Why CLTs Matter: Permanent Affordability
The CLT Cycle
Community Land Trusts (CLTs) modify the process of homebuying to make it affordable for households today and for generations to come.
CLTs create a permanently affordable home by retaining ownership of the land and selling the building only to an income qualified buyer. This lowers the cost of the home to the buyer, resulting in a smaller down payment and lower monthly mortgage expenses.
The CLT model allows households to build wealth through their monthly mortgage payments. In exchange for buying the house at a lower price, a CLT homeowner agrees to pass on the gift by selling the home at a resale price affordable to someone in a similar financial situation.
The resale formula, included in the Ground Lease, sets the resale price of the home, and ensures the home remains affordable in perpetuity for all subsequent buyers. At resale, the homeowner walks away with cash equity from their down payment, earned equity from their monthly mortgage payments, and the home’s increase in value as defined by the resale formula.
Why Buy
Purchasing a home with VSCLT allows a homebuyer to access the generational wealth-building opportunity of homeownership. Every time a homeowner makes a monthly mortgage payment, they build wealth by buying a little more of their home from the lender.
Renting doesn’t have the same effect; you don’t own more of your apartment every month, you just pay to stay there. This chart shows how much rent payments can add up over time.
Now, imagine if all the money you paid in rent went into your mortgage instead. The more you pay, the more you own, the more you walk away with when you sell your home.
Though it is important to note that a CLT home can certainly be your forever home if you would like it to be. That is the beauty of a 99-year renewable Ground Lease!
You can also view a CLT home through the lens of the housing ladder. The ability for CLT homeowners to build equity gives them more flexibility in their housing choices going forward. No homeowner needs to move along the ladder towards market-rate homeownership, but purchasing a CLT home puts you in a much better spot to do so if you choose that step than if you were renting.
Additional Resources
To learn more about Community Land Trusts and other Shared Equity housing models, visit the Grounded Solutions Network.