What is a Community Land Trust?

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Alexandrina Crawford
8 years ago
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1 What is a Community Land Trust? Community Land Trusts are community-based membership organizations whose missions include permanent stewardship of land for community benefit and perpetual preservation of the affordability of housing on that land. The Community Land Trust model was designed to balance a community's need for a stock of permanently affordable housing with wealth creation opportunities for individual families. Vinelanders Community Land Trust Inc. Is a private, nonprofit membership based organization. Our purpose is to build new and acquire affordable homeownership for persons who are poorly served by the prevailing housing market. Vinelanders Community Land Trust Inc. is also a member the National Community Land Trust Network. How Does A Community Land Work? The CLT acquires land and affordability gap subsidies through private and public donations, grants, and loans. The CLT then builds homes for sale at an affordable price (below market value). The resident owns the home and a 99-year renewable leasehold estate; the CLT retains the deed. Terms of the leasehold estate give the homeowner full use of the land, including the right to pass their home on to their children, while limiting the resale price of the home so that it will remain affordable to subsequent homeowners. The Community Land Trust Model is being used by more than 250 wellestablished land trusts in the U.S. today. Why Does Kansas City Need This?

2 In recent decades, Kansas City, Mo and Kansas City, Ks have become a premier place to live. Its success in building such an attractive community has driven the market value of land and houses beyond the reach of many people of moderate income who live here, work here, and grew up here. If the city is to maintain one of its most cherished values the wide diversity of its population the community must actively pursue community stabilization strategies. Key Components of the Ground Lease The ground lease is the legally binding agreement that gives a homeowner the right to use the land and improvements. It describes in full the rights and responsibilities of both the homeowner and the Community Land Trust (CLT), as well as the restrictions that govern the relationship. 99-Year Term - The lease is for 99 years, providing long-term security and access for the homeowner. The lease is also renewable by the homeowner- or his/her heirs - for an additional 99-year term Owner Occupancy - The homeowner must live in their house and no subleasing. Ground Lease Fee - The homeowner pays a modest monthly ground lease fee $25 - to the CLT in exchange for access to and use of the leased premises, which also helps to pay for ongoing services Taxes and Assessments - The homeowner is responsible for the payment of all real estate taxes on the house and land

If the city is to maintain one of its most cherished values the wide diversity of its population the community must actively pursue community stabilization strategies.

3 Construction, Refinancing, Alteration - The homeowner is allowed to build additions to the house only with written permission. Refinance must be approved by the CLT. Resale- If a homeowner decides to sell, he/she must work with the CLT to try and sell to another income qualified buyer. The CLT facilitates these resale s. The resale price is limited by a formula (see below) which allows the seller to recover the cost of the house plus a modest profit. The CLT has a first right of refusal. The Resale Formula The Community Land Trust (CLT) resale formula is designed to strike a balance between providing a fair return on investment to individual homeowners while limiting resale prices to a level that will ensure continued affordability to future income-qualified homebuyers. The goal is to develop a growing stock of permanently affordable homes as a means of building long-term community and individual assets. Homeowners have the opportunity to earn wealth while paying it forward some of the help they received when buying their home. Using the appraisal-based method, the resale price is established as the lessor of: a homeowners percentage of ownership interest OR the base price (what the homeowner originally paid) plus 25% of the increase in market value at the time of the resale. Following is an example.

The resale price is limited by a formula (see below) which allows the seller to recover the cost of the house plus a modest profit. The CLT has a first right of refusal.

4 (EXAMPLE ONLY) FOR EDUCATIONAL PURPOSE ONLY How Does the Formula Work? When a homeowner first purchases their home and the 99-year ground lease, the CLT will have the house and land appraised together to determine the fair market value. A homeowner purchases the home for an affordable sales price of $120,000. A fair market appraisal shows an initial appraised value of $180,000. The homebuyers base price is $120,000, while their ownership interest is 67% ($120,000/$180,000). The homeowner enjoys their home for several years before deciding to move on to a market rate home. At the time of the resale, the home and land will be appraised again. At this time, the fair market appraisal is now $200,000 an increase of $20,000. The resale formula price is the lessor of the homeowners percentage of ownership interest OR the base price plus 25% of the increase in market value. The percentage of ownership interest in this scenario is 67% of $200,000, or $134,000. The base price of $120,000 plus 25% of the increase in market value ($20,000 x 0.25) results in a sales price of $125,000. As $125,000 is less than $134,000, the new sales price is $125,000.

A homeowner purchases the home for an affordable sales price of $120,000. A fair market appraisal shows an initial appraised value of $180,000.

5 What does that mean for the seller? (EXAMPLE ONLY) FOR EDUCATIONAL PURPOSE ONLY In our example, the house sells to a new low-income buyer for the affordable price of $125,000 (see above), a sales price of $5,000 more than what they initially paid. If the seller made a down payment of $5,500 and has earned $7,800 in equity by paying down the principle of their mortgage, then the seller will receive $18,300 at the time of resale. $18,300 to the seller = $5,500 (down payment) + $7,800 (equity) + $5,000 (portion of increase in appreciation)

$125,000 (see above), a sales price of $5,000 more than what they initially paid.

Habitat for Humanity of Southern Brazoria County (HfHSBC) This policy defines the terms and conditions that are required in a Habitat mortgage.

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