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

Posted on January 25th, 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 businesses thriving and 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.

Even though several homeowners have become defaulters none of the hundreds of homes on Dudley Street Land have faced foreclosure.

The current decrease in property values might appear to provide a solution for the homeownership affordability crisis in Massachusetts 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.