How Can a Perpetual Purpose Trust Build Community?

How can community development promote inclusive growth, while avoiding displacement? An emerging community development tool, known as a perpetual purpose trust (sometimes referred to as a PPT), seeks to address that challenge.

In cities like Philadelphia, PA, perpetual purpose trusts are being used by communities as tools to plan neighborhood development. But this tool is flexible and can also be a means of business ownership. The central idea is to have ownership vested in an entity governed by a board of trustees whose fiduciary duty is to advance the social purpose of the trust.

What Is a Perpetual Purpose Trust?

Simply put, a perpetual purpose trust is a noncharitable trust established to serve a specific purpose indefinitely, without designated beneficiaries. This structure allows a business to enshrine its mission at the core of its governance and operations. Voting rights are held by the trust, ensuring that decision-making aligns with its legally defined purpose, while economic rights can be allocated to various stakeholders (like a neighborhood community or workers at a business) or reinvested to further the mission.

Perpetual purpose trusts can own either land or businesses. They began as legal structures to enable businesses to align their operations with enduring missions, ensuring that their profits serve broader societal or environmental goals rather than solely maximizing value for shareholders. Notable US-based businesses employing this model include Patagonia, Zingerman’s Community of Businesses (based in Ann Arbor, MI), Organically Grown Company (based in Eugene, OR), and The Walker Group (a tech firm based in Farmington, CT). The success of these businesses demonstrates the potential for businesses to structure themselves to advance their missions while being successful in business operations and shielding themselves against extractive market forces.

In 2022, Yvon Chouinard, the founder of Patagonia, transferred ownership of the company to two newly established entities: the Patagonia Purpose Trust and the Holdfast Collective. The trust holds all voting stock transfer rights, ensuring the company’s commitment to environmental sustainability and social responsibility remains steadfast. Meanwhile, the Holdfast Collective, a nonprofit organization, has the economic rights to fund environmental initiatives and receives dividends to do so. This bifurcated structure ensures that Patagonia’s profits are perpetually directed toward its environmental goals of combating climate change and preserving undeveloped land, effectively insulating the company’s mission from potential market pressures or shifts in ownership that could divert its purpose.

Expanding the Model to Steward Land

The above examples all focus on business development. But the tool is flexible enough to achieve other purposes. Consider, for example, the Kensington Corridor Trust (KCT) in North Philadelphia, which was born in 2019 out of a desire for the neighborhood to collectively own real estate and control redevelopment on Kensington Avenue (a primary commercial corridor) to combat gentrification and displacement.

KCT employs the perpetual purpose trust framework to take real estate off the market—thereby “decommodifying” it—and place it into the trust for collective control. This community ownership structure allows the neighborhood-based group to acquire, rehab, and reactivate residential rental and commercial mixed-use properties to preserve affordability and local control (their purpose), with neighborhood residents and business owners serving as members of its board. This structure ensures an ongoing community oversight of neighborhood development, thereby mitigating displacement risks. KCT’s model demonstrates an effective counterbalance to gentrification pressures, aligning real-estate control and management with broader social and economic equity goals: collective ownership for collective benefit.

A perpetual purpose trust offers greater flexibility [than a nonprofit] to engage in market-rate transactions and use those to cross-subsidize other operations.

Vesi, a neighborhood trust, is a start-up based in Trenton, NJ, with the goal of deploying a model similar to KCT not just in Trenton but nationally. Vesi hopes to launch with sufficient impact capital to acquire a pilot portfolio of around 30 to 40 properties, with a long-term vision to scale up, neighborhood by neighborhood, while maintaining long-term affordability and occupant equity that includes a mix of residential rental and limited-equity housing.

Combining Models to Achieve Purpose

Sometimes an organization might combine different structures to serve different purposes. For example, KCT and Vesi each use hybrid structures that combine two organizations: a standard 501c3 nonprofit structure (which makes it easier to raise grant dollars) and a for-profit perpetual purpose trust structure.

