Pros and Cons of Buying a Home in a Land or Housing Trust

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Mortgage and Lending with CMG Equities, LLC - ForTheBestRate.com

Family on their front steps.You may have heard a lot about land and housing trusts lately. They seem to be popping up everywhere, as people are growing more concerned with over development and the reduction of "green space." So what are land and housing trusts? Although land and housing trusts differ slightly, they both essentially work to promote conservation.

Land Trusts

Land trusts are non-profit agencies that work to conserve land through various methods. Often, land trusts will accept donations of land or funds to purchase land and then acquire what are known as conservation easements - which may permanently limit the type and scope of development that can occur on that land.

Housing Trusts

Housing trusts don't work exactly like land trusts, but the general idea is the same. Housing trusts seek to conserve housing by offering grants to buyers for certain properties, in the hopes of stimulating purchase activity of existing homes, rather than new developments. In other words, housing trusts want to avoid having a huge inventory of older, existing homes on the market while developers and builders continue to create brand new homes. The idea is to make home affordability sustainable for years to come. Housing trusts attempt this by offering innovative programs that provide down payment grants to qualified buyers. Although these grants do not need to ever be repaid, there is one small catch. The buyers must share a portion of the home's increase in value with the next buyer when it comes time to sell.

Pros and Cons

Working with land or housing trusts can provide valuable tax benefits, as well as community enrichment - especially if you work with one with a proven track record of success. Just as an example, Vermont-based Champlain Housing Trust boasts, "A CHT home has never been lost from our portfolio due to foreclosure, and over the course of 25 years, only nine homeowners have undergone foreclosure. In each case, the home was retained as permanently affordable and transferred to another eligible buyer."

One major downside to working with trusts may be that you may not be able to achieve full ownership of the land or housing property that you are dealing with; this is often true of housing trusts. Because you are ofetn obligated to pass along some of the equity in your home, you most likely won't be able to get a home equity line of credit (HELOC) or refinance. Additionally, you must be careful not to confuse shared property schemes  with land or housing trusts. Shared property schemes are programs that allow home buyers to purchase a share of the property (usually 25%, 50% or 75%) and the buyer then pays rent on the remaining share (which is owned by the housing association).

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