The reason we created a housing land trust is to make sure that people of modest means can afford to live in our neighborhoods in the future. Perpetual affordability can be achieved by limiting the resale price of a land trust home: the land trust limits the price for which you can sell your land trust home, and thereby limits the price that the next homebuyer pays to become a homeowner. The Land Stewardship Program asks that land trust homeowners share the benefit of the land subsidy that you receive from the land trust with the next family that wants to buy your home.
Our resale formula is designed to be simple and fair to implement. The formula gives you a portion of the appreciation in value, based upon what you paid for the house, but does not permit you to sell the house for “full market value.” It allows you to build equity and to share in market appreciation, but also ensures affordability—low and moderate income families will be able to purchase your house ten and twenty years from now. The formula also encourages home improvements and encourages long-term residence in the home and in the community.
Our resale formula allocates to you 1.5 percent increase in the value of your home per year of ownership. That means you can sell your home for:
The purchase price of your home +
1.5 percent of the purchase price of your home multiplied by the number of years you owned your home.
In addition, if you make substantial additions to the living space of your home, such as adding a bedroom or building a garage, the Value Added by the capital improvement will be added to the resale price.
When you sell your home, you have also built equity by paying off your mortgage. Initially, your mortgage payments are mostly interest and very little of the principal, but over time, you will pay off the principal of your bank loan. The following example will show both the monthly mortgage you will enjoy as a land trust home owner and the equity you will get when you decide to sell your home.
If you have any questions please don’t hesitate to call 829-0873.