renovated. Then the Trust would retain possession of the land, while selling only the house to a low-income household. The housebuyers will not have clear title. Instead the property will be subject to affordability restrictions in perpetuity. When the houseowners want to sell the property, the Land Trust would tell them who they could sell them to, and at what price.

Bank-owned properties in the target areas are selling for $170,000 or less. With a moderate down payment and a reasonable fixed mortgage, houses at these prices could cost less than $1,300 a month, including taxes and insurance. Average household income in the flatlands of Central East Oakland is $48,000. Houses in this area are affordable to the people who live in this area now, using HUD’s definition of affordability. You don’t need a land trust to make these houses affordable. The market has made them affordable. A relatively inexpensive homebuyer assistance program would help the people who already live in these neighborhoods into fee simple homeowners with the opportunity to build equity, to build household wealth, and even to trade up if they need or want to.

The houses in the targeted areas are commonly 50 to 100 years old. I can testify that old houses are expensive to maintain. Land Trust buyers will not have access to home equity loans first of all because they are not gaining equity. Land appreciates but houses depreciate. The Trust owns the part that goes up in value and the houseowners are stuck. Secondly, lenders will not be interested in the houseowners because they do not have clear title. When major repairs come up, the houseowners, because of their low-income with limited access to credit, will have no means to pay for them. They are less motivated to fix up their homes, since they don’t benefit from market appreciation. The houses will deteriorate. The land trust is a road map to blight.

The CCE PAC is involved with low-income housing. The guidelines for redevelopment come from the US Department of Housing and Urban Development (HUD). HUD requires the districts to use 20% of their funds on low-income housing. When we as a Committee discussed building new low-income housing, members from the Central East Oakland and Elmhurst stressed with a passion that would cause the paint to peel off the walls that their areas did not need more low-income housing. Their areas were already supersaturated with low-income housing. Maps produced by the Oakland Housing Division later substantiated this claims. CCE PAC is trying to attract new retail to the area. Retailers are already deterred by the concentration of low-income housing in these areas. These neighborhoods don’t want more deed-restricted low-income housing and they don’t deserve to have the Land Trust forced upon them.

In short, Land Trusts as proposed do not even address, much less mitigate the foreclosure problem. They will further depress what are already some of the most distressed neighborhoods in Oakland. They hurt the neighborhoods they portend to help and they hurt the people they portend to help. Land Trusts are very expensive subsidies that are unnecessary because the market has already made these houses affordable to the people who now live in the neighborhood. For a relatively modest cost, a homebuyer assistance program could put lots of homes in the hands of current Oakland renters. A hugely expensive Land Trust could put a few homes in the hands of a massive bureaucracy managed in part by an ideologically driven private agency.

Tom Thurston is an East Oakland resident and Chair of the Central City East Redevelopment Area PAC.

26 thoughts on “Tom Thurston: A Land Trust is bad for Oakland

  1. Art

    Actually, there are some excellent models for land trusts that deal with some of the issues you raise and have been highly successful, with residents surviving the foreclosure crisis thus far. I agree that a land trust, designed poorly, can be a big issue for neighbors—but done right, it can be a boon for East Oakland.

    You’re right that residents own only their homes in a land trust model—but in successful models they also hold long-term (sometimes 99-year) inheritable leases on the land that transfer with ownership. In most models, residents can sell at a price that covers any improvements they’ve made, as well as a given percent appreciation (lower than California boom appreciation, but higher than what we see today!) So there is certainly still some ability to build equity, and an incentive to upgrade the property along the years since that benefit can be realized. You can’t build as much equity as in the open housing market in the boom years, no—but at the same time, the buy-in cost and associated risk are reduced. It’s the flip side of the coin. Land trusts do also generally require that a home be sold to another low or moderate income family. But don’t forget what that means. In Oakland in 2008, a couple making $53K or a family of four making $66K would qualify. Ask around in your neighborhood; I imagine you’ll find that (as in mine) many of the neighbors you don’t categorize as “poor” nonetheless qualify.

