What Is a Community Land Trust?

July 01, 2003
By  Linda D Fischer

For more than 30 years, the Institute for Community Economics has touted community land trusts as a way to stabilize neighborhoods and provide affordable homes to low- and moderate-income residents. The concept has taken hold in coastal states like Massachusetts and Washington, where real estate costs have been escalating for years, but it is not as well-known in the Middle West or the Mid South, where, until recently, prices have remained fairly reasonable.

The institute describes a community land trust as a private, nonprofit organization that buys land and holds it in trust for the benefit of a community. Typically, the community land trust sells the houses that are on the land or builds new residences on it. The organization retains ownership of the land while providing a 99-year renewable land lease for a nominal fee to the homeowner. By subtracting the cost of the land from a home purchase, the community land trust makes homeownership a possi-bility for low-income buyers.

The homeowner can make improvements to the land, such as fences and gardens, and pass on the house to heirs. The one thing the homeowner cannot do is realize a windfall profit if he decides to sell the house.

To ensure that the housing remains affordable for future generations, there is a cap on the profit a homeowner can make. Resale formulas vary, but most trusts use appraisal-based formulas that set the maximum price as the total of what the house cost the homeowner plus a percentage of the increase in market value.

Community land trust developments come in a variety of shapes and sizes. They have been used in urban neighborhoods and in rural settings. Although most are established to create affordable housing, some support local businesses or parks or even community gardens.

In Bloomington, Ind., Housing Solutions Inc. has an ongoing mission to develop community land trust neighborhoods. It started its first project, a 29-lot subdivision called Autumnview, in 1993 in partnership with the city and county governments. The city used grant funds to construct roads, sidewalks, and water and sewer lines on undeveloped land that had been donated to the county. Housing Solutions, a local nonprofit organization, was selected to be the steward of the land. Energy-efficient, affordable, custom homes were built and sold. As each home was sold, the city deeded the lot to Housing Solutions. Today, Housing Solutions is working on two more subdivisions, which will feature 77 houses in mixed-income areas.

For a wealth of information on community land trusts, visit the Institute for Community Economics web site at www.nhtinc.org and the Housing Solutions web site at www.housingsolutionsinc.com.

Bridges is a regular review of regional community and economic development issues. Views expressed are not necessarily those of the St. Louis Fed or Federal Reserve System.

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