While there is a LOT of excitement about new models for affordable housing options there is also a lot of controversy.
Two Reasons CLTs Fail [Source Google Search]
| Failure Vector | Core Mechanism | Real-World Impact |
|---|---|---|
| The “Scale Trap” | CLTs require significant upfront capital to buy land, but their ongoing revenue (small ground lease fees) is minuscule. | Trusts with fewer than 50–100 homes under management rarely generate enough internal revenue to pay for professional staff, leading to volunteer burnout and operational collapse. |
| The Wealth-Generation Dilemma | Resale price restrictions designed to keep the home permanently affordable. | In low-income or minority communities, residents sometimes push back or refuse to buy CLT homes because the trust caps their equity upside, limiting their ability to build generational wealth compared to the traditional market. |
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Direct Rental Vouchers [CPBB article]
We are researching several other media sources delving into the controversies of various affordable housing models but but at this point it appears that the simple option of providing RENTAL VOUCHERS gives the greatest benefit and autonomy to individuals to make choices that allow them to move toward more financial stability. It may not be as sexy as a Community Land Trust, and gives no benefit to developers, but it is a very efficient way of getting money into the hands of the people who most need it. This is the first step to financial security and to any kind of home ownership.
Check out this Deeper Reinvestment article!
Source: Deeper Reinvestment: Studies indicate that redirecting funds into demand-side mechanisms like Housing Choice Vouchers can yield up to twice the impact per dollar. [1]
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How do CLT’s perform upon resale?
Source: Q & A during one of the Public Meetings with DevNW:
Q: Will a home owner benefit from equity growth like a regular home owner?
A: According to Luke Lonstron, Sr. Project Manager of Real Estate Development:
“The drawback for someone buying one of these homes is they will not be able to flip the home and make a bunch of money. But they do make equity on their home. There is a resale formula that is in their contract.
“They get all equity of all money that has paid down their mortgage. It is not the same amount of money someone makes in the regular market. The benefit is that it will always be affordable to the next buyer. It is never going to reach the unaffordable level. There is appreciation and they will get 25% of that when they sell.”
At the public meetings with DevNW several of the concerned neighbors asked about the track record of their other CLT-based affordable housing developments.
- What is the percent sold of the units they have available?
- How many units remain unsold?
- How have RESALE numbers gone?
- On average how long do units for RESALE take to be sold?
- Can they show us real numbers upon RESALE?
DevNW never responded to those kinds of questions. In fact they have given much less information about the specific formula that they use to calculate the equity percent than other CLT’s do.
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