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Permanently Affordable Homeownership & Community Land Trusts

Permanently Affordable Homeownership & Community Land Trusts. August 12, 2019 AMIHAC. Community Land Trust Model. Best practice for maintaining permanent affordability Preserves affordability for the long-term

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Permanently Affordable Homeownership & Community Land Trusts

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  1. Permanently Affordable Homeownership & Community Land Trusts August 12, 2019 AMIHAC

  2. Community Land Trust Model • Best practice for maintaining permanent affordability • Preserves affordability for the long-term • Uses one-time subsidy to help successive generations of low and middle-income homebuyers purchase a home • Creates wealth for families 1

  3. Community Land Trusts – Dual Ownership • Homeowner owns the house & CLT owns the land • Ground lease ties house and land together (99 years, inheritable) • Dual ownership does not automatically = affordable price. • Subsidy needed to offset difference between what a low or middle-income household can afford and the cost of the home 2

  4. Community Land Trusts – Resale Restriction • Initial sales price is affordable (subsidy needed) • Resale price is restricted by formula • Resale formula balances opportunity for seller to build wealth with ongoing affordability for future homebuyers • In CLT projects in Seattle, resale price formula generally allows annual increase of between 1-3% per year 3

  5. Community Land Trusts- Program Types Buyer-Driven: A buyer can purchase a home of their choice on the open market. The buyer qualifies for a certain amount of subsidy to fill the gap between what they can afford (maximum mortgage amount) and the home they want to purchase. New construction: New homes are developed and sold to income-qualified households. Subsidy is provided to the developer to fill the gap between what the household can afford (maximum mortgage amount) and what it costs to build.

  6. Community Land Trust – Example • A family of 3 at 100% AMI wants to participate in a buyer-driven program. • They find a 2-bedroom home that costs $523,000. The maximum mortgage they can obtain is $423,000.* • They qualify for subsidy of $100,000 to fill the gap. Their purchase price is $423,000. • Ten years later the family wants to sell. The resale price is $423,000 x 1.5% per year, compounded annually. Resale price = $483,654. • Because Area Median Income is generally going up each year, at resale home should be affordable to a household around 100% AMI, possibly even lower. * 35% DTI, 6% Interest and 20% down no PMI 4

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