    Where I used to live, we had a land trust that had been in place for a number of years and had a very positive impact on both the immediate neighborhood and on property values of neighbors:

    http://tinyurl.com/aftt5x

    And a little bit about how that trust has weathered the recent housing bust:
    http://www.yesmagazine.org/article.asp?ID=3051

    This is all just to say that I wouldn’t assume that a land trust in the neighborhood is necessarily going to bring an onslaught of bad things. But be an active neighbor, and ask questions about it: what will the income limits be? How will resales be handled, and what appreciation will be allowed? What about adjacent properties? What type of trust will hold the land, and who will manage it? A well-thought-out land trust might turn out to be just what East Oakland needs, since it has a unique ability to acquire and invest in properties to provide housing in ways that the private market can’t or won’t. Just some food for thought!

  2. Farrah

    Tom, this is an excellent article. I agree with you 100%. I think if more people understood that, especially with the City of Oakland’s MAP program, they might be able to actually afford to buy a home in Oakland now, there would be more moderate to lower-income families purchasing homes.

    One issue with some of the homes on the market is that they do need work and banks don’t want to provide mortgages for them. A better program might focus on rehab loans for these homes so that one of the major barriers to purchasing them could be removed.

  3. dto510

    Oakland had a land trust in the 1990s and it was shuttered in 2000 as a failure. I learned that at a Blue Ribbon Commission meeting, when the idea was discussed and rejected. Even more damning, the Northern California Land Trust has been unable to sell a single one of its 11 units in West Oakland’s Noodle Factory, probably because their “affordable” price is no cheaper than market-rate but comes with a host of restrictions.

    Mr. Thurston is right – a land trust doesn’t help anyone but the trust. This idea is even more suspicious because it depends on $20m in free money from the feds. How many homes could be rehabbed with that sum? How many downpayments augmented? Certainly far more people would benefit from using $20m in this market than in an attempt to create a parallel market controlled by a bureaucracy. It’s surprising this is being considered when the Oakland Housing Authority is attempting to sell off its scattered sites, recognizing that Oakland does not have the ability to manage or maintain housing units on a scale any smaller than 50 units. But then failed ideas have never had trouble getting the support of some of our leaders.

  4. Art

    For what it’s worth, part of my definition of a “good” land trust would involve a nonprofit resident trust managing the land—not the city in any way, shape, or form (and certainly not OHA!) In that scenario, there’s no way for individuals to financially benefit from the project. Oakland’s first attempt at this had a lot of design flaws, but I don’t necessarily want to see us completely abandon an idea just because the first iteration was poorly implemented. The reason it’s still on the table, after all, is that it has been effective in some communities—and has been a disaster in others. Like so many projects, a good design yields benefits while a bad design doesn’t. Dto510 hits on a good point, though—any restricted affordable model won’t work if the prices are the same as market rate prices. In that context, there’s no point in doing anything, since people can already buy in at market rate. My understanding with the Noodle Factory project is that it just had utterly abysmal timing—because projects involving subsidies take much longer to fund and build, if you guess wrong about future market conditions in your financing assumptions, you end up in a bind. If you used federal money with strings attached, you can’t just remove the restrictions after the fact, so they’re basically stuck.

  5. Max Allstadt

    While I’m no expert on land trusts, I can say that there are hundreds of houses in Oakland that are in low income neigborhoods and which are crumbling. I’m renovating one today. This place has been rotting for 19 years, and by the time we’re done with it, it will be a nice two unit rental. It might end up costing 150k on top of the 150k purchace price to get the job done.

    So how many houses could be rehabbed for 20 mil? Hundreds. And if a project was set up to do this with Oaklander owned contracting companies, with a union-neutral competitive bid, we’d get it done efficiently and put locals back to work at the same time.

  6. dto510

    Art, public money shouldn’t be given to a private entity, even a nonprofit land trust. If the city wants to spend $20m, they should do it as assistance to citizens, not as a tremendous gift to a politically-connected nonprofit. But certainly we agree that the timing for this is terrible, since the market is supplying plenty of affordable housing, by any definition. Why should a land trust “lock in” current home prices when those it is supposed to aid can do so themselves by purchasing now?

  7. mark

    Let’s not piss away another 20 million that Oakland does not have. We would be better off giving the money to the working poor in Oakland, so that they can go out and buy their own home.

