Innovations in Housing: Land Trusts

How do Community Land Trusts Work?

Land Trust Model

The basic premise behind a community-based land trust is that the land trust retains ownership of the real estate (land) and sells only the improvements (house).  A 99-year land lease between the homebuyer and the land trust is then entered into.  A unique feature of the land lease is the mandatory inclusion of a “limited equity resale formula”.  In the case of Rondo Community Land Trust, this means that if the homeowner decides to sell, they can take their original investment plus 25% of the market appreciation.  The sales price to the next buyer remains affordable because it limited to the previous sale price plus only 25% of the appreciated value of the home. (In Minnesota, it ranges from 25% to 50%; each land trust sets its own formula). The need to continually re-subsidize or lose the property’s affordability due to real estate speculation is eliminated.  This affordable housing option also gives households the opportunity to earn equity that may not have had that if they continued to rent.

In the coming year, Rondo CLT plans to add 10 units, through the following housing programs and initiatives:

v      Homebuyer Initiated Program (HIP) & Homebuyer Initiated Program/Home Ownership Program (HIP/HOP) Through HIP, participating households receive two grants, each for u to $25,000, to help them purchase and rehab a home that is available on the open real estate market in Ramsey County.  The grants are used to reduce the amount a household needs to purchase a home, and to ensure that the home purchased is structurally and mechanically safe and sound. 

The Homebuyer Initiated Program/ Home Ownership Program (HIP/HOP),  HIP/HOP a partnership with Thompson Associates, assists families with children that are currently in St. Paul Public Housing, or that have a Section 8 Voucher issued by the St. Paul PHA or Met Council.  HIP/HOP participants receive up to $50,000 in grant money from Rondo CLT and an additional $20,000 from Thompson Associates (deferred, and deferred and forgiven loans).  HIP/HOP serves two families at a time; as a family moves into homeownership, it creates a vacancy in a public housing unit or allows for a Section 8 Voucher to be turned back in for another family to use.

In Both HIP and HIP/HOP participating households look for a home that is for sale in the open real estate market. After they have been approved to participate in the Program by the Rondo CLT Board of Directors, qualified buyers look for a home with the help of a Real Estate Agent. The Realtor is responsible for helping the buyer find a home within their price range that will be up to Rondo CLT standard of quality upon the rehab.  It is important for the Homebuyer, Realtor and Rondo CLT staff to work closely to achieve this goal.

v      Rondo CLT New Construction and Rehab-   Rondo CLT continues to promote the preservation of resources for future generations by incorporating sustainable construction, energy efficient technologies and the reuse of building materials into as many of its projects as possible.  In the last couple of years Rondo CLT brought permanent affordability to four new homes in the city of St. Paul. All new construction houses have incorporated sustainable construction features.  They are  Energy Star rated,  have reclaimed hardwood floors in the living rooms and dining rooms, and  Hardie Plank (cement fiber) exterior siding with a life of at least 50 years.  In the coming year Rondo, in partnership with NeDA, will build twin homes on the Westside of St. Paul that will be LEED certified.

To learn more about how land trusts work or about the Rondo Community Land Trust, contact the organization at (651)221-9884.

Also, keep your eyes open for the second part of this series, which will touch upon how REALTORS®can work with land trusts.

Article written by Greg Finzell, Director of the Rondo Community Land Trust in Saint Paul, MN.