Community Land Trust for Taos
I have been thinking about a Taos Land Trust for a while. The intention behind it is to preserve or protect the concept of “family land” in Taos. My definition of it is property that has been handed down. Many times this is agricultural land. And in many cases the land is left unused or undeveloped. The property taxes can get forgotten and the land is either auctioned off for a fraction if its value or sold to new residents or outside developers. Ultimately there is a loss of generational wealth in the existing community. Local families lose access to the land and a say in their own communities.
What is a Community Land Trust?
Community land trusts are a type of shared equity ownership where public and private investment funds are utilized to acquire land on behalf of a particular community. The land is then owned by the CLT permanently.
Individuals within the community can purchase their homes, but not the land upon which their houses sit. Instead, they engage in long-term property leases known as “ground leases” with the CLT, typically for 99 years. Monthly fees for these leases can be as low as $100.
While CLT residents are unable to sell the land their homes are located on, they enjoy the same rights as other homeowners. They have full and exclusive use of the property during the lease term, along with standard privacy rights associated with homeownership.
CLT residents also have similar responsibilities as other homeowners, including paying property taxes. However, the assessment of taxes based on the actual market value of CLT property has historically presented challenges for CLTs, which typically use managed values.
Although CLT residents can sell their homes, the CLT has the first right of refusal for each sale, and there is a cap on resale profits to ensure that the housing remains affordable for the next buyer. CLT residents are not permitted to sublet their properties. Instead, CLT leases typically have an occupancy requirement that mandates the property must serve as the owner’s primary residence. However, CLTs allow residents to pass the property lease and home ownership to their children, promoting the accumulation of generational wealth within families.
CLT Benefits and Drawbacks
CLTs offer several benefits to both residents and the larger community. These include:
- Preventing home prices from soaring beyond the reach of low- and moderate-income buyers
- Providing homeownership opportunities for underrepresented minority communities
- Helping to reduce the wealth gap in minority communities by building generational wealth through home equity
- Contributing to the revitalization of urban neighborhoods and providing opportunities for minority-owned businesses
- Reducing delinquency and foreclosure rates
- Granting neighborhood residents control over development
However, CLTs also have drawbacks. One of which is that potential homebuyers may be hesitant to purchase property in a CLT since they do not technically own the land, even though they have ownership benefits similar to traditional homeowners. Overcoming this obstacle requires educating prospective buyers about their rights and obligations, particularly when it comes to intergenerational transfers.
Advancing Racial Justice
One of the methods for reducing the racial wealth gap and helping minority communities build wealth is through CLTs. CLTs enable low-income families, who are often overrepresented among minority communities, to accumulate generational wealth by building home equity. CLTs also provide underserved communities with more opportunities to become homeowners and acquire equity by reducing barriers to homeownership, including lower initial and overall costs.
Recent studies indicate that the average shared equity homeowner incurs initial costs of less than $2,000, which is substantially lower than the 20% loan-to-value (LTV) requirement for traditional mortgages. However, upon exiting the program, members have an average of $14,000 in equity, significantly increasing their household wealth.