Keeping homes affordable for buyers through community land trusts
Part of Habitat for Humanity International’s FY2024 annual report included a section on community land trusts (CLT). We’re reproducing most of that article here because the article does such a great job of explaining how CLTs are part of Habitat’s work to ensure homes remain affordable: Lasting affordability efforts keep housing prices in reach across generations, enable homeowners to gain equity and share in value appreciation over time, help residents with low or modest incomes avoid displacement, and avert gentrification of communities.
There are many models for CLTs, but the three Habitat uses most often are long-term deed restrictions or affordable housing covenants, ground leases, and community land trusts. In all three predominant ways that Habitat affiliates establish CLTs, the homeowner pays a monthly ground lease fee to the land trust entity.
The rest of the text, except for the last paragraph, is from Habitat’s FY2024 annual report:
Habitat’s CLT models include:
A Habitat affiliate partners with the city or county to acquire land for development, then Habitat leases the land or obtains ownership from the city agency.
A Habitat affiliate creates an independent nonprofit entity to maintain ownership of its existing land as a land trust and sells the development on the land to an income-qualified buyer.
Habitat partners with an existing community land trust in its service area, acting as a housing developer for the land trust entity.
The cycle of CLTs and Habitat homeownership
Habitat sells the home.
Habitat retains ownership of the land, and the homeowner pays a small monthly ground lease fee through a long-term renewable lease.The homebuyer experiences the benefits of homeownership.
They pay an affordable mortgage and build equity.If the homeowner is ready to sell, they do so at an affordable price.
Homeowners benefit from an appreciation in value and equity. Because Habitat owns the land, the home remains affordable for the next Habitat homebuyer.
Frederick County Habitat created the first Habitat-funded community land trust in Maryland in 2016. As part of this trust, Habitat buys homes in Frederick County that are in disrepair or works with local governments to acquire properties to be held in trust. The homes are repaired and renovated by volunteers and local partners to become market-ready. Habitat retains ownership of the land and sells the home to an income-qualified homebuyer with a monthly mortgage lower than rental prices and with a small monthly ground lease fee. Because future resale prices are based on the original affordable sale price, the home remains affordable no matter how many times it is sold. Directing these home sales to income-eligible households helps ensure that more families can build wealth that, in some cases, enables them to purchase market-rate homes later if they choose to.
When a homeowner who had been living in a Habitat house on the Frederick County CLT recently sold his home at a price set by the CLT, he received a percentage of the equity earned during his ownership and invested it in a bigger home. His house was then sold below market price to another homeowner in need of affordable housing.
CLTs and other lasting affordability models are an important component of closing the housing gap, especially for households with lower incomes. Habitat remains committed to lasting affordability efforts to keep housing prices stable for current and future homeowners so that they may enjoy the stability and wealth-building that homeownership provides.
If you would like to know more about how West Tuality Habitat for Humanity leverages CLTs in Western Washington County, Oregon, you can call us at (503) 359-8459 or email us at development@westtualityhabitat.org and say you, or a group you represent, would like to know more, and we can set up a meeting or refer you to other resources.
