One Community Update
November 14, 2024

Source: nextcity.org

In 2022, when Christa Stoneham became CEO of Houston Land Bank, a nonprofit quasi-governmental entity that holds and develops land for the largest city in Texas, she knew she wanted new homes built on its property to be accessible to people with disabilities.

For the past two years, any new properties built on the land bank have been required to have accessible bathrooms, kitchens and bedrooms. (The properties are not considered fully accessible since the land bank’s two-story homes do not have elevators, although the land bank has only sold eight two-story homes since 2022, Stoneham says.)

Its main homebuyer program requires that “the main entrance door, at least one bathroom, and the common area/kitchen must be ADA compliant for single-family homes.” This means entrances, hallways and rooms with enough space for wheelchairs to maneuver, and toilets and toilet seats close enough to the wall and high enough off the ground to access with a wheelchair.

“I instantly knew that I wasn’t going to be in support of a program that did not include some sort of consideration of accessibility,” Stoneham says.

The crisis of affordable housing is more acute for people with disabilities, who have even more limited options. According to the U.S. Senate Committee on Aging, under 5% of the nation’s housing stock is accessible to people with disabilities, whereas about 26% of Americans have a disability. The disconnect has led a quarter-million American adults with disabilities under the age of 64 to live in nursing homes.

Most land banks include in their mission the sale of cheap land and a mandate that developers build affordably. But they can also impose other requirements on developers who purchase plots of land, including making sure housing is ADA-accessible, as Houston Land Bank has done.

According to Lindsey Williams, director of community development at the land bank, building more than what’s required by the city’s building code — which does not mandate all units to be Americans with Disabilities Act, or ADA accessible – costs a little bit more for developers, “but it is something that we feel is important and the bare minimum in these cases, especially with the program of below market rate land.”

Williams says that while the land bank’s primary interest is not the builder’s return on investment, it is still able to make a profit while building accessibly.

According to Caroline Cheong, associate director of the Center for Housing and Neighborhoods at the Kinder Institute for Urban Research at Rice University, the cost of making buildings accessible depends on the choices developers make.

She points to a 127-acre master-planned development called Robins Landing, built in Houston by Habitat for Humanity; all its single-family homes are ADA compliant but, to save money, do not provide dishwashers. (She says the houses still have plumbing connections for dishwashers and many residents did end up buying their own.)

“A lot of it has come down to what the developer sees as a priority,” Cheong says.

How Houston Land Bank works

Created by the city of Houston in 1999 as the Land Assessment and Redevelopment Authority, the program’s mission was to acquire tax-delinquent and vacant properties in Houston and turn them into affordable homes. The idea was that the city could generate property tax returns from otherwise delinquent properties while creating opportunities for homeownership. In 2019, the entity changed its name to Houston Land Bank, became a nonprofit and spun off from the government. The nonprofit is required to make homes affordable to people making no more than 120% of the area median income. It has produced over 500 affordable homes for Houston residents since 2004.

As a nonprofit entity, the land bank can access grants and financing opportunities that the city cannot while being subsidized by city and state funds. Like most land banks, Houston Land Bank has a public mission to take abandoned lots and make them affordable housing, so they can take financial losses that a traditional private developer would not. The organization helps pay for itself by generating property taxes for the city and restoring blighted communities.

“We are in control of the most important asset of real estate development, which is land. And since we own the land, we’re able to write the rules for the land,” Stoneham says.

Stoneham says the value of a land bank is also the expertise. She has urban planning experience, and the lank bank is equipped to navigate the complex development process in a way that a city agency with a more bureaucratic mission might not. Stoneham also says that keeping land in a nonprofit also creates a different set of bureaucratic obligations and gives the bank more freedom than it would have if it was a government agency, while still operating for the public good.

“Our job is to partner with the public entities so we can be funded by them to help expedite the processes that sometimes get locked up in-house because of all of the bureaucracy,” Stoneham says. She says that the government’s approval process could delay building by up to two years, but the process of planning housing does not necessarily become more community-oriented or responsive to the needs of residents during that time.

Part of this is because Houston does not have zoning laws.

“The fact that we’re here for a mission, rather than for money, is how we’re able to invest into the neighborhoods, because the money that we don’t traditionally make gets reinvested into the builder and to the home buyer,” Stoneham says. Because the builder is getting a deal, the land bank can also mandate accessibility as a requirement and pass off the savings and the amenities to the home buyer.

