How does CLT homeownership compare to renting?
CLT homeownership and farm ownership is an alternative to renting that provides opportunity for people to build equity instead of paying a landlord.
CLT homeownership provides people with increased stability and security. CLT homeowners have control of their homes, and benefit from stable monthly housing costs, and the opportunity to accumulate equity. CLT homeowners can also take advantage of income tax deductions for their property taxes and the interest paid on their mortgage.
How does CLT homeownership compare to market rate homeownership?
CLT homeowners buy the home and other structures on the land, but the CLT maintains ownership of the land. The homebuyers pay a lower-than-market price, and agree to restrict the amount they will sell the house for in the future – passing the home’s affordability on to the next buyer.
Similarities:
- The homeowner has a mortgage with a bank;
- The homeowner accumulates earned equity by paying down their mortgage;
- The homeowner pays property taxes;
- The homeowner can make alterations and improvements; and,
- The homeowner may receive federal tax deductions for mortgage interest and property taxes.
Differences:
- The purchase price is lower because the CLT brings subsidy to the property, and the homebuyer is only purchase the buildings and other improvements on the land;
- The CLT and homeowner enter into a long-term agreement (the Ground Lease) to preserve the home’s affordability; and,
- If a CLT homeowner chooses to sell the home, the homeowner walks away with the equity they paid down on their mortgage, plus the amount of equity allocated via the resale formula. This is because the resale price is calculated separate from market forces. Trust Montana home owners are provided with a maximum resale price they can sell their home for — based on 1.5% simple interest per year of ownership. This resale formula is meant to balance permanent affordability with equity-building opportunity. The table below outlines costs and benefits of CLT home ownership, regular market-rate ownership, and renting.
Benefits of buying a CLT home through Trust Montana
- Affordability – CLT homes are more affordable than homes purchased on the open real estate market because the CLT and partner organizations provide affordability assistance to home buyers.
- Mortgage – stabilized, consistent, and affordable mortgage payments.
- Community – CLT homeowners are important to Trust Montana — as part of a larger community of CLT homeowners, they are encouraged to apply for membership on the Trust Montana board of directors.
- Support – If a homeowner is having trouble paying their mortgage and is entering foreclosure, Trust Montana can help expedite a sale to a new buyer to help the homeowner out of a bad situation (note: there are no guarantees that a house will sell, just like in the regular market).
- Stability – homeownership provides stable housing costs and security. With this stability, homeowners have a solid foundation that can allow them pursuit of other dreams — educational, vocational, or recreational.
- Equity — CLT homeowners retain their earned equity (the amount they pay down on their loan) and earn 1.5% per year on the value of the home.
- Tax benefits — homeowner may receive federal tax deductions for mortgage interest and property taxes.
