This essay, written by Graceful Solutions President Bill Wilson, first appeared in the Tallahassee Democrat on February 9, 2018.
Community Land Trusts have been around for a while but have not been used in Tallahassee or Leon County to support the development of affordable housing. Some years ago forward-thinking people included the concept in the local Comprehensive Plan so it is an available tool.
The Tallahassee/Leon County Affordable Housing Workgroup recommended to the Commissions that they move forward with the concept and it appears that both Commissions will have discussions about establishing a Community Land Trust in the near future.
So, what is a CLT and how does it work? A CLT home is a step between renting and buying a market rate home. It allows families to acquire a home and start building equity when they are not able to afford the size home they need.
In a CLT, housing is made affordable by separating the value of the house from the value of the land underneath it. A qualified low-income homebuyer can purchase the house, but the land is owned by a community‐based nonprofit corporation, which provides a 99‐year ground lease to the homeowner. Because the sales price of the home does not include the value of the land, the homebuyer has an affordable monthly mortgage payment and a nominal ground lease payment.
Let’s look at an example of how this works with a house that is selling for $185,000 and the land value is $50,000. Today you can get a mortgage for 97% of the purchase price, or in this case, $179,450. The monthly payment (30-year mortgage at 4%) would be $857 plus taxes and insurance.
In the case of the CLT house, you would only borrow $130,950 which would require a monthly payment of $625 a month plus taxes, insurance, and a ground lease payment of $30 – $50. That is around $200 a month less. That makes the $185,000 home more affordable for a much larger group of people.
According to the Florida Community Land Trust Institute, several local governments in Florida recognize that CLTs can play an important role as stewards of community resources for current and future residents. Local governments typically provide CLTs with essential resources for startup and sustained operation, including donating publicly owned land, providing construction financing, offering down payment assistance to CLT homebuyers, and providing ongoing administrative support to the CLT.
The terms of the 99‐year ground lease place limitations on the resale of the home, requiring that the home be sold to another family that is income‐qualified. This provides the investment that the local government makes is serving low-income families in perpetuity which is not the case with one-time subsidies.
There is always a discussion when a new CLT is formed around limiting a homeowner’s ability to realize the full appreciation of the value of the home when they sell it. The resale limits in the lease provide for sharing that increase in value with the homeowner and generally the percentage they receive is tied to how long they are in the home.
Clearly, there is a trade-off in terms of getting in at the lower price and the amount of appreciated value you receive at resale time.
Another feature of the CLT is the support that the trustee provides to the homeowners. The CLT typically has a stewardship program which provides ongoing education on home maintenance and support with budget and financial management education and counseling.
During the burst of the housing bubble in 2008 when foreclosure rates for market-rate homes hit 10%, the foreclosure rate for CLT homes was less than 1% because the trustees in the CLT were able to step in early and support the homeowners with various resources to help them keep their homes.
With the city and county both committed to increasing homeownership in our community, it may be time to use the CLT model as another tool to support housing affordability.