PHOTO courtesy of project:HOMES
Press release from the Maggie Walker Community Land Trust groundbreaking today at 1114 N. 26th Street:
Today, the Maggie Walker Community Land Trust (MWCLT) broke ground in Church Hill on the first home in Richmond designed to remain affordable in perpetuity. The 1600 square foot, 3 bedroom home is being built through a partnership with project:HOMES, and funded, in part, by Bon Secours Richmond Health System.
“We are focused on neighborhoods, like Church Hill, where real estate prices are rising rapidly,” explains Laura Lafayette, founding Chair of MWCLT. “We believe that preserving affordable housing in perpetuity is crucial for ensuring that neighborhoods stay diverse and vibrant for generations to come.”
By almost all accounts, Church Hill is a Richmond success story. The neighborhood boasts some of the city’s best restaurants, and young professionals are flocking to live in the historic neighborhood. New construction and thoughtful rehabs have made Church Hill one of the most desirable—and expensive—communities in Richmond.
In just a few short years, real estate prices have skyrocketed. What was once a working-class neighborhood is now priced beyond what most moderate income families can afford. Longtime community members, young families, teachers, police officers, fire fighters, and others working in the neighborhood may find it challenging to purchase a home in Church Hill.
Using the community land trust (CLT) model, MWCLT will retain ownership of the land beneath the house. This allows the home to be sold at a lower price to an income-qualified (50 – 115% of Area Median Income) buyer. For some families, a MWCLT home will provide an affordable alternative to renting, allowing them to benefit from the wealth-building opportunities that homeownership provides.
In exchange for buying the house at a lower price, a MWCLT homeowner agrees to “pay it forward” and receives half of the appreciation value (the difference between the market value at the time of purchase and at the time of sale).
 The remaining equity stays with the house and keeps the home affordable for the next buyer. MWCLT home buyers will be qualified by and take home ownership counseling classes through Housing Opportunities Made Equal.
“I am excited to have this opportunity in the Seventh District,” said Councilwoman Cynthia Newbille to over fifty East End community leaders gathered for the groundbreaking. “Much of the revival in Church Hill is due to the long-term work of housing non-profits such as the Better Housing Coalition, Project Homes, and Richmond Metropolitan Habitat for Humanity. It’s no coincidence that representatives from each of those organizations are serving on the MWCLT Board.”
Lee Householder, CEO of project:HOMES, also noted the exceptional collaboration of non-profits. “We have been working together in this community for years, and the time is ripe for a community land trust in Richmond.”
“This is an investment that will reap rewards for generations to come,” said John Stone, MWCLT board member and executive vice president of Financial Services at Virginia Credit Union. Virginia Credit Union has made a $100,000 multi-year contribution to the MWCLT and is providing a $1 million line of credit to rehabilitate selected properties and spur development.
Becky Clay Christensen, Director of Community Partnerships at Bon Secours and a MWCLT board member, agrees. “Bon Secours views the community land trust model as a long-term investment in the health of our community; we are delighted to be able to support its efforts.”
Freda Green-Bowling, who bought her home in Church Hill 11 years ago, emphasized the importance of homeownership in her own life, and others. “When a single person or family signs a deed to a house, it is more than just buying a house with a stable housing cost. It quite possibly changes the trajectory of their lives and the lives of their family members for generations to come. Know today, that because of the Maggie Walker Community Land Trust and its partnership with project:HOMES and other non-profits, that this is not just a groundbreaking for a new home, this is a game changer for home buyers now, and for many years to come.”
The Maggie Walker Community Land Trust is the second community land trust in Virginia, and the only CLT in Richmond. For more information visit www.maggiewalkerclt.org. To find out how to become a MWCLT homeowner, contact Nikki D’Adamo-Damery, Community Coordinator, at nikki@mwclt.org or 804-986-9213.
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I guess i remain confused about how this works exactly. Assuming this was established 2-3 years ago and the original owner was looking for a larger home in the neighborhood, it would seem the absence of that full appreciation would foreclose their ability to “upgrade.” It would also seem the artificially low price the homes are held to could distort comps in a section over time. I get the ambition, but it seems like their could be some consequences here.
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HW:
Those are two common concerns with the CLT model. Let me address each one to the best of my ability.
1. Your first question refers to the “equity share” component, where the increase in home value is split 50/50 between the owner and the land trust at the time of resale. While it does place a cap on the equity provided to the homeowner, which could theoretically prevent them from “upgrading” to a more expensive house, the split exists to maintain affordability for the the next buyer and all future buyers. The initial subsidy provided by the CLT is preserved in the form of a perpetually below-market sales price, unlike most other mechanisms (e.g., downpayment assistance only benefits a single buyer one time). The original owner is made aware of this unique transaction before signing the contract so, ideally, there are no surprises.
2. Your second question has to do with the effect of CLT homes on neighboring property values. Local assessors generally do not consider CLT transactions to be traditional sales because of the inherent uniqueness of the model, just like non-market transfers (say, between relatives) aren’t used in comps. They are “non-arms length” and will therefore not be considered when nearby fee-simple homes are assessed.
Here is a good FAQ resource to learn more about CLTs for anyone that’s curious:
http://www.burlingtonassociates.com/files/4913/4461/2390/9-Frequently_Asked_Questions_About_CLTs.pdf
HW – it sounds like when the owner sells, they sell at market rate, but any appreciation over the original price is split between the owner and the trust. If the owner has built up equity in the home by paying down the mortgage, I don’t think they would have trouble affording a new home, though they might need to live in their first home longer than is typical before “trading up,” as you put it. My concern would be that income restriction on future sales would make it difficult for the owner to find a buyer if they wanted to move, but it isn’t clear that the same restrictions will apply, and 115% of AMI should still allow for a decent size pool of potential buyers, shouldn’t it?
Lee–
To clarify further, CLT homes are not resold at market rate. The appreciation is split between the owner and the trust, but the trust portion stays with the house, allowing the CLT to sell it at an affordable rate to another qualified owner.
In a basic example, if the property originally appraises at $185K, and the land accounts for $25K, we can sell the home for $160K. At the time of resale, if the property value has increased to $225K ($40,000 increase), the seller gets $20K, the other $20K “stays with the trust”, and the home can be sold to another income qualified buyer for about $180k…which is $45,000 below the market value of $225K.
(I hope there is a math teacher reading who can use this as a word problem…)
This example is easier to view here: https://www.facebook.com/MWCLT/photos/a.1294850683928041.1073741828.1231916526888124/1294850317261411/?type=3
And, yes, 115% of AMI is the cap, so there should be a decent pool of qualified buyers. (For example, 115% of AMI for a family of 3 is about $75,000. It varies by family size.)
Hope that helps.