Community land trust

A community land trust is a system for owning a home that attempts to preserve some benefits of homeownership (such as wealth accumulation and control over one's structure) without some of the problems (such as the need to have a lot of wealth for a down payment and the fact that homeowners face major financial risk if land values fluctuate).

Characteristics

Though community land trusts can be structured differently, one way to set up the arrangement is for the land beneath one or more homes to be owned by a nonprofit; for the structure or structures to be owned by residents; and for the residents to agree, upon purchase of their structure, not to sell the building for more than a particular price, for example not more than a 5 percent price increase per year of ownership.

As part of the deal, the homeowner might lease the land from the nonprofit for a 99-year term, which is renewed for subsequent 99-year terms each time the property is resold.

Advantages and disadvantages

This structure of ownership potentially reduces the size of the homeowner's down payment, because they only need to buy a share of the structure, not the land. The nonprofit that owns the land takes on the largest risk of long-term ownership: the future value of land. The resident, meanwhile, has the financial right and responsibility to modify and maintain their structure. Assuming the structure continues to hold value, the homeowner is typically able to gradually accumulate wealth through loan payments, as with any mortgage.

Related homeownership models

This setup has similarities to a condominium, but also includes the restriction on resale price (which tends to further hold down purchase prices, because of the reduced chance of a big future payout).

stub: please add!