Community Land Trusts (CLTs) are nonprofit organizations that acquire and manage land to provide long-term affordable homeownership. (Not to be confused with a conservation land trust such as Sonoma Land Trust, which protects “open, natural, and working lands and waters”, not housing.) CLTs typically sell homes to qualifying buyers at below-market prices while retaining ownership of the land. The land is leased to the homeowners through long-term ground leases, ensuring that housing remains affordable across future sales. This model balances affordability with wealth-building opportunities for homeowners through shared equity.

CLTs maintain affordability by setting resale restrictions, ensuring homes are sold to income-qualified buyers. They also play an active role in property stewardship, providing homeownership education and support. This model not only preserves affordability but also helps stabilize communities and offers a pathway to homeownership for those typically priced out of the market.

The CLT model's value lies in its ability to keep homes affordable in perpetuity, making it a powerful tool for expanding affordable housing options. Local governments often support CLTs through grants and public subsidies, recognizing the long-term benefits of this model for inclusive, stable, and equitable community development.

CLTs also stipulate a resale formula that determines the sale price of the property. The formulas are typically structured to balance the community need for affordable homes with the opportunity for homebuyers to build wealth through homeownership. Common types of formulas are “indexed formulas” and “shared appreciation formulas.” Indexed formulas use economic indicators, such as the area median income, wages, or consumer prices, to determine the home’s sales price. These indices typically provide a more accurate reflection of families’ purchasing power than changes in home values. Shared appreciation formulas calculate a sales price by adding some percentage of the home’s value appreciation to the original sales price. 

Consider, for example, a homeowner who purchases a CLT home for $200,000. If the market value of an equivalent home increased by $40,000 during the period of ownership, and the CLT utilizes a shared appreciation model that allows the owner to keep one-quarter of the home price appreciation, the sales price would be set at $210,000 (the initial $200,000 purchase prices plus one-quarter of the $40,000 appreciation). Management of the units falls to the organization that owns the lease.

CLT ownership of land could be combined with master leasing, in which a nonprofit property manager handles all the face-to-face, day-to-day operations with property residents. See Strategy 2a Strengthen Housing Services, for more on master leasing.

In Sonoma Valley, using the CLT model could bring the cost of a home into an affordable range for many more working families, young people, people on a fixed income, and essential workers.