  8. Art

    Just to play devil’s advocate, if you don’t like giving public money to a nonprofit, isn’t it even worse to give public money to a private individual for personal profit in the form of downpayment assistance or rehab funding? (I actually think all of the above are great strategies that we should be pursuing, and really like Max’s idea of creating jobs for local contractors through such a program—but still something to think about.) The idea behind any type of land trust is that public money buys land for public benefit, whether it’s managed by a nonprofit, public authority, or quasi-public agency. (And for what it’s worth, I don’t much care which of the three it is, as long as management is accountable, effective, and efficient. I just don’t think the City or OHA is set up to be any of those things right now.)

    The traditional land trust is used for wild lands to preserve these properties. Public money pays for lands like these all the time—for instance, I bet many of us enjoy parks in the area, and don’t pay too much attention to whether they’re owned by trusts, public authorities, or cities. (From time to time, parks are purchased by trusts and then transferred to agencies.) In Marin, public money helps pay for land through their nonprofit land trust that isn’t even open to the public—it’s used for agriculture, because residents there have identified keeping local agriculture as an important action worthy of public funds. Public money goes directly to private benefit, but the land has restrictions so the owners have given up the right to, say, sell to a developer—they must sell to other farmers or to others approved by the trust. It’s one of the most successful land trusts in the country. A similar trust operates very successfully in Sonoma County using sales tax revenue. It all goes back to how well put together the management is. The difference here is that in the urban model, the benefit identified is the ability to keep low- and middle-income families in a given neighborhood as home prices rise, rather than keeping ag uses or open space.

    Here’s how one model of an urban land trust works, since this seems to be a point of confusion. Nobody’s locking in home prices (for better or worse). In some cases, the money goes to purchasing the homes; in others, the homes are transferred to the trust through eminent domain or from banks, and the money goes to rehabbing them. The land is then owned in perpetuity (in theory, at least). The homes on it are bought and sold as the market demands—but they’re worth less because they don’t come with land, which is what makes them affordable compared to the same house in the same condition a block over that’s not part of the land trust. You’re limited in what you can do with the property, because you don’t actually own the land—much like the farmers who participate in ag land trusts. Some land trusts cap appreciation at a certain amount or require all buyers to be low or moderate income, but you don’t have to have those elements to make it work; they’re just added controls to ensure that the trust is always providing affordable housing. But in theory you could set up a land trust that didn’t have any of those caveats beyond the land lease, and it would still reduce the value of the home over the same home on the next block, making it accessible to someone who wouldn’t otherwise be able to buy in that neighborhood.

    I sound like I’m trying to sell this—I’m not, necessarily. It doesn’t work everywhere, and I don’t know whether or not it would work in East Oakland with a good model. But where it works, it works very well—so all I’m saying is that it’s worth a long hard look.

  9. Art

    (Oh, and Mark, the $20M being thrown around here would come from stimulus funds, not from Oakland’s coffers. It’s worth noting that this is all very hypothetical right now. All that’s happened so far is that the City asked for the money—along with many millions for other projects—as part of billions and billions requested by cities across the country.)

  10. Max Allstadt

    My biggest problem with the so called “permanently affordable” model is that is is classist, and ultimately helps keep the middle class from accumulating ancestral wealth. Too poor to buy market rate? Well here’s a mortgage you can afford, with no opportunity to gain equity if the market rises. That’s not much better than a long lease.

    I’m much more interested in first time homebuyers programs, or downpayment assistance. As far as using that 20 mil for rehabs, there are an awful lot of occupied houses in east and west oakland that need rehabs, and if they got rehabs, the heirs of some old owner occupants might actually have a reason to stay in Oakland.

  11. len raphael

    Art, do you see a weakness in TT’s point that 80 year old (most of which were so so houses when they were built), single family houses will not appreciate above the rehab costs invested, if the resident only has a land lease? i’m thinking that the example you gave was mostly a case of the location becoming more desirable in a short period of time. after that increase, what happens?

    you could look at examples of land leases in Hawaii and London, where much of the land is or was owned by someone other than the owners of the buildings. i’m not an expert on either areas, but my impression is that long term land lease residential apartment units in fancy parts of London zoomed up, but apartment units in older Honolulu buildings did not.

    But maybe that’s going to be the norm for next twenty or more years: ie. most mortgages will basically be rent paid to banks.

