CLTs make expensive homes affordable
By Jay MacDonald • Bankrate.com

After renting for 20 years in Seattle's funky Fremont district, artist Frank Video was finally ready to buy his first home last year.

Unfortunately, while Fremont's lovable hippie vibe remains intact, its home prices were out of sight -- and not in a good way.

"It was crazy. Nothing was in my price point," Video says. "There were a couple of studios but not a single one-bedroom for less than $350,000."

So Video turned to the Homestead Community Land Trust.

As the name suggests, Homestead is an example of a community land trust -- a nonprofit organization that seeks to make homes permanently affordable for creditworthy, moderate-income, first-time homebuyers who live in communities where housing prices have passed them by.

Video, a visual artist who works part time as a legislative assistant, qualified for Homestead's $100,000 homebuyer grant because he earns less than the trust's income cap of $41,700 -- roughly 80 percent of the median income in King County, where Fremont is located.

Even with the additional six figures of help, it still took Video four months to find a one-bedroom condo for $269,500 that wouldn't bust his budget.

Video's $10,000 down payment, along with Homestead's $100,000, bought him his own piece of Fremont with a 30-year fixed-rate mortgage of $162,500.

"Without the grant, that mortgage payment certainly would have been more than I could handle, and might have been more than I take home every month," he says.

How it works:

• First-time homebuyers apply to a CLT, or community land trusts, for grant money that allows them to "buy down" the price of a home. • Homeowners must live in the house as their primary residence. • The CLT may provide access to government-sponsored financing. • Buyers receive upfront education and ongoing support from the CLT. • When owners sell, they must do so at a price below market value to keep that unit permanently affordable. • Owners typically receive one-quarter to one-third of the home's appraised market appreciation, as well as reimbursement for most capital improvements.

The new old paradigm
CLTs began more than 30 years ago to preserve aging housing stock and revitalize blighted urban neighborhoods in the Rust Belt. Today, it's the high cost of housing that is driving renewed interest in these little-known tools for more affordable home ownership.

"It's one of those really well-kept secrets that shouldn't be," says Glen Gilbert, executive director of the National Community Land Trust Network, the 2-year-old CLT trade association.

Unlike traditional land trusts, which typically seek to preserve raw land, the goal of CLTs is to encourage owner occupancy and seed investment. CLTs are often promoted as a way to maintain sustainable, affordable neighborhoods for people like teachers, firefighters, policemen, public employees, service workers and other lesser-paid but vital members of the community.