CLTs make expensive homes affordable |
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"Most of them would qualify for a mortgage; they just wouldn't qualify for an amount that would buy them anything in Seattle," he says. "Someone who can buy a home on their own in the marketplace is not going to be a big fan of limiting their equity, but for someone who is priced out, this is very attractive. It gives them stability, a stake in their community, equity building and the ability to pass it along to their heirs."
CLTs share a fundamental belief that stable, connected
communities tend to fend off a whole range of ills, from crime to
crabgrass. When part of any community is displaced by rising prices
and rampant housing speculation, it creates a modern version of
urban blight. Who wants to raise a family in a community of "flippers?"
"When you have areas where the average work force can't afford to live in their communities, there are so many ripple effects: traffic, commuting time eating into family time and civic engagement. The fabric of community really gets weakened," says Cooper.
Solution to subprimes?
CLTs also offer a sustainable alternative to subprime lending.
"The key distinction is, when that (subprime) property goes to sell five or 10 years later, it is going to be just as expensive -- in other words, unaffordable -- to most middle-income folks," says Gilbert. "The great thing about the CLT is that that house is going to remain permanently affordable."
Wondering about the default rate on CLT homes? Gilbert says the NCLT Network recently studied 3,115 CLT mortgages and found only 19 foreclosures, roughly equal to the national prime foreclosure rate of .6 percent.
"That was a really good thing to know because, while we might be selling homes to people who would normally be in the subprime market, it was behaving like the prime market," he says. "That's because CLTs are there for people; they don't sell that note. They're there to help their owners."
Gilbert says CLTs could even provide a socially and fiscally responsible solution to the subprime debacle.
"The best solution would be for government entities to subsidize CLTs to help cure the defaults," he says. "The person stays in their house but the land becomes part of the CLT. It certainly would be a better solution than the temporary fixes that they're looking at now."
CLTs show another encouraging sign -- a tendency
to serve as grassroots wealth incubators. According to a 2003 study
of 97 resales by the Burlington
(Vt.) Community Land Trust, the nation's largest CLT, three
out of four (74 percent) of CLT homeowners who sold had accumulated
sufficient wealth to purchase their next home on the retail market,
despite their limited equity share.
Owning within a CLT helped improve their financial status. When they sold, it made room for nearly 100 more first-time CLT homebuyers to do the same thing.
Gilbert says the sustainability of the community land trust model should have across-the-aisle appeal at all levels of government.
"If you're a fiscal conservative, the worst thing
you can hear is that someone who got a housing subsidy turned around
and flipped that house in a couple of years, pocketed the profit
and drove off to Vegas. With CLTs, knowing that that subsidy fulfills
its purpose for at least 200 years and probably beyond, that's about
the best government spending you can imagine."
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