Tools to keep farm and ranch land accessible and affordable

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1 Tools to keep farm and ranch land accessible and affordable to farmers and in production Jim Oldham Equity Trust PO Box 746 Amherst, MA equitytrust.org

2 Equity Trust Promoting equity in the world by changing the way people think about and hold property. Farms for Farmers Alternative ownership models benefit farmers who need farmland, and communities that want a secure source of locally grown food. Equity Trust Fund Enables socially conscious lenders and donors to support projects creating new ways of owning, using, and stewarding property.

3 Farms for Farmers Program Protecting affordable farms since mid- 1990s Keeping farms part of the food system by protecting: Land Infrastructure Affordability Productivity We facilitate & advise projects. We help farmers partner with land trust or other local stewardship organization.

4 Key elements to protecting affordable working lands Land use requirements & limitations Environmental stewardship Security of tenure Farmer / rancher ability to develop and manage business Community access Buildings and infrastructure Farmer / rancher equity Future transfers

5 Factors in ensuring affordability Removal of development rights Resale restrictions (limit sale to farmers at an affordable price) Farming requirements Goal is for cost to farmer to be agricultural value (price that can be paid with earnings from farming the land).

6 Establishing permanent affordability Achieved through either: I) Specialized agricultural conservation easement, or II) Land trust ownership of the land with ground lease giving occupancy use rights to farmer who purchases infrastructure.

7 Agricultural conservation easement Farmer holds title to property while a land trust or similar stewardship institution holds and monitors easement.

8 Live Power Community Farm Covelo, Mendocino County, California Challenge: Established CSA farm on leased land lacked security needed to invest long-term in land. Outcome: CSA members and others raised funds to purchase and preserve permanently affordable farm. Land & infrastructure are owned by the farmers. Equity Trust holds specialized Agricultural Conservation Easement.

9 Live Power Community Farm Guaranteed source of local food Farmers must grow food and earn over 50% of income from farming the land. Sustainable farming practices Farm must be either biodynamically or organically certified. Affordable access for future farmers At resale, farmers must sell the farm at its appraised agricultural value. Always a working farm Purchase option enables Equity Trust to buy the farm at agricultural

10 Key elements of Equity Trust s agricultural conservation easement Requirement for active farming (measured by farm income) Farmer residency usually required Option to purchase at agricultural value (OPAV) or preemptive right to purchase ensure future sale to another farmer at affordable price. Defines permitted and required farming and stewardship practices, while allowing for changing

11 More agricultural easements with OPAV and affirmative requirements White Oak Farm & Education Center (Williams, OR) Southern Oregon Land Conservancy holds agricultural conservation easement with OPAV Good Humus Produce (Capay, Yolo County, CA) Easement in draft form Discussions with land trust in progress Local co-ops fundraising through One Farm at a Time campaign

12 Programs and land trusts using similar tools New England MA Agricultural Preservation Restriction Program Affirmative covenant requires active farming. Option to purchase at agricultural value (OPAV) assures sale to a qualified farmer at agricultural value. Vermont Land Trust OPAV requires sale to qualified farmer and ensures sale at agricultural value Does not include affirmative requirement

13 Programs and land trusts using similar tools NY Agricultural Stewardship Association Preemptive right to purchase functions similarly to the VLT OPAV Equity Trust Hudson Valley Farm Affordability Program Partnering with a growing number of NY land trusts Adds preemptive purchase right to CE Peconic Land Trust (Long Island) Affirmative farming covenant requires active farming. Affordable farming covenant and resale restriction limits maximum

14 Programs and land trusts using similar tools CA Marin Agricultural Land Trust (MALT) Mandatory Agricultural Use Provision Ø Requires productive commercial ag. Ø Agricultural Management Plan (AMP) landowner written / MALT approved Ø Landowner or tenant carries out AMP Ø MALT monitors, enforces Peninsular Open Space Trust

15 Agricultural ground lease (shared ownership) Land trust or other stewardship institution holds title to the land while a ground lease conveys occupancy and use rights to the farmer who purchases or develops infrastructure on the land.

