AHURI BRIEF

What is a Community Land Trust?

This unique form of shared ownership may be another affordable housing option

Last updated 27 September 2018

Although not common in Australia, community land trusts have been used in some parts of the world, particularly the US and the UK, to make housing more affordable.

What is a Community Land Trust?

A Community Land Trust (CLT) is a form of shared ownership of a property, where the land component of a residential property is owned by community based, not-for-profit legal entity and the actual building is owned (or leased long-term) by an individual household.

How does a CLT work?

As CLTs remove land costs from the cost of housing they can make housing more affordable, particularly in markets where increases in land value outpace income gains for lower income workers. The CLT will charge an ongoing ground lease (i.e. a form of rent) for the land, often payable monthly by the householder. This ground lease may be subsidised for low income households so as to make housing affordable.

What are the benefits?

CLTs offer householder’s many of the benefits of home ownership, including householder’s control over a dwelling, security of tenure and transfer of occupancy rights, and the potential for some asset wealth building. The ground leases on which the homes are built are inheritable, and properties on leased land can be bought and sold at prices determined by a resale formula spelt out in each CLT’s ground lease.

When the householder decides to sell, any increases in the value of the property are limited through the use of predetermined price formulae instead of being based upon open market values. The intention is that, rather than the initial subsidy dissipating when the household sells, the community partner’s ongoing financial interest ensures the home will remain affordable for future households.

The benefits for governments come from assisting lower income households into affordable rental or housing ownership, which can relieve the strain on housing assistance programs.

CLTs in the United States

CLTs are a more common form of land ownership in the USA and the UK. In the US, CLT housing ranges from affordable rentals in boarding houses to buyers of single-family houses, townhouses, and apartments.

In the US most CLTs have relied on government or philanthropic subsidies (including land donation) to get going, and, in general, begin to cover their ongoing operational costs when they are leasing over 200 housing units.  Householders are only able to fund their home purchase through long-term, fixed-rate mortgages, which means all parties are aware of the ongoing costs.

Potential for CLTs in Australia

CLTs are not common in Australia, where most property sales contracts entwine ownership title of the land and the building (if there is one). AHURI research from 2012 found:

CLTs may have potential application in Australia to address affordable home ownership concerns, increase the range of housing tenure options available, foster community development and social capital, and maintain a stock of perpetually affordable housing options.

Source: Crabtree and Phibbs et al. 2012, page 8.

Further AHURI research has also investigated CLTs being used to create home ownership opportunities for Indigenous communities finding the CLT model could be an attractive option in Indigenous communities if it can address issues of Indigenous land rights and community ownership, and involves the community in governance.

Further reading