A Sky-High Mortgage In A Big City Isn’t Cool, But This Affordable Housing Solution Is

Here's what happens when the community takes the lead.

For the wealthy, living in places such as New York City or Los Angeles is likely a nickel in a bucket. As a young person just starting out, a working family raising multiple children or a single parent, just to name a few, the rising cost of housing in major cities is more like a constant concern.

The National Community Land Trust Network in the U.K. acts as a sort of housing superhero that understands the strain expensive living can have on individuals and families. The network's formula creates an opportunity for the community to take control of housing costs by basing mortgage rates on income instead of market value.

"Community Land Trusts (CLTs) are a form of community-led housing, where local organizations set up and run by ordinary people to develop and manage homes as well as other assets important to that community, like community enterprises, food growing or workspaces," the network's website states. "The CLTs main task is to make sure these homes are genuinely affordable, based on what people actually earn in their area, not just for now but for every future occupier."


The London-based network has helped to organize CLTs throughout England and Wales. Thus far, there are more than 225 CLTs with members ranging in size from a couple hundred to the largest with 1,000. CLTs successfully developed more than 700 permanently affordable homes to date and will have developed 3,000 future homes by 2020.

Twenty-three of those homes are located in the St. Clement property in East London. The site, London's first CLT, is a former psychiatric institution that closed in 2005 and was finally obtained by the East London Community Land Trust with the help of activist group Citizens UK after nearly a decade of campaigning. By 2014, with support from the Greater London Authority (GLA) and the backing of the then-Mayor Boris Johnson, the East London CLT and Galliford Try — the company known for developing luxury homes that bought the property when it was first put on the market — joined forces to collaborate on plans for the site.

The nearly two dozen homes within the total 252 homes on the site look no different than their higher-priced counterparts. The difference can be seen in the mortgage rates.

By leasing properties at rates tied to income instead of market values, it becomes more realistic for those fleeing major cities in search of sustainable living to stay in their respective cities. One-third of the local median wage multiplied by the standard 25-year mortgage rate of 5.5 percent with a 10 percent deposit rate added is how the CLTs calculate prices. However, the immediate gain may mean future losses for homeowners selling within the CLT model. In order to keep costs affordable for future occupiers, homeowners may have to forego personal financial benefits obtained from a healthy housing market because they must sell the property at a price tied to income.  

Still, the difference in price for a CLT-owned property is quite substantial. At St. Clement, a one-bedroom apartment goes for around $556,000 while the same type of unit based on the CLT calculation would go for approximately $161,000. This allows people in the $28,000 to $55,000 income bracket to have an opportunity to live in the building situated in a quickly developing neighborhood.

The U.K. model was adopted from the United States in 2006, and has already had an impact in rural and metropolis areas across the country. In the U.S. the Champlain Housing Trust in northwest Vermont is the largest CLT with more than $223 million in assets under its stewardship. Through the nonprofit, homebuyer education classes are offered as well, as are loans for repairs and energy efficiency work. Because of the residential and commercial properties Champlain developed, 260 construction jobs were created.

Take that, gentrification!

"(CLTs) have the potential to be a hugely disruptive force," Housing and Planning expert Stephen Hill told The Guardian. "They allow people to say 'the land market doesn't work in this area, so we're going to get together and change it."

(H/T: Co.Exist)

Cover image:Shutterstock

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