The land bank’s ability to carry out its mission was under question prior to spinning off as a separate entity. In 2018, a Houston Chronicle investigation found that the land bank, which had not yet spun off from the government, was violating its own rules by selling homes to people making well above 80% of the area median income. Builders and buyers who spoke to the chronicle reported not being aware that there was an income cutoff for buyers.

Donesha Albrow, program manager of the land bank, says that buyers now have to go through an income certification process with the city and must submit paystubs, tax returns and other financial documents. Since becoming independent, the land bank now has two homebuyer programs, one for people making 80% of the AMI and one for people making 120% of AMI, according to Albrow, and people who make below 80 percent of AMI can get an up to $50,000 subsidy for downpayment assistance from the City of Houston.

While the change to nonprofit status came after the intense scrutiny after the Houston Chronicle investigation, Stoneham said the decision to spin off and become independent was made to align with “national best practices in land banking and affordable housing.”

Cheong, from the Kinder Institute, says land banks are crucial non-governmental entities that rejuvenate parcels that can be an economic drain on the city.

“If you have a city that’s plagued by bureaucracy, having those pathways smoothed and cleared makes things much more effective,” Cheong says.

When it comes to vacant and tax-delinquent properties, Cheong says, the process is cheaper than it would be to contract with a private entity, because the land bank has the authority to go to the city and get delinquent taxes thrown out.

The land bank’s main mission of affordable homeownership is needed in Houston, which like many cities is facing challenges for new homeowners. According to a report from the Kinder Institute for Urban Research at Rice University, homeownership in Houston has been on the decline since the early 2000s as a result of increasing prices. A majority of Harris County neighborhoods, which include Houston, are not affordable to households earning $100,000 a year. The gap between the home price that residents can afford on the median income and actual housing prices increased by 275% between 2018 and 2023, according to the report.

Cheong says the Houston Land Bank has accomplished a lot since it became a government-affiliated nonprofit in 2019. “They have been able to supply a significant amount of affordable housing to our housing supply and stock,” Cheong says. The land bank has built 341 homes in the past five years, Stoneham says.

While the land bank is still more cost-effective than buying land in the private market, the cost of land bank-controlled property rose in 2019 as the nonprofit became independent. This was partially because of Covid-19 and budget issues, but also because of additional staff, according to Stoneham.

Vanessa Cole is a local developer who built 26 homes through Houston Land Bank between 2019 and 2020 when lots were sold for just a dollar. The homes Cole built were marketed to aspiring homeowners who made 80 to 100 percent of area median income. Cole says that when she worked with the dollar lot program, the sales price of the homes was capped at $180,000, well below Houston’s median home sale price of $308,667 (as of August).

Cole says that in 2020, the land bank’s lot prices rose to $30,000; sales prices were capped at $280,000. But she described the lot price increase and the new sale cap as not financially feasible for her firm. She hasn’t built on the land bank since, but suports the changes that Stoneham has made since taking over.

Stoneham says that while the land bank’s dollar lot program was in place, the program did not have parameters in place to enforce construction standards, nor was there dedicated staff to help with bureaucratic issues like clearing titles. New fees were introduced in 2019 to fund these programs while ensuring builders get a minimum 12% profit off the land, Stoneham explains.

The land bank’s lot prices vary, but Stoneham says that they sell for $9,500 on average, or between 50-90% of market value. Resale price caps range between $115,000 to $285,000 depending on lot size and number of bedrooms.

Cheong says land banks can also face pricing changes depending on shifts in city and state budgets. She says Covid-19 could have impacted the land bank’s funding in 2020. “Whenever there’s a shock to not just the larger economy, but the budget of the local government … that is one avenue in which there’s some vulnerability,” Cheong says.

Stoneham says additional pricing changes in 2020 happened to “ensure sustainable program funding and support operational capacity, not directly as a result of COVID-19 or budget cuts.”

But the Houston Land Bank has still been able to take on ambitious projects in the years since, including a $5 million Environmental Protection Agency grant to clean up a former incinerator site.

“It’s not just the right thing to do for the environment and for people’s health and equity and accessibility measures, it’s also helpful as a business model, because if it’s contaminated, it’s instantly depreciated,” Stoneham says of its cleanup work.

The land bank is currently selling a 3,000- and a 5,000-square foot lot, as well as a 20-acre housing development, Stoneham says. All of the buildings will be accessible, fulfilling the land bank’s goal of building housing that is affordable and meets the needs of Houston homebuyers.

“It’s not just a checkbox of, OK, we’re putting accessible homes together,” Stoneham says. “We’re really making sure that people are able to access equitable solutions.”