    My impression is that OHA is now being run much better than it has in years, but to hear a contractor buddy tell me how inefficiently the repairs are done, i’d say it’s an insurmountable task administrating a large land trust for housing here. maybe in a few years of the new admin of OHA, and after they’ve divested some of the smaller properties (to other nonprofits), i’ll think differently.

  12. Max Allstadt

    Len, while some of those houses may be poorly built and need serious work, there is one thing that many have going for them in terms of investment value. As the urban core gets bigger, and as we have a greater percentage of apartments and condos, the incentive and ability to build single family homes goes down. This pushes down the supply, which pushes up the demand. Add to that the allure of no condo fees and no HOA full of icky neighbors telling you how to live. Oh and ad to that the fact that the credit crunch and housing bubble have driven prices through the floor. What’s not to like? The only catch is that you need cash to buy right now ’cause nobody can get a loan.

  13. Izzy Ort

    I’m not so sure you can say 80 year old houses were only built “so-so”. My house in E. Oakland is 99 years old, and although it’s basically a rectangular box, it’s made of redwood, with real 2x4s, that actually measure 2×4, has tongue-in-groove redwood sub-flooring, hardwood floors, and is very easy to work on — plenty of access underneath and in the attic.

    And Max’s point about no new single family homes in the urban core is well taken — I have a back yard, a little front yard, no condo fees, no CCs and Rs, and if I wanted to live closer to my neighbors, well, I’m zoned R3 and could probably rip down my bungalow and rebuild multi-unit. .

  14. Oaktowntom

    My house is older than Izzy’s by two decades. Since I bought it in 2001 it has needed the floors refinished, major work in the bathrooms and the kitchen, new plumbing, a new foundation and a new heater. It’s a great house and well build, but things wear out or were neglected.

    The $20 million figure I heard was for the acquisition of 200 homes. Urban Strategies suggestion was for the economic stimulus money to rehab the homes and the land trust would purchase them after rehab. Urban Strategies has hinted at asking the redevelopment district for the money, but no formal proposal has yet been made, at least not to the Central City East district. Redevelopment would have to forgo other planned project, like attracting retail, facade improvements, historic restoration, safety projects…if they were to give the money to the land trust project.

    I think the governance question is a real concern. The trust as proposed would be governed by a coalition including people from the community in association with Urban Strategies. How do you assemble a group of people who will act wisely and unselfishly and how do you maintain this noble motivation in perpetuity? Or will Urban Strategies exercise increasing influence over a substantial number of properties in the East Oakland flatlands? When a nonprofit operates a low income apartment complex, their own finances are on the line. Does Urban Strategies have any skin in the game? Who can hold them accountable?

  15. Art

    I agree that the who and the how makes all the difference in whether something like this could work. I’d want these funds to be a dedicated grant (ideally through a fed stimulus or what-have-you) and not draw from the overall resources of Redevelopment, because it would be a huge chunk of their funding. And again—I’m not saying that it will work in Oakland, just that it MIGHT. Market conditions and other economic aspects also factor in.

    I’m with Max and Izzy on the old houses front, though. Our house is worth more *because* it’s 100 years old–if it were new construction on the same lot, it would be worth a lot less. That said, the points on old houses being costly to maintain are well taken. Home ownership in general (new or old—because they always don’t build ‘em like they used to!) can have a lot of hidden costs, whereas as a renter you’re protected from those surprises. That’s a problem overall with extending home ownership to those with little in savings (often an issue for low-income families, but also a concern for any living at the edge of their means). It’s a real quandary—we’ve built a society where (at least historically) property ownership has been a significant way of building wealth, but at the same time it’s very inaccessible to those who don’t already have wealth. I like models (whatever the program) that do allow some equity building—though I’m okay with capping it at reasonable amounts. Expecting to make 200% back on a house is insane, and may well be a thing of the past. But you could easily set a more rational limit based on historic norms (x% a year, etc.) that would allow for wealth building without promoting speculation. It all makes it tricky to find an equitable solution.

  16. Max Allstadt

    Izzy and Other homeowners,

    There are indeed plusses to those old houses in terms of construction quality, but it’s mainly aesthetic. Structurally, we’re in earthquake country and the newer codes are much much safer. An 80 or 100 year old house has no shear walling, poor anchoring to it’s foundation, minimal or no headers over large openings, archaic wiring… It’s a long list I won’t bother finishing. Suffice it to say that “real 2x4s” aren’t all that great. As for the workforce housing built in East Oakland during the Roosevelt era, some of that wasn’t even meant to be permanent, but it’s still there. I expect that in a big quake, our housing stock will be a major contributor to the body count.

