A community land trust (CLT) is an independent nonprofit organization created to oversee affordable housing and preserve it for future generations.

Under the CLT Homeownership model, the CLT owns the underlying land and sells the houses to individual homeowners at affordable prices. A CLT also leases land to affordable rental housing developers and restricts the rents they charge through a ground lease. Currently the ICLT is leasing many units for affordable rental housing and is working with its current partners to develop many rental units.

For ownership housing, the CLT enters into a 99-year, renewable ground lease with each homeowner which gives the homeowner exclusive use of the land and nearly all of the benefits of traditional homeownership. On a daily basis, CLT homeownership is no different than traditional homeownership, except that that the monthly housing costs will be significantly lower than if a market-rate home had been purchased. In exchange for the benefit of a below-market rate purchase price, CLT homeowners acknowledge that their housing investment will appreciate at a different rate than their market rate neighbors. The future sales price of the home is restricted by the resale formula that is described in the ground lease. This system allows future households of modest means to be able to achieve the dream of homeownership without the need for ongoing investment of new public funding.

The CLT model of homeownership is growing rapidly. Today in the United States there are over 5,000 CLT homes under stewardship by nearly 200 different land trusts. More and more communities are attracted to CLTs, as a means of providing permanently affordable homeownership. The CLT model balances the interests of individual homeowners in housing stability and equity generation with the public interest in preserving public resources. Similarly, CLT’s addresses the needs of renters by ensuring permanent affordability of rental housing units.

History of the CLT Movement

Community land trusts have grown in popularity over the last few decades as communities embrace this effective model for creating permanently affordable housing. The first CLT in the United States, New Communities, Inc., was started in rural Georgia in 1968, and today there are nearly 200 active land trust organizations throughout the country. In California alone there are over ten active community land trusts which provide a range of housing types at affordable prices. In addition, the University of California uses the land lease model to provide affordable housing opportunities to faculty and staff at multiple campus locations; this practice was first started on the Irvine campus in the mid-1980’s.

For more information on Land Trusts seeNational Community Land Trust Network http://www.cltnetwork.org

Ground Lease (Homeownership Only)

A CLT Ground Lease is a legally binding agreement that gives an individual homeowner the right to exclusive use of the land beneath their home for at least 99 years. The Ground Lease has been carefully crafted to balance the interests of the homeowner with the interests of the land trust. The Ground Lease describes a homeowner’s rights and responsibilities and what restrictions s/he has agreed to in exchange for those rights. Some of the basic responsibilities of an ICLT homeowner include:

  • Paying the monthly ground lease fee to the ICLT (projected at $50 initially).
  • Occupying the home as a permanent residence.
  • Maintaining the home appropriately.
  • Providing Notice of Intent to Sell to the ICLT
  • Selling home only to the ICLT or another income qualified homebuyer
  • Selling the home for no more than the resale formula price.

Similarly, the ICLT agrees to certain responsibilities as the landowner. The ICLT is responsible both to the local government and to individual homeowners. The basic responsibilities with respect to ICLT homeowners include:

  • Granting the homeowner exclusive use and peaceful enjoyment of the land.
  • Providing at least 48 hours notice if a representative intends to inspect the property.
  • Responding to homeowner notices and concerns including notice of intent to sell or requests for assistance.
  • Supporting the homeowner through the process of resale.

Resale Formula (Homeownership Only)

The homeownership resale formula sets a maximum price for which land trust homes can be sold in the future which ensures that ICLT homes remain affordable to future buyers. Rather than rising (and falling) with the market, ICLT home prices only increase as fast as people’s incomes. In many cases this may mean that ICLT homeowners will earn less appreciation than traditional homeowners, but the formula has been designed to offer ICLT homeowners the opportunity to build very significant equity.

The ICLT resale formula allows the value of the homes to appreciate at the same rate as local incomes. The price of each home is increased each year based on the percentage change in the Area Median Income (AMI) for Orange County. Homeowners who make certain approved capital improvements to their homes can also receive a credit for these improvements which would increase the sale price of their homes even further. The resale formula is described in detail in the ground lease, and should be carefully read and clearly understood before deciding to purchase an ICLT home.

ICLT Resale Formula:

Initial Purchase Price
+ Increase in price based on change in AMI
+ Value of approved capital improvements
= Maximum Resale Price

The Area Median Income for Orange County is published annually by the California Department of Housing and Community Development. Over the period of 1995-2010, the average annual increase in the Orange County Median income has been 2.6%. In the future the average increase, could, of course, be higher or lower than this.