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CLT Overview
What
is a CLT?
A community land trust
(CLT) is a nonprofit organization that owns land in order make housing available
to residents
who could not
otherwise afford it. In the United States
and Canada, there are currently over 100 active community land trusts that
provide affordable homeownership to households in their area.
Community land
trusts help communities to:
- Gain control over local land
use and reduce absentee ownership
- Provide affordable housing for
lower income residents in the community
- Promote resident ownership and
control of housing
- Keep housing affordable for future
residents
- Capture the value of public investment
for long-term community benefit
- Build a strong base for community
action
Why a CLT?
Population growth
and
economic investment are driving up real estate prices so that fewer and fewer
people can afford to
live in the communities where they work. Limited public funds are available
to subsidize housing costs for lower income households, but the gap between
the amount of subsidy
needed and the amount of subsidy available continues to widen as housing
costs rise.
To address this problem, community land trusts are being developed to control
housing costs by permanently limiting land costs and "locking
in" subsidies. By limiting
market appreciation, permanent affordability is ensured and initial subsidies
invested in making the home affordable for future generations of low-to-moderate
income homebuyers.
The problems of low-income neighborhoods typically revolve around disinvestment
and absentee ownership. As homeownership declines older buildings are
likely to be bought by absentee investors who allow the buildings to
deteriorate while charging high rents. The rent paid to these absentee
owners leaves the community. It is not saved by the residents, not spent
in local stores, not used to improve the community. If residents do not
organize themselves to improve their neighborhood, it will be the absentee
owners
who will reap the benefits of increased property values. Through
a CLT, however, residents themselves can capture the value they create
so that it benefits their own
community rather than absentee investors.
Click
here to learn more about subsidy retention
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How
it Works
- The CLCLT acquires a house.
- An appraisal is done to determine the value
of the house and the land.
- A family or individual purchases the house
and leases the land from the Community Land Trust.
- Ongoing homeowner
education, community participation, and financial reassessment for
CLCLT homeowners.
- If the owner wants to sell, the house is appraised again.
-
When the home
is resold, the seller receives a portion of the home's increased value,
and the Community Land Trust retains the affordability for another
individual or family.
In this way, a one-time community investment keeps the house affordable
perpetually instead of letting it rise in cost along with the market.
So, more affordable homes are available for future generations of homebuyers.
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Example
Let's say you purchased your home through the City of Lakes Community Land
Trust (CLCLT). It is worth (market appraisal) $150,000, and
you pay a net price of $120,000 (assumes subsidies/investments of $30,000 through the CLCLT and/or
other means).
 7
years later, you decide to sell your home to either the CLCLT or another
CLT income-qualified buyer.
Let's now assume that your home's new value (market appraisal conducted by
independent third party appraiser) is $210,000.
 Your
home's value increased by $60,000 ($210,000 - $150,000). Your share of
the increased value is 25% or $15,000 ($60,000 x .25)
The CLCLT or
another income-qualified CLT homebuyer may purchase your home for what
you originally paid ($120,000)
PLUS your share of the increased value of your home ($15,000)
For a maximum sales price of $135,000 ($120,000 + $15,000)
What this means for you
You were able to purchase a home you otherwise would not have been able to
responsibly purchase at the time. You were able to receive all the benefits
of homeownership including mortgage interest deductions. You also are able
earn equity ($15,000 + downpayment made on the home purchase + principal paid).
What this means for long-term affordability
The importance of the Community Land Trust model is demonstrated by the ability
to extend long-term affordability to households similar to yours in the future.
Another family or individual will be able to purchase this home for $135,000,
even though it is valued at $200,000. (the initial $30,000 CLCLT investment
has grown to $65,000 in only 7 years).
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