How does community land trust homeownership work?

Homebuyers with community land trust programs purchase only the house and enter into a long term agreement – a 99-year ground lease – with Dakota Land Trust to lease the land.  These homes cost less than market rate homes and are sold to families with limited incomes.  When a family decides to sell a DLT home, they sell only the house to another family with a limited income for the price that is determined by the resale formula (Refer to Page 5) in the ground lease.  By taking the cost of the land out of the real estate transaction, the home stays affordable for future generations.
What is the ground lease?

Dakota Land Trust and the homeowner sign a ground lease that defines the roles and responsibilities of both the community land trust and the homeowner. The ground lease allows the homeowner secure, long-term rights to use the land and full responsibility for the property. The lease fee gives the homeowner full use of the land and support services from the CLT.  The ground lease is renewable, can be transferred to the family’s heirs and ensures full rights of privacy. Community land trust homeowners and their descendents have a right to occupy and use the leased land for as long as they wish, provided that they abide by the terms of the land lease. These terms place some limitations – such as requiring that homes be owner-occupied and also limitations on the resale of the home— preventing resale to a household that does not qualify as low or moderate income, and limiting the sales price to keep it affordable. The lease lays out a "resale formula" that determines the maximum allowable price.

Who is our target market?

To meet the requirements of the 501c3, Dakota Land Trust (DLT) will primarily serve families of 80% or below the area median income (AMI.)  However, DLT will be flexible to meet needs and goals of each community.  It is not the intent of DLT to serve families above the 120% AMI.  Each homeowner’s circumstances will be reviewed by the board individually.  In the event of a waiting list, the lowest income will take priority.
Who pays the property taxes?

The homeowner pays all the taxes associated with the property. As with all homeowners, property taxes and mortgage interest are tax deductible.
Will banks and other financial institutions make loans for homes on leased land?

Yes. There are dozens of banks, housing finance agencies and other mortgage lenders who lend to community land trusts. When first approached, lenders may be concerned that DLT will inhibit their ability to foreclose in the event of a default and make it difficult to remarket the property in a timely manner. Community land trusts have been able to negotiate mortgage agreements that address the legitimate concerns of lenders and also protect DLT`s long-term interest in the property by allowing the community land trust to step in and cure a default, when necessary, to prevent the property from being sold on the open market.
What kind of support does a community land trust provide for its homeowners?

A community land trust makes a long-term commitment to its homeowners. Types of support offered by Dakota Land Trust to homeowners after they purchase their homes include education, resources and community events. Community land trusts have helped homeowners with foreclosure prevention and re-financing options. DLT will also offer ‘how-to’ home maintenance workshops for its homeowners.

Community land trusts can also provide a connection to the greater CLT community – DLT will provide Board positions to offer opportunities for homeowners to be involved in the decision-making process for the organization.

How does community land trust homeownership compare to conventional homeownership?

Community land trust homeownership is essentially the same as other homeownership except that the land which DLT homes are located on is owned by the community based organization.
Similarities:
•The homeowner has a mortgage with a bank
•The homeowner accumulates equity
•The homeowner pays property taxes
•The homeowner can make alterations and improvements
•The homeowner receives federal tax deductions for mortgage interest and property taxes
Differences:
•The purchase price is lower, because the land is not purchased by the homeowner
•The CLT owns the land, the homeowner leases the land from the CLT for a nominal fee
•If a family chooses to sell their home, the selling price will be lower – selling a CLT home helps limited income families
the same way as buying a CLT home


Benefits of a community land trust.

•Increases supply of permanently affordable housing
•Preserves land and various types of housing to fit the needs of those working and living in our communities
•Facilitates partnerships between residents, businesses, realtors, non-profit developers
•Keeps housing affordable for future residents
•Provides access, affordability, assistance and security to homeowners
•A win-win situation for all stakeholders

Resale Formula Example