Community Land Trusts
A. Defining a Community Land Trust
A Community Land Trust (CLT) is a shared equity affordable homeownership model that conceptually exists between the homeownership and rental tenure models. Under the CLT model, a community based non-profit corporation purchases land and subsequently leases the improvements on the land, such as residential homes, to low income households. The CLT is set up in such a way that the low-income household will only achieve a limited equity return on its investment. Appreciation of the land is taken out of the price equation because the CLT holds the land on which the homes sit on in permanent stewardship. CLTs use various legal mechanisms to convey ownership and subsidize properties under resale constrictions set by a formula created by the CLT that allows the next buyer to also pay a below-market price.
B. Key Features of a Classic CLT
1. Nonprofit, Tax-exempt Corporation: A community land trust is an independent, nonprofit corporation that is chartered in the state where it is located. Most CLTs are started from scratch, but some are grafted onto existing nonprofit corporations.
2. Dual ownership: The CLT acquires multiple parcels of land throughout a targeted geographic area with the intention of retaining ownership permanently. The parcels do not need to be contiguous. Any buildings already located or later constructed on the land are sold to individual homeowners, condo owners, cooperative housing corporations, nonprofit developers of rental housing, governmental, or for-profit entities.
3. Leased land: CLTs provide for the exclusive use of their land by the owners of any buildings on the land. Parcels of land are conveyed to individual homeowners (or the owners of other types of residential or commercial structures) through long-term ground leases, typically 99 year leases. This two-party contract between the CLT and owner protects the lessee’s interests in security, privacy, legacy and equity, and the contract enforces the CLT’s interests in preserving the appropriate use, structural integrity, and continuing affordability of any buildings located on the CLT land. In most housing markets, the CLT’s ground lease fee is set far below what a market rent would be.
4. Perpetual affordability. By intentional design, the CLT is committed to preserving the affordability of housing and other structures on its land. The CLT retains an option to repurchase any structures located upon its land if their owners choose to sell. The resale price is set by a formula in the ground lease providing current owners a fair return on their investments and future buyers fair access to housing at an affordable price. Resale restrictions restrict the owner’s opportunity to sell the property to particular buyers for a pre-determined period of time, meaning that any potential buyers will have to meet to certain income requirements in order to purchase the land, and any value the homeowner receives from the sale...