Several communities in the Des Moines metro have approved funding for a new initiative to bring down the cost of homeownership.
The project follows a model called a community land trust. The trust is a nonprofit that owns land and sells the houses that sit on the land at a significant discount. A community land trust helps make homeownership more affordable for low-income families and keeps those homes permanently affordable.
Once fully up and running, the project will be Iowa’s only active community land trust. It will join around 300 others nationwide.
The housing nonprofit HOME, Inc. is managing the trust until it can stand alone and is self-sustaining. Executive Director Carrie Woerdeman said homes within the trust will be available for people with earnings at or below the area's median income.
Polk County, Des Moines and West Des Moines agreed to start up the trust with a joint investment of $125,000 this year, and half that amount next year until the trust can manage itself.
The first two homes entering the trust are currently under construction and are set to be completed early next year. Woerdeman said she has an ambitious goal of adding at least 100 homes into the trust over the next five years.
How does the community land trust work?
Homeownership is unaffordable for many people with an average income. And if a home is affordable, then it’s typically one that will require a lot of repairs.
“The goal is to create homeownership opportunities for lower income families in Waukee and Ankeny and Pleasant Hill and the places they would not be able to buy,” Woerdeman said.
In a community land trust, buyers give up some investment value in order to receive a smaller down payment and mortgage. Prospective buyers don’t pay the full market value of a house because they do not have to buy the land. In addition, the trust can help subsidize more of the cost for a buyer.
In exchange, the buyer signs a contract saying they won’t sell the house for full market value. The homeowner will still see a payoff from their real estate investment — in this case, 25% of the house’s increased value — but they won’t benefit from the full appreciation. The remaining increase in value goes to the trust and acts as a subsidy for the next buyer.
That’s different than other kinds of help, like down payment assistance, that allow a homeowner to sell their property at market value, which increases costs for future homebuyers.
The trust will also provide financial counseling before and after someone buys a house. Inspectors will help owners keep their finances healthy for potential repairs that come up.
“The intent is to walk the property with the homeowner and say, ‘All right, your roof is 5 years old. You've probably got another 10 years on it. Your HVAC system is 5 years old. And remember, those usually need to be replaced at about year 12,’” Woerdeman said.
When a house is resold, the trust is responsible for making sure it is fit and habitable.
Woerdeman said she’s hopeful the trust can begin to build a solid foundation with the first couple of houses they build. Once they are built and sold, HOME, Inc. will begin fundraising to purchase more homes to sell.
