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Community
Land Trust Ownership
A community land
trust achieves permanently affordable homeownership opportunities for low
to moderate-income households by separating the ownership of the house and
the land. A community land trust achieves permanent, long-term housing affordability
through the use of a Ground Lease. CLT homebuyers purchase only the house,
and enter into a 99-year Ground Lease with the community land trust for the
exclusive use of the land. When a CLT homeowner decides to sell their home,
the house is sold to another low-to-moderate income household for the original
purchase price plus 25% of any appreciation in the home’s value. 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.
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Conventional Resident
Ownership
In this model, the housing sponsor transfers to the resident "full" (fee
simple) ownership of the entire property. Limitations are established through
either a deed restriction, a collateral agreement, or a mortgage agreement.
The model works well for a program that simply wants to recapture a subsidy,
In that case, the sponsor can simply use a mortgage to secure the amount
of subsidy to be repaid upon resale. The conventional resident-ownership
model
can also be used with resale price restrictions. In order to transfer full
title to the resident and then restrict resale, the sponsor will need to
use a deed restriction or collateral agreement. Because of the statutory
time limits
on deed restrictions and the property law limits on perpetual restrictions
in either deeds or collateral agreements, any resale price restrictions in
connection with conventional resident-ownership will probably have to be
limited to a certain time period rather than establishing permanent
affordability.
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Condominium Ownership
Condominium ownership in multi-family buildings is roughly the equivalent of
conventional resident-ownership in single-family homes. The individual owner
has fee simple ownership of the unit as defined by the walls, ceilings, and
floors. All the unit owners together own the common areas through a condominium
association. While condominium ownership was not originally conceived as an
affordable housing model, housing organizations have recently begun to set
up limited-equity condominiums. Limitations on the residents' equity are implemented
in much the same way as with conventional resident-ownership - through deed
restrictions or collateral agreements containing preemptive options, or through
mortgages allowing subsidy recapture. Because the model is similar to conventional
single-family resident-ownership, the same questions as to the enforceability
of long-term resale restrictions apply. The condominium association or housing
sponsor may have a stronger justification for an over-all affordable housing
scheme for the whole building. Nonetheless, legal concerns about long-term
enforceability have led sponsors either to draft restrictions that preserve
affordability only for a limited period of time, or to arrange for ownership
of the land by a community land trust, with long-term affordability protected
by provisions in the land trust ground lease.
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Cooperative Ownership
With the cooperative ownership model, title to the property is placed
in corporation rather than being divided among the individual residents.
The residents purchase
shares of stock in the corporation and participate in governing the corporation
as owners. As a shareholder, the resident received a long-term ("proprietary")
lease to her housing unit. In limited-equity cooperatives, the bylaws require
that each resident agree to a restriction on the price that she can receive
when she sells her share of stock. Perpetual resale restrictions on shares
of stock do not involve the problems of legal enforceability that accompany
restrictions on the resale of conventional resident-owned or condominium homes.
The rules against restraints and perpetuities apply primarily to interests
in real property. A resident's ownership of stock in a cooperative typically
is considered to be an interest in personal rather than real property. However,
while the long-term enforceability of the restrictions may not be a problem,
the long-term existence of the restrictions themselves may be jeopardized.
As noted above, the restrictions are implemented through the cooperative's
bylaws, which can be revised by the resident-shareholders, who may have a strong
interest in removing resale restrictions. Cooperative ownership is therefore
a less than perfect means of preserving long-term affordability, unless the
continued existence of resale restrictions can be assured by means not inherent
in the model itself. One way of ensuring the continued existence of a cooperative's
resale restrictions is to arrange for ownership of the land by a community
land trust. Land trusts themselves are often the developer/sponsors of limited-equity
cooperatives of their land. In these cases, the land trust ground lease requires
that specified resale restrictions remain in place perpetually. The land trust
monitors the ground lease agreement with the cooperative and can enforce its
terms when necessary.
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