When it comes to preserving land, a perpetual purpose trust shares many elements of the nonprofit community land trust model—including the potential to hold community ownership of land for the long term and to use land for a combination of community, commercial, and residential purposes. However, a perpetual purpose trust offers greater flexibility to engage in market-rate transactions and use those to cross-subsidize other operations. In short, a perpetual purpose trust offers the promise of achieving financial self-sufficiency, thereby avoiding heavy dependence on philanthropic support.

A perpetual purpose trust can also raise money from and make payouts to private-equity investors. As a nonprofit, a community land trust can borrow from private investors but cannot offer investors equity shares. The flexibility of the perpetual purpose trust legal instrument also makes it easier to build an organization that owns land across many different communities, although the actual (as opposed to legal) ability of a perpetual purpose trust to do that has yet to be effectively demonstrated.

Using a Perpetual Purpose Trust for Employee Ownership

In addition to using a purpose trust structure for a social mission goal (like Patagonia) or to preserve a neighborhood, a third use of a purpose trust structure is to lock in employee ownership. This is what is known as an employee ownership trust. In Great Britain, employee ownership trusts are quite common, numbering over 1,000 businesses. The most famous is the John Lewis Partnership, a business that has been governed by an employee-owned trust since 1929 and employs about 70,000 people.

The perpetual purpose trust framework holds significant potential to democratize a wide range of businesses.

An employee-owned trust differs from an employee stock ownership plan (ESOP) company or worker cooperative in that workers do not own shares in the company. Instead, workers have economic rights (which often means annual profit payments) and, sometimes, depending on the trust’s bylaws, governance rights. Unlike an ESOP, where workers (or a trustee voting on behalf of workers) can vote to sell the company to a non-employee-owned company, a trust structure “locks in” trust ownership. This means that employees lack the ability to “cash out,” but ensures that future generations of workers retain the same rights as current generations.

Clegg Auto offers a US-based example of this structure. As of July 2022, an employee ownership trust now governs Clegg Auto’s three auto repair stores and one auto body and collision store, all located outside of Salt Lake City, UT. Additionally, Clegg Auto is using the trust structure to acquire other like-minded small businesses to help them protect their legacies and share in the collective benefits of purpose, care, and community.

How Perpetual Purpose Trusts Are Formed

The perpetual purpose trust framework holds significant potential to democratize a wide range of businesses and organizations. But establishing a perpetual purpose trust can be expensive, with sizeable upfront costs, including legal fees and strategic planning. Start-up costs can vary but typically range between $25,000 and $100,000. This means that philanthropic support is often required.

However, for those committed to addressing the complex challenges created by uneven neighborhood development, the upfront investment into perpetual purpose trust structures have the potential to achieve significant long-term impact. For funders, perpetual ownership models not only offer a tool that locks in affordability, but they also foster engines of reinvestment that continuously anchor and uplift communities that strongly align with the respective impact these organizations seek to advance.

Several philanthropic entities have already recognized and supported the adoption and proliferation of perpetual purpose trusts. For example, the Kresge Foundation and RSF Social Finance have both actively supported trust structures through strategic investments and grants. Additionally, Common Trust, a consultancy with expertise in perpetual purpose trusts, provides valuable resources and initial support for organizations adopting this legal infrastructure.

Future Directions

Collectively, KCT, Clegg Auto, and Vesi all illustrate the growing attraction of perpetual purpose trusts in very different situations.

Perpetual purpose trusts reinforce the foundational principle that purpose and mission are essential motivators in driving sustained innovation, community power, and inclusive prosperity across diverse economic landscapes.

Purpose-driven governance, facilitated by trust structures, ensures that the pursuit of profit does not undermine foundational missions, creating a balanced ecosystem, where ethical and sustainable business practices can thrive.

This alignment not only helps maintain organizational integrity over time, but it also cultivates trust, accountability, and sustainability. As the perpetual trust structure becomes more common, we hope more groups adopt this model to meet their needs.