How does CLT homeownership compare to renting?

CLT home ownership provides households stability and security. CLT homeowners have secure control of their homes, benefit from stable monthly housing payments, and the opportunity to accumulate equity.  CLT homeowners can also take advantage of income tax deductions for their property taxes and the interest paid on their mortgage.

How does CLT home ownership compare to non-CLT home ownership?

Land trust home ownership is like market-rate ownership except that CLT homeowners agree to pass the home’s original affordability on to the next homebuyer.

Similarities:

  • The homeowner has a mortgage with a bank;
  • The homeowner accumulates earned equity by paying down their mortgage;
  • The homeowner pays property taxes;
  • The homeowner can make alterations and improvements; and,
  • The homeowner may receive federal tax deductions for mortgage interest and property taxes.

Differences:

  • The purchase price is lower because the CLT brings subsidy to the property;
  • The CLT and homeowner enter into a long-term agreement (the Ground Lease) to preserve the home’s affordability; and,
  • If a CLT homeowner chooses to sell the home, the homeowner walks away with limited equity, with the amount of equity being based on the resale formula instead of market forces. NMCDC homeowners earn 1.5% simple interest per year of homeownership, which will keep the home affordable for the next buyer. The table on Page 8 outlines costs and benefits of CLT home ownership, non-CLT home ownership, and renting.

Who pays the property taxes?

The CLT homeowner pays all the taxes associated with the home. The CLT-owned land beneath is tax exempt in order to increase the affordability of the home.

What is the process for selling a CLT home?

When a CLT homeowner wants to move, they must notify NMCDC in order to determine the maximum allowable resale price. Then, they can either hire a realtor or sell the home on their own. The home can be sold to an income-qualified buyer (buyers must be income-qualified by NMCDC and follow all other required steps as listed in this packet before closing on the home).

Comparing CLT Ownership to Other Types of Housing

The chart below shows an estimate of how CLT homeownership compares to renting a home and purchasing a home through the regular market over a seven-year period:

Table showing relative financial gain/loss of CLT homeownership, non-CLT homeownership, and renting over a seven year period.

* CLT calculations assume a Montana Housing-guaranteed loan with 3.5% interest and no PMI

* Taxes and SID (Special Improvement District) fees are estimated

* Realtor fees calculated at 3% of sale price, not applicable for first buyer of CLT home