This week, the Minnesota Homeownership Center looks at two alternative homeownership options that can help those with very low income get started on a successful ownership and wealth-building journey–namely, community land trusts and housing equity coops. These options involve sharing the home’s equity with a sponsoring entity or with other owners, and thus the cost of entry for buyers is significantly reduced. It’s very important to note, that as a result of the shared equity, these options facilitate reduced wealth-building when compared to traditional homeownership. They are best utilized as a stepping-stone toward full ownership as the buyer continues to improve their financial situation from a stable housing vantage point.
Community land trusts
In the world of homeownership, a community land trust is typically a plot or plots of land administered by a nonprofit on behalf of the community. Such land primarily hosts single-family homes. The land trust acquires land and maintains ownership of it permanently. It then enters into long-term lease transactions involving the homes sitting on the land, allowing low- to moderate-income individuals to purchase them. When the occupants sell, they retain a portion of the increased property value of the structure. The increased value of the land is retained by the trust, thus preserving affordability of the property for future low- to moderate-income households. By separating ownership of the land from ownership of the housing structure, this alternative model keeps land trust homes deeply affordable for future generations.
According to Grounded Solutions Network, there are more than 225 community land trusts in the United States today. Here in Minnesota, we have City of Lakes as well as One Roof Community Housing in Duluth, Central Minnesota Housing Partnership in St Cloud, and Greater Metropolitan Housing Corporation and Rondo Community Land Trust here in the Twin Cities.
Housing equity coops
In the world of homeownership, a housing equity cooperative is an entity that owns one or more multi-family residential buildings. The co-op is membership based, with membership granted via purchase of a share in the cooperative. Each shareholder is granted the right to occupy one co-op housing unit. By pooling member resources, this alternative ownership model achieves significant economy of scale, thereby reducing the cost of owning one’s home (unit). Similar to a land trust, when the occupants sell, they retain a portion of the increased property value of the unit. The increased value of the building as a whole is retained by the coop, again allowing the deeply affordable ownership cycle to continue.
According to Cooperative Housing International, there are about 6,400 housing cooperatives in the United States today. A partial list of housing equity co-ops in Minnesota is available on the locally based Shared Capital Cooperative’s website at SharedCapital.coop. Shared Capital is a funder of business coops of all types, all across the country.
It’s worthwhile to state again that these options offer significantly lower potential for wealth building when compared to traditional homeownership, as the equity of the home or unit is being shared with the sponsoring organization in order to perpetuate deep affordability. They are best utilized as stepping-stones toward full ownership as the buyer continues to improve their financial situation from a stable housing foundation. The Minnesota Homeownership Center’s Homeownership Advisors are well-equipped to navigate these options with you, and help you to determine if they are the right path for you.
Homeownership is possible. We can show you how.
For more information on the Minnesota Homeownership Center and its advisor and education services, visit www.HOCMN.org.