How Does a CLT Work?
By keeping housing permanently affordable, a community land trust helps reduce the displacement that can accompany gentrification when property values are climbing, and provides a community framework that supports residents and limits their overall exposure to debt that has been proven to sharply reduce the incidence of foreclosure when the economy takes a turn for the worse.
- The trust acquires the land and maintains ownership of it permanently, with prospective homeowners entering into long-term renewable leases of the land.
- The organization supports the residents to attain and sustain homeownership. In return, the homeowner agrees to sell the home at resale-restricted and affordable pricing to another lower income homebuyer in the future. Consequently, the homeowner is able to successfully own a home and build wealth from the investment, while the organization is able to preserve the public’s investment in the affordable home permanently to help family after family.
- When the homeowner decides to sell the resale formula is used to determine the resale value. ALT uses two different resale formulas. One permits homeowners to realize 25% of the appreciated value of the home and the other uses average income growth to determine how much equity a homeowner can realize.
A Foundation for Lasting Opportunities
Community land trusts are a key strategy for helping low-income communities build assets through home ownership while mitigating the destructive consequences of irrational, speculation-fueled housing markets.
Community Land Trusts Can:
- Provide long-term affordable home ownership opportunities
- Offer an equity stake for homeowner to realize a portion of gains from appreciation
- Ensure affordability for future low- to moderate-income families
- Allow long-term residents to remain in their communities despite cost increases
- Create a productive use of properties that might otherwise contribute to neighborhood decline
- Establish well-maintained properties around which additional development can succeed
By locking in permanent access to affordable housing, CLTs can play an important role in countering the market-driven displacement associated with gentrification. And by stewarding neighborhood land for the public good, not speculative profit, CLTs have played an equally important role in stabilizing communities by preventing unnecessary foreclosures.Democracy Collaborative