WHAT ARE COMMUNITY LAND TRUSTS?
Community Land Trusts, more commonly referred to as CLTs, are community-based nonprofit organizations that provide perpetually affordable housing options. Their purpose is to provide access to land and housing to people who are otherwise denied access; to increase long-term community control of neighborhood resources; to empower residents through involvement and participation in the organization; and to preserve the affordability of housing permanently.
How Does It Work?
A CLT will secure homes through acquisition/rehabilitation or new construction to sell to income-eligible families. The family goes to a local lender to obtain a mortgage for the house itself, while the CLT retains ownership of the land – this reduces the purchase price instantly. Along with this model of homeownership a Ground Lease agreement is signed. The Ground Lease establishes the relationship and agreements between the organization and the home owner, including a minimal monthly ground lease fee paid to the organization and the resale formula utilized at the time of sale. When the home owner goes to sell their home to another program applicant, home owners receive the amount they originally paid for the house and an index-based appreciation. This allows for the home owner to build equity and receive a portion of the appreciation while the home remains affordable for the next family.
CLTs across the country provide this unique opportunity to families. Common characteristics:
- Empowerment of homeowners and community members, who make up a minimum of 1/3 of each CLT board of directors, and ensure CLT homeowners maintain an active voice in CLT governance.
- Provision of access to land and housing to people who are otherwise unable to afford these opportunities.
- On average, CLT homeowners earn around 40% of the area median income.
- Balanced approach to homeownership allowing CLTs to own land and lease it for a nominal fee, reducing the overall home price for families who own homes on the land.
- CLTs maintain ownership of the land on which a CLT home sits. This allows for an initial reduction in price by subtracting the value of the land from the market-value of the home. Additional subsidy will then be added according to a family’s income and the purchase price they can afford, as determined by Minot Area CLT.
- Benefits to homeowners including the security of owning your own home and use of land much like a market-rate homeowner, combined with the protection of a CLT providing homebuyer education, foreclosure prevention, and a guaranteed sale when homeowners choose to move.
- Equity production for homeowners partnered with preservation of affordability for future buyers, providing the opportunity for wealth creation to each subsequent homebuyer.
- In a study done by the National CLT Network over 90% of CLT families remained in their homes for at least 5 years. Of these families, over 70% went on to purchase owner-occupied, market-rate homes.
- Commitment to the perpetual affordability of housing in the community in which we operate.
- A sustainable model that only requires subsidy once rather than new subsidy upon each resale.
- Because CLT homeowners are required to follow a resale formula, when they decide to move their home will be resold at a price that appreciates per their initial investment rather than the full market-value, thus appreciation is reduced and homes remain affordable in perpetuity.