16 Understanding shared ownership Roots of the model in affordable housing Ø Community land trusts have been using this approach since 1980s in urban and rural areas Ø Currently about 250 CLTs active in US Ø One of the most effective strategies for affordable housing Land trust owns land, farmer / rancher owns infrastructure Building ownership subject to ground lease Requirements/restrictions in lease Agricultural ground lease can be layered with conservation easement

17 Caretaker Farm Williamstown, MA Challenges faced by Sam and Elizabeth No guarantee that vibrant farm they began will continue Gap between retirement needs and what farmers can afford to pay Challenges faced by Don and Bridget No secure tenure at Food Project (Lincoln, MA) No on-site housing Farms near viable markets are

18 Caretaker Farm Challenges for Community No guarantee that farm will continue to provide locallygrown food. No guarantee that other benefits from the farm will continue in the future. Goals for project Ensure continued source of locally-grown food. Preserve a working farm with sustainable farming practices. Community contact with farmland for education and celebration. Affordable, secure access to farmland, housing, and infrastructure for current and future farmers.

19 Caretaker Farm: Goals achieved through new ownership structure Farmhouse & other infrastructure owned by farmers Land is owned by Williamstown Rural Lands Foundation (WRLF) Option to purchase infrastructure is held by WRLF APR (conservation easement) is held by MA Dept. of Agriculture 99-Year Ground Lease Lessor: Williamstown Rural Lands Foundation Lessee: Don & Bridget, Farmers Sam and Elizabeth own small retirement home on farm with corresponding ground lease.

20 Key elements of Equity Trust s agricultural ground lease Long-term (e.g., 99-year) inheritable lease with renewal provisions provides secure tenure. Farmer buys existing improvements, and may develop additional improvements, which can be sold at end of lease. Lease requires active farming (measured by farm income). Lease normally requires farmer occupancy. Lease defines permitted and required stewardship and

21 Ground lease model enables land trust to 21 Share costs and responsibilities Sale of the buildings to the farmer recuperates portion of investment. Farmer ownership of buildings incentivizes maintenance, relieves land trust of this responsibility. Lease can include requirement for repair reserve fund and other terms to promote on-going stewardship. Provide effective stewardship Create a strong legal position for enforce the lease requirements and restrictions. Benefit from the ground lease s greater flexibility over time.

22 More ground lease farms * Each farm is also protected by a third party easement. Roxbury Farm (Kinderhook, Columbia County, NY) Equity Trust Dimond Hill Farm (Concord, NH) Equity Trust (Farmer holds life estate) Crimson & Clover Farm (Northampton, MA) Grow Food Northampton, Inc. Scatter Creek Community Farm (Rochester, Thurston County, WA) South of the Sound Community Farm Land Trust Simple Gifts Farm (Amherst, MA) North Amherst Community Farm (Transitioning to long term lease) Red Fire Farm (Montague, MA) Mount Grace Land Conservation Trust (In progress) Newly formed Sustainable Iowa Land Trust is also adopting this model

23 SSCFLT Agricultural Ground Leases Affirmative Farming Requirements Restrictions Requirements Conservation plan and/or Organic Systems Plan Income requirement (Livelihood from farming) Ø i.e. $100,000 gross sales annually Annual revenue report to Land used only for residential, agricultural, or educational purposes Grass/hay production <50% of farmable acres Ornamentals <25% of farmable acres Products sold outside a 300 mile radius <50% of annual gross sales

24 Protecting affordable farmer housing Farmer housing is key to affordability and to farm productivity & viability Strategies: Ø keep house with land Ø place limits on farmhouse size Ø limit resale price Beneficial to beginning farmers or others seeking whole farm Owner Occupancy Requirement Ø Can be paired with requirement to keep home in habitable condition Ø Sabbatical provision possible Ø Can be used with easement or ground lease (easier in latter)

25 Considerations when choosing tools Types of agriculture Pressures on land / competing uses Availability and sources of funding Attitudes and expectations in

26 Critical details when drafting enhanced easements or ground leases Setting appropriate resale price (agricultural value or other approach?) Definition of qualified owner Exempt transactions Definition of productive agriculture (consider type of agriculture) Consideration of housing (existing and potential future housing) Process and communications

27 How are affordable farm protection projects financed? Land gifts & bargain sales may provide tax benefit Government funds federal, state, local Nonprofit resources e.g., conservation land trust purchase of conservation easement Farmer purchase of ownerhip share either house and barns or easement-restricticted farm property Capital campaigns foundation grants, and gifts from nonprofits, businesses, and individuals

28 Monitoring for active farming and owner occupancy Annual site visit; and Review farmer s income tax return; and/or Periodic report from farmer; and/or May include periodic review of: Ø Organic certification Ø Forest management plan Ø Farmer s marketing plan or Ø Restoration or management plan for part of land

29 Monitoring for compliance with lease term Review any proposal for building on site Approve expenditures from building reserve fund (if established) Collaborate with easement holder to ensure compliance Require farmer s mortgage holder provide notice of any default Require insurance company report cancellations, or failure