What is a Community Land Trust?
Community land trusts develop housing through renovation or new construction and sell the homes to low- to moderate-income families. The community land trust leases the land to the families, who agree to restrictions on how the house can be sold in the future. As a result, community land trusts are able to produce high-quality affordable housing and keep it affordable. This 30-year old model is at work in over 225 communities throughout the nation. There are more than one hundred community land trusts in the U.S. overseeing more than 5,000 units of housing.
How Does it Work?
In the conventional market, the homeowner owns their house and owns the land underneath it. In the community land trust model the homeowner owns the house and the community land trust owns the land. Much like a rental lease, a ground lease outlines the rights and responsibilities of the home owner and landowner. Two Rivers CLT retains an option to repurchase the homes located upon its land, should the owners ever choose to sell. The resale price is set by a formula, contained in the ground lease, and is designed to give the present homeowners a fair return on their investment, while giving future homebuyers fair access to housing at an affordable price.
Analysis of the Community Land Trust Resale Formula
|
|
CLT Model |
Conventional Model |
|
Development & Acquisition Cost |
|
|
|
Land |
$35,000 |
$35,000 |
|
Improvements (house) |
$135,000 |
$135,000 |
|
Total Development Costs |
$170,000 |
$170,000 |
|
|
|
|
|
Less Subsidy Provided |
|
|
|
Subsidized Land Cost |
$35,000 |
$0 |
|
Sale Price to Qualified Buyer |
$135,000 |
$170,000 |
|
|
|
|
|
Market Value in 10 Years |
|
|
|
Value of improvements (house) |
$219,901 |
|
|
Value of Land and Improvements |
|
$276,912 |
|
Increase in Property Values |
$84,901 |
$106,912 |
|
|
|
|
|
Percentage of Appreciation to Owner |
25% |
100% |
|
|
|
|
|
Change in Value Available to Owner |
$21,225 |
$106,912 |
|
|
|
|
|
Owner #1’s Share of Increased Value |
$21,225 |
$106,912 |
|
|
|
|
|
Sale Price of House to Buyer #2 |
$156,225 |
$276,912 |
Building Community Wealth and Homeowner Assets
Community land trusts build wealth for communities and homeowners. The community gets permanently affordable housing and the homeowners get all of the advantages of owning a home- security, a chance for appreciated value, tax benefits, and a bridge between rental and market-rate homeownership. Helping low-income families make that transition- from renting to owning, and taking pride in their own home- is one of the hallmarks of the community land trusts. With the cost of land removed from the home sales price, community land trusts make homeownership a reality for thousands of families who thought it was out of reach.
Stabilizing Communities and Creating Economic Viability
Two Rivers Community Land Trust is playing a role in Anoka and Washington counties in MN and St Croix and Pierce counties in WI economic future by:
- Removing houses from the speculative market, thus reducing the cost increases found in the conventional market;
- Providing opportunities for homeownership to people who are` unable to otherwise enter into ownership of home;
- Providing homes in good condition through rehabilitation;
- Opening up the opportunity for wealth building for low to moderate - income people, using Community Land Trust as their step into the conventional housing market;
- Developing a permanently affordable pool of houses.