Two wallets are better than one, as partnerships between environmental groups and affordable housing advocates are demonstrating.Housing - Finance ; Housing - New England ; Conservation of natural resources

Sam Merrill

English

Research Papers in Economics

    Spring 007
For  example,  municipal  leaders  may 
convene a group of stakeholders to determine 
how to address the lack of capital available 
for local water infrastructure. The process 
of coming up with a financial solution that 
has broad public support involves working 
toward  an  agreement  about  how  dollars   
will be spent on the environment—in this 
case, water.  
For  years,  wealthy  landowners  have 
benefited  from  environmental  finance—
through  conservation  easements,  for 
example,  that  preserve  land  and  reduce 
tax burdens. Today groups that serve low- 
and moderate-income households also are 
tapping into it. 
Environmental  finance  categories  of 
potential  benefit  to  lower-income  people 
include  sewer-  and  water-affordability 
finance  and  brownfield-redevelopment 
insurance finance. But a discussion of land-
conservation  finance  may  offer  the  best 
opportunity  to  illustrate  the  larger  set  of 
possible benefits. In New England, where 
open space is getting scarce, the link between 
land conservation and affordable housing is 
especially germane.1 
Conservation Development
A concept known as conservation develop-
ment—preserving land as part of a housing 
development—has been gaining adherents 
in recent years. In nearly all cases, it has 
not been the result of regulation but is a 
grassroots, volunteer-driven trend. And in-
creasingly,  conservation  developments  are 
focused on affordable housing. 
One  reason  is  that  there  is  a  new 
understanding  among  land  trusts,  state 
agencies,  municipalities  with  open  space 
bond  funds,  and  other  conservation 
entities  of  the  need  for  a  more  holistic 
approach to land conservation and housing. 
Conservationists  are  recognizing  that 
affordable  housing  is  needed  in  rural  as 
well as urban areas and that it is possible for 
different groups to meet mutually beneficial 
goals. More organizations are approaching 
developers  with  progressive  ideas  about 
how  to  combine  conservation,  housing 
development, and other community goals 
as land becomes available. 
The  interest  in  conservation-based 
affordable  housing  is  a  response  to 
escalating housing prices and their impact 
on  communities—fewer  young  people 
staying  in  town,  fewer  public  employees 
living locally, and so on. Many conservation 
groups are finding that they can protect land 
while creating town meeting places, fostering 
a  sense  of  community,  and  conserving 
farming, forestry, and rural character. 
Conservation  leaders  and  municipal 
officials in these communities have observed 
that providing adequate financial resources 
for  land  conservation  can  help  create 
affordable housing on the same parcels. An 
additional impetus for conservation-based 
affordable housing, especially in urban and 
coastal areas, is that land has soared beyond 
the pocketbook of the local conservation or-
ganization. Combining conservation monies 
with funds reserved for affordable-develop-
ment has become a land-protection option. 
Beacon Hill Lane, 
Block Island, Rhode 
Island— 
an affordable 
housing devel-
opment that 
made use of 
environmental 
finance.  
A mong communities concerned about funding affordable   
housing,  a  new  approach  is  getting  attention.  It’s  called   
environmental finance.
  Environmental finance is often defined as the process of making 
money more readily available and using it more efficiently to pay for   
environmental goods and services. It is applied in a wide variety of 
organizations, agencies, and disciplines, and may be accomplished 
through activities not conventionally termed finance.  
by Sam Merrill 
New England Environmental  
Finance Center Environmental 
                 Finance for Affordable HousingCommunities & Banking    3
Three New England  
Examples
The  following  three  communities  have 
pieced together the funding for conserva-
tion-based affordable housing.
Block Island, Rhode Island 
About 15 years ago, a conservation-mind-
ed landowner with an interest in helping 
low- and moderate-income households on 
the island made a 12-acre parcel available 
to  conservation  and  affordable-housing-
development partners at a bargain price of 
$275,000. The majority of the funds came 
from the Champlin Foundation. Additional 
funds were generated when the Block Island 
Land  Trust  (a  municipal  agency  autho-
rized to protect open space) purchased the 
conservation easement using funds from a   
3 percent real estate transfer fee. In what 
became  known  as  the  Beacon  Hill  Lane 
