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• How does a CLT keep homes affordable for the next buyer?
• Ground leases or deed restrictions: which is better?
• What is shared equity homeownership?
• Can community land trusts slow gentrification or prevent displacement?

How does a CLT keep homes affordable for the next buyer?

Through the resale formula in the ground lease. When a CLT home is first sold, public or private money usually brings its price down to what a lower-income household can pay. The resale formula keeps that subsidy in the home. When the owner sells, the price is set by the formula, not the market, so the next buyer gets the same affordable price without new subsidy.

That is the main difference from most homebuyer assistance programs, where the subsidy goes to the first buyer and the home becomes unaffordable when it is sold. In a CLT, one investment serves family after family. Formulas differ. A fixed annual increase is simple to calculate and easy for owners to understand, while others track area incomes or market values. Each balances fair returns for today’s owner with affordability for tomorrow’s.

Resale formulas fall into three main types. Appraisal-based formulas give the seller a set share of any increase in the home’s appraised value; the Champlain Housing Trust gave sellers 25 percent. Indexed formulas raise the original price by a single measure, such as area median income or a fixed percentage a year. Itemized formulas add and subtract specific factors, such as improvements and depreciation. Each balances a fair return for today’s owner against affordability for the next one, and owners are usually credited for major improvements.

The model ground lease used by most U.S. CLTs builds the resale formula into its transfer article, which comes in four versions depending on the type of formula and whether the owner may choose the next buyer. The CLT Technical Manual devotes a chapter to designing a resale formula, including how to weigh a fair return to sellers against affordability for buyers.

Sources

• John Emmeus Davis and Alice Stokes, Lands in Trust, Homes That Last: A Performance Evaluation of the Champlain Housing Trust (Champlain Housing Trust, 2009).
• John Emmeus Davis and Kristin King-Ries, Preserving Affordable Homeownership: Municipal Partnerships with Community Land Trusts (Lincoln Institute of Land Policy, 2024). See Joint Publications.
• Kirby White, ed., The CLT Technical Manual (National Community Land Trust Network, 2011). See Manuals and Guides.
• Kirby White, ed., The CLT Technical Manual (2011), chapter 11-A (Article 10) and chapter 12, “Resale Formula Design.” See Manuals and Guides.
• Grounded Solutions Network, Model Ground Leases: the 2011 CLT Network Model Ground Lease and Commentary.

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Ground leases or deed restrictions: which is better?

Both can keep a home affordable when it is resold. A deed restriction (or covenant) is recorded with the property and limits who can buy it and at what price. A ground lease does the same through a contract between the CLT, which keeps the land, and the homeowner. Many housing programs treat the two as equal, and deed restrictions are often called simpler.

The CLT Center’s view is that ground leases are better wherever they can be used. In many places they are easier to defend and enforce in court than a permanent restriction on a privately owned home. A steward that owns the land is more likely to know when an owner is in trouble and to act in time. Land ownership gives a CLT revenue, assets and a lasting stake in the neighborhood. And ground leasing ties the CLT more closely to the people it serves. Deed restrictions make sense where a lease is impractical, such as for individual condominium units in a mixed-income building. John Emmeus Davis sets out the case in Ground Leasing Without Tears.

In “Ground Leasing Without Tears,” John Emmeus Davis grants that the two can be written with the same terms and overseen the same way, and that deed covenants are far better than the old practice of letting subsidized homes lose their affordability at first resale. But he argues that ground leases are better on five counts: durable enforcement, because leases with an end date and a landowner with a direct interest stand up better in court than perpetual covenants in most states; effective stewardship, because a steward that owns the land is more likely to know about and act on an owner’s problems; equitable development, because homes on leased land cost less and land gives the steward revenue, assets and influence across a neighborhood; community empowerment, because ground leasing pulls the steward toward involving its residents and neighbors; and ethical ownership, a long tradition of treating land as held in common. “Of course ground leasing is hard,” he writes. “If it wasn’t hard, everyone would do it.”

Sources

• John Emmeus Davis, “Ground Leasing Without Tears,” Shelterforce, January 29, 2014; republished on cltweb.org.
• Greg Rosenberg, CLT Center (practice position: ground leases preferred; deed covenants where a lease is impractical, such as individual condominium units in a mixed-income building).
• David Abromowitz and Kirby White, “Deed Restrictions and Community Land Trust Ground Leases,” in John Emmeus Davis, ed., The Community Land Trust Reader (Lincoln Institute of Land Policy, 2010).

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What is shared equity homeownership?

Shared equity homeownership is a family of programs that make homes affordable to buy and keep them affordable on resale. The homeowner and the program “share” the equity: the owner gets back what they put in plus a fair share of any increase in value, and the rest stays with the home to keep it affordable for the next buyer.

Community land trusts are the best-known form, along with limited-equity cooperatives and homes with resale restrictions recorded in the deed. What makes a CLT different is that it owns the land, is governed with the community and holds its land permanently. The Lincoln Institute’s 2022 census of CLTs and shared equity programs counted them together, which is one reason its numbers are not a count of CLTs.

A 2022 census of U.S. shared equity programs found that 98 percent keep their homes affordable for 30 years or longer. It counted CLTs together with other shared equity programs, such as Habitat for Humanity affiliates with resale restrictions, so its totals are not a count of CLTs; the CLT Center’s CLT Map is the better guide to how many CLTs there are.

Sources

• Ruoniu (Vince) Wang and others, “The 2022 Census of Community Land Trusts and Shared Equity Entities in the United States,” Lincoln Institute of Land Policy working paper (2023). Covers shared equity programs generally, not only CLTs.
• John Emmeus Davis, Shared Equity Homeownership: The Changing Landscape of Resale-Restricted, Owner-Occupied Housing (National Housing Institute, 2006).
• John Emmeus Davis and Alice Stokes, Lands in Trust, Homes That Last: A Performance Evaluation of the Champlain Housing Trust (Champlain Housing Trust, 2009).

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Can community land trusts slow gentrification or prevent displacement?

They can, where they hold enough land early enough. Because CLT land is permanently off the speculative market, the homes, shops and community spaces on it stay affordable however much the neighborhood around them changes. Long-time residents can stay, and new residents of modest means can move in.

A CLT cannot stop gentrification alone. It controls only the land it holds, so the earlier it acquires land in a neighborhood, the more it can do. Boston’s Dudley Neighbors Inc. holds land across a whole neighborhood, and the Caño Martín Peña CLT was created specifically to prevent displacement when a canal clean-up would raise land values. Many cities now use CLTs as part of a wider anti-displacement strategy.

Research on U.S. neighborhoods has found evidence that CLTs can slow gentrification. Boston’s Dudley Neighbors Inc. was able to hold land across its neighborhood because the city gave it the power of eminent domain over vacant land in the late 1980s and later transferred tax-foreclosed parcels to it; it now holds about 30 acres in Roxbury.

Sources

• Myungshik Choi, Shannon Van Zandt and David Matarrita-Cascante, “Can Community Land Trusts Slow Gentrification?” Journal of Urban Affairs 40, no. 3 (2018).
• John Emmeus Davis and Kristin King-Ries, Preserving Affordable Homeownership: Municipal Partnerships with Community Land Trusts (Lincoln Institute of Land Policy, 2024). See Joint Publications.
• CLT Center, Community land trusts in Puerto Rico.

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