Frequently Asked Questions
We realize you may have many questions regarding HWR programs and the Community Land Trust model.
Below are brief answers to the most common questions, and feel free to contact our office for additional information. Our staff will guide you through every step of the process.
Are we a business or non-profit organization?
West Hennepin Affordable Housing Land Trust (WHAHLT) dba Homes Within Reach (HWR) is a non-profit, community-based organization that uses the Community Land Trust (CLT) model to create and preserve affordable homeownership for a families that otherwise would be unable to purchase a home in Hennepin County.
How does the Community Land Trust (CLT) Homeownership work?
A CLT establishes initial affordability by removing the market value of the land from the mortgage equation.
A CLT typically purchases an existing owner-occupied home currently for sale and then sells just the home, and not the land, to a low-to-moderate-income household. The CLT retains ownership of the land and enters into a 99-year Ground Lease with the leaseholder-homeowner at a nominal fee.
Removing the land value from the mortgage equation reduces the mortgage, down payment and closing costs. A CLT also ensures permanent affordability of the home through two provisions found in the Ground Lease.
- A pricing formula that provides the owner with a fair amount of equity while also ensuring that the sale price for subsequent low-to moderate-income households remains affordable.
- A provision that requires the homeowner to sell either to another low-to-moderate-income household or to the CLT. In addition, the provisions ensure the home continues to be affordable with each sale.
A CLT leaseholder-homeowner receives benefits similar to non-CLT homeowners such as the ability to build equity, utilize federal mortgage interest and property tax deductions, and the ability to transfer the lease interest and home to their heirs.
What Is the Ground Lease?
CLT homes cost less than market rate homes because the CLT homebuyer purchases only the house and enters into an agreement with the CLT for the use of the land — this agreement is called a Ground Lease.
The Ground Lease allows the homeowner to secure long-term rights to the land, and also protects the assets of the land by providing the CLT certain rights to safeguard the condition and affordability of the home. Therefore, CLT homeowners have exclusive use of the land, and they have full responsibility for the property. There is a nominal lease fee that gives the homeowner full use of the land from the CLT.
The Ground Lease is renewable, transferable to the family’s heirs, and ensures full rights of privacy. It also provides a resale formula that is used to determine the sales price based on current market conditions should the family decide to sell their CLT home.
How Does CLT Homeownership Compare to Conventional Homeownership?
CLT homeownership is essentially the same as other homeownership except that land on which the home resides is owned by the CLT.
- The homeowner has a mortgage with a bank.
- The homeowner accumulates equity.
- The homeowner pays property taxes.
- The homeowner can make alterations and improvements.
- The homeowner receives federal tax deductions for mortgage interest and property taxes.
- The purchase price is lower, because the land is not purchased by the homeowner.
- The CLT owns the land, the homeowner leases the land, securing the rights to use the land from the CLT for a nominal fee.
- If a family chooses to sell their home, the homeowner may sell his/her home only to a qualified buyer.
- The resale price is limited by a formula which (based on market conditions) more than likely allows the seller to recover the original cost of the house plus a modest profit.
- Therefore, assuming the house has retained or increased in value, the homeowner who sells his or her home will receive all of their equity (the amount of money that they used as a down payment as well as all principal that has been paid).
What Are The Benefits of CLT Homeownership?
There are a number of benefits to purchasing a house through a CLT.
- Affordability – CLT homes are more affordable than those purchased on the open real estate market, yet provide the same sense of stability and community.
- Mortgage – Consistent housing payments allowing the homeowner to build equity, receive federal tax interest and property tax deductions, and offer an inheritance to heirs.
- Community – The 99-year Ground Lease ensures that CLT homeowners will have the support of CLT organization and their community through voting, volunteering and becoming an HWR committee or board member.
- Support – CLT homebuyers have the support of CLT staff and other homeowners, including resources for financial problems and foreclosure prevention.
- Stability – Homeownership is central to family life, strong communities and overall economic growth.
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