project, seven of the acres were permanently 
protected;  the  remainder  were  developed 
with  seven  single-family  homes  at  initial 
prices of $133,000. 
Benefits to low- and moderate-income 
households were immediate. On an island 
where  rising  real  estate  values  had  made 
buying land a significant burden for many 
families, seven new homes suddenly were 
within  financial  reach.  Mechanisms  were 
established  to  keep  the  units  affordable, 
including limiting their resale value for as 
much as 30 years. 
Although  several  willing  partners  are 
necessary for this type of arrangement, the 
example  illustrates  that  mainstream  land-
protection  mechanisms  can  help  provide 
housing  for  low-  and  moderate-income 
families.  For  any  such  approach,  trust 
among prospective partners is an essential 
ingredient.2 
Jay, Vermont 
In 2005, the Vermont Land Trust sold the 
town of Jay two parcels totaling 282 acres 
and donated 20 additional acres outright. 
The  town  identified  three  main  goals:  to 
protect  land  for  public  recreation,  deer 
wintering,  and  town  forestry;  to  provide 
affordable  housing  in  response  to  ris-
ing home prices; and to promote careful,   
deliberate  growth  patterns.  Roughly  240 
acres were placed in permanent protection, to 
be managed for wildlife habitat and forestry   
objectives. 
Thirty-five  acres  were  conserved  for 
intensive community recreational use, and 
20  acres  were  apportioned  for  affordable 
housing.  The  housing  proposal  had  two 
market-rate units and four affordable units 
with an initial sales price of $100,000, well 
below  market  rate.  The  price  was  made 
possible  by  a  collaboration  that  included 
the Vermont Housing Finance Agency, the 
Neighborhood Reinvestment Corporation, 
and  the  Gilman  Housing  Trust,  which 
together  enabled  substantial  subsidies  for 
the affordable homes. 
Although only a few affordable units 
will be brought to the market, the project 
illustrates the strictly local nature of many 
efforts  in  applied  environmental  finance. 
That is, in order to make significant changes 
in housing options for low- and moderate-
income households, a local, parcel-by-parcel 
focus and an aggressive use of partnerships 
can make more money available. 
South Burlington, Vermont
In South Burlington, 48 apartments were 
built in a multifamily complex on a 22.7-
acre parcel. Thirty-eight of the apartments 
are  affordable,  providing  below-market-
rate rents to income-eligible households at   
several income tiers. Ten acres on the parcel 
were protected as a natural area for purposes 
of flood control, rare and unusual habitat, 
and a trail for hiking and river viewing (dra-
matic limestone bluffs with 100-foot drops). 
Density  of  the  units  helped  control 
costs and lessen impact on natural features of 
the site. This complex project was financed 
through  at  least  six  significant  funding 
sources (including the Vermont Housing & 
Conservation Board, the Lake Champlain 
Housing  Development  Corporation,  the 
U.S.  Department  of  Housing  and  Urban 
Development,  a  low-income  housing  tax 
credit equity, the Vermont Housing Finance 
Agency, and a developer loan), illustrating the 
need for sophisticated financial management 
and  multiparty  coordination  on  projects 
that aim simultaneously to protect land and 
provide affordable housing.   
It is clear that, in the arena of land-
conservation  finance,  low-  and  moderate-
income households stand to benefit from 
the  recent  innovations.  Environmental 
finance is a tide that can lift many boats. 
In  the  case  of  affordable  housing,  it  lifts 
people who have been priced out of regional 
housing markets. 
Sam Merrill is the director of the New Eng-
land Environmental Finance Center at the 
University of Southern Maine’s Muskie School 
of Public Service in Portland.
Endnotes
1  The  examples  are  excerpted  from  K.J.  Breichle, 
Conservation-Based  Affordable  Housing:  Improving 
the  Nature  of  Affordable  Housing  to  Protect  Place 
and  People  (Arlington,  Virginia:  The  Conservation   
Fund, 2006), http://www.conservationfund.org?article 
=3192&back=true. 
2  For  more  information  on  trust  in  partnerships,  see 
http://efc.muskie.usm.maine.edu/Trust_and_Risk.htm.  
Photographs by Sandra M. Kelly
u This Communities & Banking article is copyrighted by the Federal Reserve Bank of Boston. The views expressed are not necessarily those of  the Bank 
or the Federal Reserve System. Copies of articles may be downloaded without cost at www.bos.frb.org/commdev/c&b/index.htm.

Environmental finance for affordable housing

http://www.bostonfed.org/commdev/c&b/2007/spring/article8.pdf

Environmental finance for affordable housing

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