| Funding Development and Financing CLT Homes
Funds must be obtained for development of housing on CLT lands and mortgage financing needs to be available to buyers. By and large, CLT’s access all the same project funding and buyer financing sources as other affordable housing development organizations, although they may utilize them somewhat differently. Project funding may be secured from government sources such as the HOME program, USDA Rural Housing Services, CDBG, state or local Housing Trust Funds, as well as private lenders.
Buyer financing to take out all or most of these housing development costs may come from private mortgage lenders, USDA 502 mortgage loans, HOME Program mortgage financing, state housing finance agencies or housing trust funds, or FHA. For mortgages that will be sold to Fannie Mae, a rider attached to the leasehold mortgage document clarifies the protections for the homebuyer, the CLT and the lender in case of default. This “Fannie Mae Rider” is now widely accepted by lenders and CLT’s alike. This document can be viewed at: www.sawmillclt.org/FNMA%20LL%20RIDER.doc; or from the Burlington Associates in Community Development LLC web site Resource Center:
http://www.burlingtonassociates.com/resources/archives/fannie_mae/000094.html
Other entities that have assisted with CLT land purchase or housing development are the Housing Assistance Council (HAC) and RCAC (Rural Communities Assistance Corporation); a small number of states are actively working with community land trusts, providing seed money, surplus property and financing. The Affordable Housing Program (AHP) of the Federal Home Loan Bank system also fills gaps with grants and with commitments to lower the lending rates of participating banks; Community Reinvestment Act (CRA) provisions encourage lending institutions to better serve lower-income and minority community needs and CLT is one way they can be encouraged to help that happen.
The key difference between how CLT’s and other housing agencies fund and finance their affordable homes is that CLT’s move permanent funding into the CLT side of the developer-buyer equation. This means that funds to cover all costs associated with the land and infrastructure (and any additional subsidy needed) must be in the form of grants or loans that don’t need to be paid back as long as the land is used for the purpose of affordable housing. On the buyer side, this means that usually CLT homes can be sold at an affordable price without subsidy (i.e. down-payment assistance) for the buyer.
Mortgages held by CLT homebuyers are “leasehold mortgages”, that is mortgages on the home and the (nominal) value of the leasehold interest in the land, but not the land itself. Private and public lenders unfamiliar with CLT’s or leasehold financing may need to be educated by CLT staff. Public funders like HUD and USDA as well as many private lenders are now very familiar with how Community Land Trusts and leasehold mortgages work, so acceptance is growing and unfamiliar lenders can easily access information and resources.
Information on funding/financing of organization, land purchase, housing development, and buyer financing can be found from the following sources:
National Community Land Trust Network:
An excellent vehicle for learning about CLTs and their operation is at a training event sponsored by the National Community Land Trust Network. http://www.cltnetwork.org/Academy/index.htm
The National Community Land Trust Network sponsors an annual Academy that is designed to provide comprehensive training on theories and practices unique to community land trusts taught by highly skilled and experienced instructors. The CLT Academy promotes public understanding of the community land trust model, sets a high standard for practitioner competence, and supports research and publication on evolving practices.
The CLT Academy is a program activity of the National Community Land Trust Network (CLT Network). Services provided by the CLT Network include training, and the provision of resources for its member organizations, which nurture and sustain healthy and economically diverse communities by providing permanently affordable access to land and homes.
Burlington Associates in Community Development:
http://www.burlingtonassociates.com/resources/
archives/financing_clt_homes/000331.html
You will find material written by Rick Jacobus and Jerry Rioux for HUD and the Institute for Community Economics to help California Land Trusts understand the ins and outs of state housing finance resources. Each of the following four documents describe how the funding sources can be used to finance affordable homeownership opportunities and highlights some potential challenges that CLT’s may face.
HUD:
http://www.burlingtonassociates.com/resources/archives/hud/000102.html
Fannie Mae:
Much can be found on Fannie Mae financing on the Burlington Associates in Community Development web site in the Resource section:
- Fannie Mae "Community Land Trust Option"
- Fannie Mae Appraisal Methodology
- Fannie Mae Uniform Rider to CLT Ground Lease
These from the Fannie Mae site:
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