[Year-Round Housing Committee] more ground-lease information

[Alden Robinson]

Hello YRHC,

Below, please find two emails that we discussed at your last meeting.  The first is from Joanne Whitehead, of Islesboro Affordable Property; the second is from the town's assessor, Robert Konczal.  Both regard the financing and value of ground-leased property.

I will be sending you maps of potential parcels very soon.

Alden

--------From Joanne Whitehead----------
Hi Alden,  Glad the information has been helpful.  Joanne Campbell from Camden National Bank(CNB) is involved in the Camden Affordable Housing effort and can help with this. She came out to Islesboro and spoke to the board here.  CNB is also having a Forum March 20th in Rockport "2007 Housing Challenges and Solutions Forum - might be something you could go to.  Call Sherry Guarneri at 236-2388.  There is another woman I met at a conference in Portland that was from a bank down that way that was VERY involved in Affordable Housing - I will see what I can find out for you.  You might want to just call around locally and have some conversations.  
It is a very similar arrangement as a condo idea - you own the house but not the land.  Also we need to look at incorporating equity building for the second homeowner 
since the way it stands now - the only equity the person receives is the initial first homeowner sweat equity - there is currently nothing beyond that.  There needs to be an increase based on some constant such as cost of living, etc.  Education is the key to having a successful project - as long as everything is spelled out at the beginning -
clear and no surprises, all will go well.  We have to change our thinking from land being a commodity to land being part of a community.  RJS is something like a CLT
Community Land Trust except that IAP is the major manager of it where it usually is the other way around - the homeowners run it.  I hope this is helpful. 

I will get back to you on the Bank in Portland.

Talk to you soon,
Joanne 



--------------------From Bob Konczal------------------
Hi:
Well, there are a few pieces to the answer. :-)

1-: the improvements to the land are assessed as part of the land.
The tax bill is broken up into land and building values, and these things aren't considered buildings. Think of it this way: if there were a fire that wiped everything off the lot, the septic system would still be there. Plus you could technically remove the house and use it elsewhere, but not the septic system. Mobile home parks are a common example, where the trailers are owned by the tenants, but the park and the lots are owned by the landlord. Each are assessed according to what they own.

2-: Historically, land has been assessed as either vacant or improved, vacant meaning a lot with no human interference, and improved meaning it's cleared, has a driveway, well, septic, and lawn, etc. A good rule of thumb is that the improvements to the lot add about 20% to the value. Subdivision lots are often sold this way.


3-: Now the interesting question here is how the owner of the house should be assessed for the market value of their building. Imagine 2 identical houses, one is located on a town lot in the middle of an interior swamp, and the other located on a town-owned piece of a peninsula with wonderful views. 
*If the owner of the building sells it and all they sell is the structure and it has to be removed, then the building has similar values in both locations.
*But what if the buyer gets the right to keep it at its current location, then the value of each building is completely different at its current location. The value on the market will be more than just the sticks and nails that went into it. They also own something called a leasehold interest. That means they own a long term lease from the town that has value, and could be assessed as such. As you can imagine this does not happen often. 
I have an example here of a mobile home park in Freeport that is on a tidal part of the bay. Mobiles in the park never sell for less than 35,000 there, while the same tin can might sell for $15000 elsewhere in town. This is kind of a drastic example, but it happens. 

4-: I suppose that a point of contention might be that since the tenant put the well/septic there that it belongs to them. I suppose so, but they can't take the stuff with them certainly. Maybe it should be considered a donation to the town. Alternatively, the town could pay to have the stuff installed and the rent rate could reflect that.

Maybe this is more than you wanted to know. :-) .

I assume that this has come up because you are trying to figure out how much to charge for leasing. Am a bit surprised that the town wants to get into the landlord business, but 'to each his own'.

Please keep me posted.


regards,
bob


________________________________________________
 
Alden Robinson
Island Institute Fellow
Town of Long Island, Maine
 
(207) 837-0636
 
arobinson at islandinstitute.org