Shared Equity Housing

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" rowspan="2" width=200 BGCOLOR="#99CC99" TEXT="#080000" bgproperties="fixed" background="1278dfc3.jpg"> <bR> </td> <td valign="top" colspan=2 height=82 BGCOLOR="#CCCC99" TEXT="#080000" bgproperties="fixed" background="1288dfe1esnpes.jpg"> <div> <FONT SIZE="5" COLOR="#336666" FACE="Arial" ><B>New Directions CBRI</B></FONT><B>     </B><B>|</B><B>     </B><A HREF="index.htm" TARGET="_top" TITLE="New Directions CBRI"><U><B>home</B></U></A></div> <div> back to  <A HREF="id34_community_land_trusts___the_following.htm" TARGET="_top" TITLE="Tool Box"><U><B>Community land trusts</B></U></A></div> </td> </tr><tr> <td valign="top" height=398 colspan=2 BGCOLOR="#FFFFFF" TEXT="#080000"> <div> <B>COMMUNITY LAND TRUSTS:  THE POWER OF SHARED EQUITY</B></div> <bR> <div> Community land trusts (CLT) are democratically controlled nonprofit organizations that own real estate in order to provide benefits to local communities--in particular, to make land and housing available to residents who could not otherwise afford them.  CLT's provide permanent affordability by keeping community ownership and control of the land.  Subsidies stay with the land and can't be taken away upon resale.</div> <bR> <div> Subsidy with recapture is a way that is commonly used to protect the community's investment in housing.  The buyer who receives a subsidy to reduce the original purchase of a house is required to return the amount of the subsidy when the house is resold.  This is a step in the right direction, but over the years the dollar amount that was invested in the subsidy will buy less and less real estate as land and house prices rise.  Increasing at 3% a year, residential real estate prices will double in 24 years.  In the table below, subsidy recapture is compared with the CLT approach, in which the subsidy stays in the land and cannot be sold.  </div> <bR> <div> The yellow highlights in the table are to call attention to some of the more important contrasts between the two models.  In the example shown, the second buyer 24 years later, if fortunate enough to have the subsidy repeated on the same house, pays three times as much as the first buyer did.  But the second buyer of the CLT house pays only 40% more.  Meanwhile, the CLT's share in the property increases by 160% while the recaptured subsidy only comes back in the original dollar amount and with only half the buying power it started with.  Making a home affordable means reducing the income level that is required of a buyer.  The bottom line of the table shows the power of the CLT to increase affordability over time.  The CLT homebuyer can qualify with an annual income of $112,368, which is less than 60% of the $190,908 needed to buy the conventionally subsidized house.</div> <bR> <div> <TABLE BORDER="1" CELLPADDING="2" CELLSPACING="1" WIDTH="652" BORDERCOLORLIGHT="#000000" BORDERCOLORDARK="#FFFFFF" FRAME="BOX" RULES="ALL" ALIGN="BOTTOM" HSPACE="0" VSPACE="0" > <tR> <tD VALIGN=TOP ROWSPAN=2 HEIGHT= 57 ><NOBR><div>  </div> <div> <B>SUBSIDY WITH RECAPTURE</B></div> <div> <B>COMPARED WITH CLT</B></div> </NOBR></tD> <tD VALIGN=TOP COLSPAN=2><NOBR><div> <B>Subsidy with recapture:</B></div> <div> <B>Homeowner buys</B></div> <div> <B>house & land.</B></div> </NOBR></tD> <tD VALIGN=TOP COLSPAN=2><NOBR><div> <B>CLT:  Homeowner buys</B></div> <div> <B>house only, with</B></div> <div> <B>gain limited.</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP WIDTH="77"><div> <B>Now</B></div> </tD> <tD VALIGN=TOP><NOBR><div> <B>In 24 years*</B></div> </NOBR></tD> <tD VALIGN=TOP WIDTH="81"><div> <B>Now</B></div> </tD> <tD VALIGN=TOP><NOBR><div> <B>In 24 years*</B></div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Total market value of house & land</div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> $500,000</div> </NOBR></tD> <tD VALIGN=TOP><NOBR><div> $1,000,000</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="81"><div> $500,000</div> </tD> <tD VALIGN=TOP><NOBR><div> $1,000,000</div> </NOBR></tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> House market value</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 500,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> House selling/resale price</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 350,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Amount house price reduced by formula</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 0</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 150,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Land market value (held by CLT)</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 500,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Total subsidy or buyer price reduction</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 250,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 650,000</div> </tD> </tR> <tR> <tD VALIGN=TOP BGCOLOR=#FFFFCC HEIGHT= 20 WIDTH="278"><div> Amount home buyer pays</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="77"><div> 250,000</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="91"><div> 750,000</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="81"><div> 250,000</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="87"><div> 350,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Gain to original owner, in dollars</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 500,000</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 100,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Gain to original owner, percent</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 200%</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 40%</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Gain in subsidy or community equity, in dollars</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 0</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> ---</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 400,000</div> </tD> </tR> <tR> <tD VALIGN=TOP BGCOLOR=#FFFFCC HEIGHT= 20 ><NOBR><div> Gain in subsidy or community equity, percent</div> </NOBR></tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="77"><div> ---</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="91"><div> 0%</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="81"><div> ---</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="87"><div> 160%</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Down payment 10%</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> 25,000</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 75,000</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 25,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 35,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Mortgage amount</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> 225,000</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 675,000</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 225,000</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 315,000</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Monthy mortgage payment</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> 1,350</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 4,050</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 1,350</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 1,890</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Monthly tax & insurance</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> 600</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 1,200</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 600</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 1,200</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 WIDTH="278"><div> Monthly total payament**</div> </tD> <tD VALIGN=TOP WIDTH="77"><div> 1,950</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 5,250</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 1,950</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 3,090</div> </tD> </tR> <tR> <tD VALIGN=TOP HEIGHT= 20 ><NOBR><div> Required monthly income (about 3 x pmt.)</div> </NOBR></tD> <tD VALIGN=TOP WIDTH="77"><div> 5,909</div> </tD> <tD VALIGN=TOP WIDTH="91"><div> 15,909</div> </tD> <tD VALIGN=TOP WIDTH="81"><div> 5,909</div> </tD> <tD VALIGN=TOP WIDTH="87"><div> 9,364</div> </tD> </tR> <tR> <tD VALIGN=TOP BGCOLOR=#FFFFCC HEIGHT= 20 WIDTH="278"><div> Required annual income</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="77"><div> 70,908</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="91"><div> 190,908</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="81"><div> 70,908</div> </tD> <tD VALIGN=TOP BGCOLOR=#FFFFCC WIDTH="87"><div> 112,368</div> </tD> </tR> <tR> <tD VALIGN=TOP COLSPAN=5 HEIGHT= 39 ><NOBR><div> *   At 3% a year, the price doubles in 24 years.</div> <div> ** Plus private mortgage insurance (PMI).  In the CLT, also add ground lease fee.</div> </NOBR></tD> </tR> </TABLE></div> <bR> </td> </tr></table></body>