The Community Land Trust Model
Community Land Trusts, or CLTs, are non-profit organizations that acquire land and steward its ownership in perpetuity to provide permanently affordable housing.
CLTs provide a mechanism to reduce the purchase price of a home in two ways:
The land underneath a home is held in a trust, and is not conveyed to the buyer at the time of purchase. This removes the cost of the land from the purchase transactions and restricts its land use to permanent affordable housing.
At times, additional public or private investment may be required to make the home’s purchase price affordable. The CLT protects that additional investment in the home through the restricted ground lease, allowing for multiple generations to benefit from the one-time initial investment in the property.
How a CLT works
Community Land Trusts modify the homebuying process to reduce the cost of purchasing a home. The model allows the current owner an opportunity to build wealth, while also preserving its affordability for future homebuyers.
Step 1: Homebuyer purchases the home at a reduced cost. CLT retains ownership of the land, in trust. Homebuyer leases exclusive rights to the land use through a 99-year Ground Lease with the CLT.
Step 2: Homeowner makes monthly mortgage payments to their loan servicer, building equity, and a monthly ground lease fee to the CLT. The homeowner must occupy the home as their primary residence.
Step 3: At any point in the future, the homeowner can notify the CLT of their intent to sell the home to another CLT buyer. CLT will help identify the next buyer and coordinate the resale process.
Step 4: The homeowner sells the property to a new income-qualified homebuyer at a restricted resale price. This restricted price is indexed to the appreciation area median incomes, removing speculative pricing pressures from the sale.
Step 5: The homeowner retains any equity gain created from their monthly mortgage payments AND the limited appreciation experienced by the restricted sales price. Since the sales price increase was indexed to the rise in incomes over time, it remains attainable to another income qualified household.