Community Land Trusts
Community Land Trusts are one of several tools that serve to retain the affordability of homes over time by largely isolating them from the forces of the real estate marketplace. This is accomplished through various forms of equity limitation. Here, we’ll look briefly at
- Deed-Restricted Housing
- Limited-Equity Co-ops or Condominiums
- Community Land Trusts
In deed-restricted housing, sometimes referred to as resale restricted housing or limited equity housing, encumbrances are placed on the homeowner’s deed to the property which remove the owner’s right to resell the home at market value. This is done through either a pre-emptive option or a restrictive covenant that contractually controls the home’s future affordability. If a pre-emptive option is used, a non-profit organization or public body has the fist right to repurchase the home at a price restricted by formula. A restrictive covenant imposes an obligation on the owner to resell the home at the restricted price to another income-eligible buyer.
Limited-equity co-ops or condos both place a financial cap on the transfer value of the property sold. In a limited-equity co-op, this is a share in the co-op ownership of the entire development. In a limited-equity condo, it is ownership of ones unit and a share in the corporation owning the entire development. In either case, a formula determines the equity-limited price for which a homeowner can sell their interest in the property.
Like limited-equity co-ops or condos, and deed-restricted housing, community land trust homes are also limited in terms of the amount of equity the homeowner may recapture upon resale. There are several approaches to determining the equity limitation. CLTs, however, offer benefits in addition to retaining the affordability of homes upon resale. The community land trust is a dual ownership model, with one entity – usually a community-based non-profit organization – holding the deed to the parcel of land and another entity – usually a single family – holds the deed to the house and other improvements on the land. The home owner also has a long-term (usually at least 99 year) lease on the ground on which the home sits and pays a very modest fee for this lease which is renewable and inheritable. The community-based organization which owns the land holds it in permanent trust for the purpose of providing perpetually affordable housing as a community resource. A tri-partite governing board assures balance between the interests of the community as a whole and the rights of the leaseholders/homeowners.
CLT homes are usually significantly more affordable than other types of affordable housing development because the cost/value of the land is retained by the CLT and not passed on to the homebuyer. With escalating land costs, the CLT model can be particularly useful in high-cost areas, especially if CLTs can secure land without significant debt through use of grants or donations.
Another significant dimension of the CLT model is embedded in its origins and philosophy: the concept of building permanently-affordable homes as a community asset as opposed to most other approaches to affordable housing which are founded on the premise of building individual assets through home equity accrual. Today, when even middle-income families often cannot aspire to entering the homeownership marketplace, the CLT model offers security of tenure, privacy of use, a legacy for one’s heirs, the right to control and change one’s living space, and (some) equity on resale, along with lower-than-market cost.
Resources:
The Lincoln Land Policy Institute
www.lincolninst.edu/index-high.asp
Burlington Associates in Community Development
www.burlingtonassociates.com
Institute for Community Economics
www.iceclt.org
Burlington Community Land Trust
www.bclt.net
Northwest Community Land Trust Coalition
www.opalclt.org
www.pclt.org
For further information, please visit our web page on "An Introduction to Community Land Trusts" here. |
