Raleigh Area Land Trust: Shared Equity Homeownership and Building Generational Wealth

Community Land Trust Model

One problem that has bedeviled affordable housing initiatives is the fact that most of the tools in Raleigh’s housing affordability toolkit have a limited duration.  For instance, when a developer obtains a Low-Income Housing Tax Credit (LIHTC) subsidy to build housing, it typically has an affordability restriction for up to thirty years.  When the affordability restriction expires, the property reverts to market-rate housing unless it is acquired by a buyer that commits to keeping it affordable.  The same dynamic applies when developers agree to reserve affordable residential units as part of conditional use zoning. The commitment to preserve affordability is typically for 5-15 years. To effectively address the housing affordability crisis, however, permanent affordable housing is needed. 

One way to preserve affordability is through a community land trust (CLT).  CLTs are nonprofits that acquire and own real estate for the purpose of providing affordable housing to members of the community. CLTs do this by retaining ownership of the underlying land while selling or renting only the structure built on the land.

According to Shelterforce, CLT buyers receive a below-market price on a home because the underlying land accounts for 20 to 50 percent of housing prices, depending on location. Instead of buying the land, CLT buyers get a 99-year renewable, inheritable lease on the land. The article goes on to state, “[i]n exchange, they agree to restrictions on how much they can resell the property for based on a formula that lets buyers build some equity while also keeping the home affordable for future buyers in need of affordable housing.”

Buyers of CLT properties can obtain government-backed mortgage financing just like any other home buyer, but those buyers only need to finance the cost of the structure.  The ability to obtain financing and the reduced cost of CLT property lowers the financial barriers to ownership.  Additionally, the property tax burden is lower for a CLT owner because they pay only for the portion of the assessment attributable to the structure. CLTs also help address the wealth gap because they typically have more Black and female owners than market rate housing.

Depending on the model, CLTs can also provide lower income residents with rental opportunities.  If a CLT acquires property for free or substantially reduced cost, combined with additional financial subsidies from the government or elsewhere to build and/or manage the property, CLTs can rent units at below-market rates.  CLTs can accept Housing Choice Vouchers or use Project Based Vouchers to further subsidize rents for properties it owns and operates.

Raleigh Area Land Trust

The Raleigh Area Land Trust (RALT) is a relatively new entrant to the Raleigh housing market.  RALT sold its first two homes in 2023, both in Southeast Raleigh.  But RALT is now embarking on a larger project involving the construction of a “cottage court” community called the “Cottages of Idlewild” in Southeast Raleigh.  The development will have 4 rental units for people making 30%-80% AMI and 14 for-sale properties for people making between 50% to 60% AMI. The homes will range in size from 1 to 3 bedrooms and are oriented around a common courtyard open space.  This type of community was made possible when the prior City Council approved a package of regulatory reforms known as Missing Middle. 

Moving to Higher Density

The CLT model could be used for higher density multifamily developments such as condos or apartments in certain circumstances.  Expanding to higher density housing would enable RALT to have a larger community impact.  For that to happen, however, RALT will need financial assistance from the private sector, not to mention increased government subsidies.  For context, Raleigh originally only agreed to convey property to RALT for $1.00 to build Idlewild Cottages.  Due to increasing costs, RALT needed additional financial support in order to proceed with the project.  Raleigh and Wake County stepped up to provide Idlewild Cottages nearly $1.5 million in zero interest loans to defray the increasing development costs.  

Since the CLT model helps address the wealth gap, Raleigh, Wake County and other government agencies should prioritize financial support to RALT so it can build more housing using the community trust model.  To further facilitate this effort, RALT could seek Project Based Vouchers from the Raleigh Housing Authority to bolster its subsidy package to make building additional density more feasible.

While the CLT model can help people with lower incomes achieve home ownership, it also validates what housing experts have been saying for years.  There is no single tool that will solve America’s housing crisis.  The solution will come when cities like Raleigh adopt an “all of the above” approach to housing.  Cities must use every tool available to increase the supply of housing, reduce the cost of housing and adequately fund subsidized housing for those most in need.  

If you are interested in helping RALT accomplish its mission, consider making a donation.