  17. ConcernedOakFF

    Max,

    I think you are gravely mistaken. The new codes with their 1/4 inch gang nailing/Gusset plates and 2×4 hanging joists are much more likely to have a catastrophic collapse without warning, and don’t even get me started on the engineered I beams.

    Those old houses, if properly maintained, and not jacked up an entire story are far superior to the normal home construction that we see popping up all over the city.

    Especially under fire conditions, where the new light weight construction can catastrophically fail in less than 5 minutes.

  18. len raphael

    veering off into pros and cons of construction materials and technques of 80 to 100, many of the old single family houses in the flatlands were built for working class people and just like today in tract housing, anyplace the builder could cut costs, eg by using substandard studs, they did. in north oakland there isn’t a single old stucco house that doesn’t have extensive dry rot. or drive around north oakland and see how many houses have the front driveways draining into the basements.

    CFF, what are the issues with the one story houses that get jacked up, foundations replaced, and complete shearwalling installed? Are you saying that the sheetrocking (and stucco) are not as good as plaster at stopping fire? (makes sense)? or the fireblocking in the walls is now inferior?

  19. Oaktowntom

    Max makes a good point about earthquakes. Virtually everyplace in Oakland that is flat is a liquefaction zone. It’s all highly vulnerable in case of earthquake, including all of East Oakland between Foothill and the bay.

    One of my main concerns with the proposed land trust that has gotten little attention is the location. 200 low income land trust properties will be highly concentrated in some of the most distressed areas in Oakland. This is not equitable in that it makes permanent a concentration of low income people rather than disbursing low income people throughout the city (or even the county–what a thought!). At least when you build low-income apartments, you increase the retail potential in an area because you add density. Increasing the concentration of low income housing without increasing density guarantees that depressed neighborhoods remain depressed.

  20. ConcernedOakFF

    The houses that get jacked up I would not count on as much in an earthquake, but then again, I am not a structural engineer. I do not recall seeing any arts and crafts or bungalows that had fallen off of their foundations, mostly the Victorians or jacked up houses that had fallen parallel to their foundations.

    Sheetrock is actually quite a bit more effective under fire conditions. Fire breaks did not exist in many of the older structures (especially “balloon frame” Victorians).

    The new construction style’s problems lie in the fact that they rely on very very tightly engineered margins, and under extreme conditions, after being exposed to weather, water, earthquakes and especially FIRE, they tend to fail, and fail catastrophically.

    Look up “gusset plates” that are used in new roofing trusses, and you will understand what I mean. They are mechanically nailed plates that only penetrate (at most) 1/4 inches into the wood, and then, only about 60% of them are even attached correctly.

  21. Max Allstadt

    It’s true that there are modern construction techniques are dodgy, and it’s also true that there are a number of new methods that fail catastrophically.

    All things considered, the point I was making is that there is a huge number of 80 to 100+ year old houses in Oakland, particularly in the flats, that need help in order to be safe. I went to pry out a top plate the other day because it looked dodgy, and I put my crowbar straight through it because it was so rotten. Not an uncommon experience for a remodeler.

    As far as concentrating land-trust properties goes, I’m certainly concerned. Places like GhostTown are already overburdened with high-impact social services. Ad to that the old practice of redlining, combined with decades of urban planning and highway routing that has walled off the poor, and there’s definitely reason to worry about land-trust properties being located in the poorest parts of town. Our city has a habit of not requiring clients of social services to behave. OHA has similar problems. If we screw up the land trust by putting it in the wrong place and not holding the residents accountable, all we do is amplify the ghetto.

  22. Andy Nelsen, Urban Strategies

    Glad to see we are having this discussion. Wanted to make a few points about the Oakland Community Land Trust that we are proposing.

