CAMBRIDGE, Mass. (July 28, 2011) -- Despite unemployment rates and continuing home-financing problems, delinquent mortgages and foreclosures continue to decline in community land trusts, according to a paper published by the Lincoln Institute of Land Policy.
Stable Home Ownership in a Turbulent Economy, a study conducted by a researcher from The Housing Fund and Vanderbilt University and commissioned by the National Community Land Trust (CLT) Network, found substantially lower delinquency and foreclosure rates compared to owners of market-rate homes.
Conventional homeowners were 10 times more likely to be in foreclosure proceedings than CLT homeowners at the end of 2010 (respectively 4.63% in the conventional market versus 0.46% in mortgages held by CLT homeowners), the study found.
The survey results were based on 3,143 mortgage holders in 62 CLTs across 29 states.
While the Mortgage Bankers Association reported all-time highs in foreclosure proceedings following the 2008 housing market collapse, CLTs reported ongoing declines of homeowners in trouble. In terms of mortgage delinquencies, 1.30% of CLT homeowners were seriously delinquent relative to 8.57% of homeowners in the conventional market at the end of 2010, as reported by the MBA. Serious delinquencies included mortgages at least 90 days delinquent or those in foreclosure proceedings.
Community land trusts offer low-to-moderate income households the opportunity to buy homes at prices substantially below market rates, utilizing a combination of public and private subsidies. In most cases a long-term ground lease allows buyers to purchase homes excluding the cost of the land. CLTs also provide pre-purchase education and support that prepare families for homeownership, and after purchase, provide ongoing stewardship services to "backstop" homeowners for as long as they own their homes. In exchange, homeowners agree to limit the appreciation they receive when they sell their home, which has the effect of sustaining housing affordability for future generations of homebuyers.
The study found that the stewardship services offered by CLTs prevented foreclosure for 82% of the CLT homeowners who became serious delinquent during 2010.
Roger Lewis, Executive Director of the National CLT Network, said that compared to interventions by the federal government, or steps by private industry, community land trusts do a better job of securing successful homeownership to lower-income earners.
“I feel supported all throughout my home buying and homeowner experience," said Jackline Mukiibi, a homeowner in the City of Lakes Community Land Trust in Minneapolis. "I feel like I will always have a resource to get me through any challenges I may have while owning a home.”
“Fostering sincere relationships is the most valuable tool we have in resolving challenges faced by our homeowners,” said Staci Horwitz, program director at the City of Lakes Community Land Trust. “Knowing what is happening sooner than later helps us readily connect homeowners to the resources needed to minimize the impact of unexpected financial or life changes.”
“Lower earning homeowners were disproportionately hit by subprime lending and now they have been hit again by higher unemployment rates," said Emily Thaden, the researcher of the study. "CLTs never allowed homeowners to obtain subprime loans in the first place, and now CLTs — through their stewardship — are buffering the impact of the economic recession on their homeowners."
About The National CLT Network
The National CLT Network is the umbrella organization for community land trusts in the U.S., with over 100 member organizations. The National CLT Network provides training, advocacy and resources for its member organizations, which nurture and sustain healthy and economically diverse communities by providing permanently affordable access to land, homes, and related resources. For information, visit www.cltnetwork.org.
About the Lincoln Institute of Land Policy
As part of its joint venture agreement with the National CLT Network, the Lincoln Institute of Land Policy has supported ongoing workshops for best practices in community land trusts as well as the last two national CLT foreclosure surveys. The Lincoln Institute of Land Policy is a leading resource for key issues about the use, regulation and taxation of land. Providing high-quality education and research, the institute strives to improve public dialogue and decisions about land policy. For information, visit www.lincolninst.edu.