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.

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.

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.

SUBSIDY WITH RECAPTURE COMPARED WITH CLT	Subsidy with recapture: Homeowner buys house & land.		CLT: Homeowner buys house only, with gain limited.
SUBSIDY WITH RECAPTURE COMPARED WITH CLT	Now	In 24 years*	Now	In 24 years*
Total market value of house & land	$500,000	$1,000,000	$500,000	$1,000,000
House market value	---	---	250,000	500,000
House selling/resale price	---	---	250,000	350,000
Amount house price reduced by formula	---	---	0	150,000
Land market value (held by CLT)	---	---	250,000	500,000
Total subsidy or buyer price reduction	250,000	250,000	250,000	650,000
Amount home buyer pays	250,000	750,000	250,000	350,000
Gain to original owner, in dollars	---	500,000	---	100,000
Gain to original owner, percent	---	200%	---	40%
Gain in subsidy or community equity, in dollars	---	0	---	400,000
Gain in subsidy or community equity, percent	---	0%	---	160%
Down payment 10%	25,000	75,000	25,000	35,000
Mortgage amount	225,000	675,000	225,000	315,000
Monthy mortgage payment	1,350	4,050	1,350	1,890
Monthly tax & insurance	600	1,200	600	1,200
Monthly total payament**	1,950	5,250	1,950	3,090
Required monthly income (about 3 x pmt.)	5,909	15,909	5,909	9,364
Required annual income	70,908	190,908	70,908	112,368
* At 3% a year, the price doubles in 24 years. ** Plus private mortgage insurance (PMI). In the CLT, also add ground lease fee.