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Gentrification: Mitigation Tools and Techniques for Nonprofits 2003 TACDC Conference February 24, 2003

Gentrification: Mitigation Tools and Techniques for Nonprofits 2003 TACDC Conference February 24, 2003. Gentrification: What is it?. Displacement of lower-income residents by higher-income residents—those displaced often minority Physical upgrading of housing stock

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Gentrification: Mitigation Tools and Techniques for Nonprofits 2003 TACDC Conference February 24, 2003

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  1. Gentrification: Mitigation Tools and Techniques for Nonprofits 2003 TACDC Conference February 24, 2003

  2. Gentrification: What is it? • Displacement of lower-income residents by higher-income residents—those displaced often minority • Physical upgrading of housing stock • Both occur at a large enough scale to change the character of the neighborhood

  3. Myths about gentrification • It’s a “natural” outcome of the housing market: • Market models predict the reverse • Location value strongly shaped by policy tools (zoning, dev codes, infra investments) • Homeowners benefit from gentrification • Low-income owners need to sell early, face limited options in heated markets, esp if minority. Will sell before big change in value occurs.

  4. The challenge: • Channel benefits of growth to neighborhood • Harness changes planned or ongoing in neighborhoods for benefit of both current and future residents • Think ahead, develop tools before you need them

  5. Causes of gentrification: conditions likely to produce it • Rapid job growth • Tight housing markets • Preference for city amenities • Rising traffic congestion, longer commutes • Public policies aimed at stimulating central city development, homeownership. All make central city neighborhoods more attractive to new groups with more income

  6. Characteristics of vulnerable neighborhoods • High percentage of renters • High share of elderly, fixed income owners • Return to renovation high • Easy access to jobs, transit • Significant change in local amenities

  7. Example: Infill development policies • Conflicting goals for city: • Prevent sprawl, better use of city infrastructure • Increase city tax base • Revitalize declining areas • Create mixed income neighborhoods • Preserve/create affordable housing

  8. When might infill = gentrification? • Large scale relative to neighborhood • Large gap between current rents, homeowner costs and project rents, mortgages • When incentives work against affordability, neighborhood character • When incentives allow by-pass of public process

  9. Thinking ahead: Reducing vulnerability to gentrification • Control land for community development—community ownership strategies • Stabilize housing costs for current residents—preservation districts, rental housing subsidies • Supportive policies: • Finance land and housing needs • Link growth to residents

  10. Legal Tools To Mitigate Gentrification • Homeownership • Increase neighborhood stability • Giving families the opportunity to invest in the “American dream” • Cons: Lose control over the affordability of: • land • resale prices • rents

  11. Legal Tools for CDCs • Nonprofit control • Resale Prices • Land • Rents

  12. Legal Tools for CDCs: Controlling Resale Prices • Rights of First Refusal • Subsidy/Recapture Provisions • Deed Restrictions

  13. Legal Tools for CDCs: Controlling Resale Prices • Right of First Refusal • Part of earnest money contract • Recorded by title company at closing • CDC has to set purchase price: • Amount should give family fair return on investment while preserving affordability for future families

  14. Legal Tools for CDCs: Controlling Resale Prices • Subsidy/Recapture Provisions = “soft seconds” • Difference b/w appraised value and first lien • Amount is forgiven if family stays in home

  15. Legal Tools for CDCs: Controlling Resale Prices • Deed Restrictions • Family required to resell home to another lower income family • Possible problems with enforceability

  16. Legal Tools for CDCs:Controlling Land • Rental Housing • Great tool for long-term control of land • More limited subsidies available for single-family rental

  17. Legal Tools for CDCs:Controlling Land • Community Land Trusts • Nonprofit corporation owns land • Family owns home on top of land • Nonprofit is able to control resale price and use of housing • Community-based organization

  18. Legal Tools for CDCs:Controlling Land • Community Land Trusts • Step One: Organization • Nonprofit membership corporation • Residents of CLT land are members • Step Two: Property Acquisition • Can be improved or unimproved property • Step Three: Sale of Property to Homeowners/Rental of Land • Land is typically rented for 99 years for a dollar • Step Four: Land Lease with Resale Formula • Homeowners required to maintain property

  19. Legal Tools for CDCs:Controlling Land • Condos and Cooperatives

  20. Legal Tools for CDCs:Controlling Rents • Rental Housing

  21. Legal Tools for CDCs:Controlling Rents • Restrictive Covenants

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