A solution to the housing crisis that provides a foreclosure-free option

Posted on January 29th, 2008 by saman

The rise in foreclosures and the nationwide mortgage crisis has left a recession looming and has shattered the American dream but one form of housing has become virtually foreclosure-free, this being the community land trust. Putting a roof over the heads of homeless people in Boston is one of the best examples of this approach.

The initiative began almost a quarter a century ago around Dudley Square on the Roxbury neighborhood and is known as The Dudley Street Neighborhood. The founders of this program aim to encourage wealth creation and development wile ensuring that residents of limited means can make use of their hard work for long even after property values start rising again. Community Land Trust, was the centerpiece of the initiative, where buyers that purchase homes do not pay for the land the house is situated on.

Currently, over 400 new homes occupy these once vacant lots with small business thriving n the locality and a greenhouse producing organically grown products for the local restaurants, playgrounds and parks have been rebuilt and close by a community center expected to cost $100 million is underway. When the Dudley Street Neighborhood Initiative started in 1984 the housing pricing were ten times lower than they are now but the houses in the trust still remain available to the next bank teller, nurse, teacher or who so ever wants to stay in the community.

The best features of home ownership are combined in a community land trust. These include wealth creation, predictable mortgage costs, control and inheritability. The ownership of the land and the house is split between the occupant of the house owning the house he resides in and the CLT owns the land.

With the mortgage defaults as rampant as they are in the current foreclosure crisis this approach has provided community land trust homeowners with a partner. Even though several homeowners have become defaulters none of the hundreds of homes on Dudley Street Land have faced foreclosure.

The Community Land Trust in the city of Irvine in Orange County, California initiated a city-wide CLT after the city realized that it lost millions of dollars of public subsidy to a speculative market and furthermore, hundreds of ownership units. It is projected by the Irvine Land Trust that ten thousand units of housing, which make up about 10% of cities housed, will be conserved for the long term.

The current decrease in property values might appear to provide a solution for the Massachusetts homeownership affordability crisis but in the long run it has been noted that affordability can never be secured by waiting for prices to drop as this is almost always followed by a rapid increase in prices.

Those who have discovered CLT will tell you that slow and steady is how to do it when you’re buying your own home. Through CLT you can buy the home now but not the land and by agreeing to some limitation on resale you can enjoy becoming a homeowner and avoid the current foreclosure crisis.