Perpetual affordability is achieved by removing the cost of the land and by limiting the resale price of a land trust home. The Land Stewardship Program requires that land trust homeowners share the benefit of the land subsidy with the next eligible buyer that wants to purchase the home.
Though homeownership a homeowner gains two types of equity: earned equity and unearned equity. Earned equity is what is gain by paying off the mortgage. Initially, mortgage payments are mostly allocated toward interest and very little of the principal, but over time, a greater proportion of the principal is paid. Any additional principal payments that are made over the course of being a homeowner are also earned equity, and the longer a home is owned the more earned equity is gained. Unearned equity is value that is added through appreciation as market values rise. A Land Stewardship Program home limits the amount of unearned equity that can be collected at sale. The resale formula is designed to be simple, fair and predictable to implement. The formula gives the owner a portion of the appreciation, or unearned equity, based on the original purchase price. It allows an owner to retain earned equity, and build limited unearned equity, while also ensuring affordability to low and moderate income household will be able to purchase a CLT home ten and twenty years from now. The formula encourages home improvement and long-term residency in the home and in the community.
The resale formula allocates a 1.5 percent increase in the value of your home per year of ownership.
Purchase price + 1.5 % (purchase price x years of ownership) = Resale Price
In addition, if substantial additions to the living space of a home are made, such as adding a bedroom or building a garage, the added value of the capital improvement will be added to the resale price.
The Resale Formula and Value Added Formula is contained in Article X of the Land Stewardship Program’s ground lease. Click here to see the Ground lease.
Prior to purchasing a home, potential buyers will be required to meet with an attorney, to ensure knowledge of the Ground Lease and that buyers are making an informed decision when purchasing a Land Stewardship Program home.
To apply for the Land Stewardship Program, please fill out the NMCDC Homebuyer Application and return it to the NMCDC office, located at 1500 Burns Street, Missoula, MT 59802. Please call 406.829.0873 with any questions!