ph: 619-495-8393
info
Frequently Asked Questions
Community land trusts at first glance seem very complicated, and though the details are many, the premise is simple: we give first time homebuyers an opportunity at successful homeownership while protecting future affordability through a shared appreciation model. Click below for more answers:
- What is a Community Land Trust?
- A community land trust (CLT) is an independent, non-profit organization that acquires and holds title to land for the purpose of providing affordable housing opportunities. A CLT uses a 99-year, renewable ground lease to give owners of the homes exclusive use of the land. The ground lease is the mechanism for preserving affordability of the housing. The ground lease contains certain restrictions on the use of the home and specifically a limit on the future resale price of the home. The future sales price is determined by the resale formula, which is designed to provide a fair return on the homeowner’s investment, but keep the price sufficiently below market rate prices so that the home will be affordable to the next income-eligible buyer.
- Why does the SDCLT sell the house but never the land?
- Owning the land underneath each home is the way that the SDCLT permanently maintains the affordability of the home. Because the land trust owns the land, each homeowner must enter into a ground lease contract with the land trust. The ground lease is an enforceable legal mechanism to ensure that homeowners abide by the restrictions in the ground lease, particularly the restrictions on occupancy and resale of homes.
- What is the resale formula?
- A resale formula limits the rate at which CLT home prices rise over time. The SDCLT resale formula is a shared-appreciation formula that allocates 25 percent of the appreciation (based on appraisals) to the homeowner and the other 75 percent remains with the SDCLT.
- What is a ground lease?
- The ground lease is an agreement between the SDCLT and individual homeowners, which grants the homeowners exclusive use of the land for a period of 99 years. The ground lease assigns other rights and responsibilities to both the individual owners and the SDCLT.
- What is the homeowner’s cost the land from the SDCLT?
The monthly ground lease fee is initially projected to be $50/month. This fee will increase over time along with the cost of living.
- Who is eligible to buy a home from SDCLT?
- All applicants must meet the following criteria:
• The head of the household must be at least 18 years of age
• Earn 80% or below Area Median Income
• Pre-qualify for prime mortgage financing
• Understand and agree to the restrictions of CLT ownership, particularly the limited equity resale formula.
- What are the advantages of owning a land trust house versus renting?
- SDCLT homeownership provides the majority of the benefits of traditional homeownership: long-term security of homeownership, fixed housing expense, tax deductions, and equity. While CLT ownership limits the appreciation a homeowner may realize, this investment is still likely to provide a significant return relative to renting. In addition to this limited appreciation, Land Trust homeowners will also earn equity by paying down their mortgages over time.
- Can a SDCLT home be passed on to one’s heirs?
- Yes, a SDCLT homeowner may leave his or her home to any heir. Heirs who choose to remain in the unit must sign a letter of acknowledgement accepting the resale and other restrictions of the unit. Heirs who sell the unit will be able to keep the homeowners equity according to the resale formula.
- Should a household still consider conventional homeownership?
- Yes, if a household has the means to purchase a market rate home in the area, then homeownership with no restrictions may be a better financial decision. Potential homeowners should make sure that they can actually afford the home over time and be cautious of what types of mortgage products they accept. For more information on the responsibilities of owning a home, consider attending a general homebuyer education class. We consider CLT homeownership as an intermediary rung on the housing ladder between renting and conventional homeownership.
- Do CLT homeowners pay property taxes?
- Yes, CLT homeowners pay property taxes on both the homes and the underlying land to which they have permanent, exclusive use. The SDCLT is working with the local San Diego County assessor to ensure fair taxation of the properties with recognition of the limitations imposed by the resale price restrictions.
- Can a homeowner access mortgage financing for a CLT home?
- Yes, many lenders offer mortgage financing for the CLT homes. The SDCLT has worked to educate a number of local lenders about this model of homeownership and will provide referrals.
- May a CLT homeowner rent out the home?
- Under most circumstances, a CLT homeowner may not rent out their home. SDCLT homes are intended to provide stable housing opportunities for eligible buyers and these buyers commit to occupy the home as their permanent residence. Under extenuating circumstances, with written permission from the SDCLT, homeowners may be allowed to rent out the home for a limited period of time. During these rare occasions, the rent that a homeowner may charge may be limited.
- Why does San Diego County need a CLT?
- Because housing prices have been rising faster than incomes in recent decades, there is a growing need for both affordable rental and homeownership opportunities. Today households of moderate incomes often find it very difficult to secure decent, affordable housing close to their jobs and schools. While San Diego County needs to produce more affordable housing, it continues to face severe budget constraints. SDCLT’s resale formula ensures that the home remains affordable for 99 years to all subsequent purchasers. The initial subsidy is wholly “recaptured” at each resale, thereby preserving the public’s investment dollars. Given limited resources, SDCLT can create more (permanently) affordable units with same public funding. We can help more families than the current homeownership assistance programs available in San Diego.
- How is SDCLT different from other affordable housing groups?
- SDCLT believes each word in its name is critical. We’ve described the importance of the Land in preserving affordability. We’ve described the role of the Trust in the stewardship of the land and in enforcing the Ground Lease. But we also have committed to the ideal of Community. Community will be created and enhanced on several levels. 1.) SDCLT homeowners will be by default members of our CLT family with voting rights for Board seat elections, post-purchase support from the CLT staff and, or course, the many intangibles of neighborly associations. 2.) Some SDCLT Homeowners will choose to serve on our Governing Board where they will vote as representatives of the homeowners and develop their individual potential for community leadership. 3.) Ultimately, SDCLT homeowners will benefit from knowing that the SDCLT has their back when they face financial difficulties. National survey results show that only a fraction of homes on community land trust land have gone to foreclosure, and in dozens of cases the community land trust has intervened to head off default.
If your question remains unanswered contact us.
Copyright 2009 San Diego Community Land Trust. All rights reserved.
ph: 619-495-8393
info