    First, no single strategy will work to address the problem of foreclosed properties in Oakland. On any given day, there are around 2000 vacant, foreclosed-upon bank-owned properties (REOs) in Oakland, overwhelmingly concentrated in the Flatlands neighborhoods in Districts 3, 6, and 7. For the majority of these homes, a strategy of augmenting the City’s Mortgage Assistance Program and targeting it to assist purchasers of makes a lot of sense. The Land Trust would be a strategy to deal with the 200 or so REOs that are a) remaining vacant for long periods of time and/or b) likely to be purchased by investors and converted to poorly-maintained rental housing. The Land Trust would purchase, fully renovate and convert these to permanently affordable home ownership units, making non-Land Trust properties in the neighborhood more attractive to market-rate purchasers and immediately removing the blighting influence these units are having on neighborhoods, in addition to creating affordable home ownership opportunities for generation of residents, whatever the housing market may do.

    On average, Land Trusts around the country end up offering 2 to 3% a year in equity appreciation. I bet most homeowners nowadays would take that if they could get it. But that’s sort of the point, as Art points out. The Land Trust protects homebuyers from the downside and in return limits the upside. We expect to engage a broad range of residents and stakeholders to determine the equity appreciation formula for the proposed Oakland CLT.

    That equity can be borrowed against, and CLT homeowners would get all the tax benefits of homeownership, as well. We plan to give credit on resale for homeowner improvements, and there is a pool of lenders in the Bay Area already familiar with the Land Trust model that CLT homeowners can work with.

    Of course, since the Land Trust will fully rehab units to energy efficient standards before initial sale, the first generation of homeowners may not need to do much home improvement, but that option is available to them and incentivized.

    The trade-off for homebuyers for getting a fully-rehabbed unit at below market prices is a limit on equity appreciation, ie the deed restriction, so obviously units will have to be priced low enough for homebuyers to accept that trade-off. The amount of public investment required to get to that price point will depend in large part on acquisition and rehab costs but the per-unit investment will undoubtedly be far below what the City spends to produce a unit of new affordable rental housing.

    There are dozens of blocks in East Oakland where more than half of the houses are vacant due to foreclosure. The problem is severe and goes way beyond ideological debates about affordable housing. We think we need an earnest conversation that considers all the community, public and private resources available to deal with this issue. The Land Trust is not intended to compete with other home ownership strategies, In fact we think both are needed and actually can work well together.

    Andy Nelsen, Urban Strategies Council

  23. 94610BizMan

    Andy when you say “a fully-rehabbed unit” what geo-technical assumptions are you making? Are you rehabbing to full engineered assumptions of .5 g lateral displacement assumptions or just code bolt the foundations and shearwall the cripple-walls to minimum code and pray.

    I ask as someone who as done a fair amount of rehab and EQ retrofit. The folks who buy your homes won’t be able to afford EQ insurance. With the probability of an Hayward fault earthquake combined with the projected MM index numbers for the flats (not even assuming liquefaction) means that the house will likely be red tagged.

    With a land value of zero, the likely EQ scenario has unusual financial implications.

  24. Oaktowntom

    The past eighteen months have shown us that real estate investment is not the automatic road to riches that many imagined it to be. Over the long run, market rate home ownership has a financial return comparable to other equity investments, such as large cap stock. If the land trust limits appreciation to 2-3%, then the buyers would be better off financially by putting their money in an investment-grade corporate bond fund, where they would expect to get 5-6% over the long run. And their bond fund would never need a new furnace or a new roof. The mortgage interest deduction is less valuable to lower income people, and their income on a bond fund is taxed at a lower level than for higher-income people. If they need to relocate for family or employment reasons, their bond fund is liquid.

    They could eliminate their investment risk through CDs and still probably do better than the land trust.

    I question whether home-ownership makes financial sense on a risk/return basis if the buyer doesn’t have clear title. Home ownership is for people whose financial situation allows them to tolerate the risk this sort of equity investment involves.

  25. len raphael

    OTT, yup, which is to say more apartment buildings are needed for poor people, and not so poor people. in turn, that would get into question of tearing down those houses and replacing them with rental units aimed at ?

    if the apartment building or land acquisition is subsidized in any way, TT’s concern that more poor people will get crammed into East O is legit.

  26. Wow

    Now here is a nut, a land trust is excellent for Oakland especially during this time. The community as a whole should be included in the process as much as possible to ensure that it is one that answers the needs of oakland not just one that helps with displacement…we need more affordable housing anyway