A new approach to affordable housing is in its early stages here, with $220,000 in startup money for land acquisition from the city of Wilmington giving it impetus.
The Cape Fear Housing Land Trust plans to offer homes at a lower price to qualified applicants in a specific income range. It will do this by taking the cost of land out of the equation, shaving 20 percent to 30 percent off the price.
The land trust will have perpetual ownership of the lots it buys and on which it will build housing. That housing will be sold to qualified applicants, but the land will always be owned by the land trust and leased to the homeowner. Homeowners will sign a 99-year renewable lease, paying a nominal monthly fee.
"(This) ensures that homes built on land trust land stay affordable forever," said Erin Diener, the land trust's first managing director and its sole employee.
Affordable housing is achievable when the cost of the land isn't a factor, Diener said. The land trust was established in January and is in the process of acquiring its nonprofit status. Diener was hired in March.
The program will promote workforce housing. An applicant for a land trust home must have an income between 25 percent and 125 percent of the area's median income and have the ability to obtain a mortgage. For example, in Wilmington, where the median income is $56,600, a family of four could have an income between $14,150 and $70,750.
Mayor Bill Saffo said one of the city's initiatives is supporting affordable housing and the land trust offers a method of doing so. "Land costs are one of the driving costs that's making houses unaffordable," Saffo said.
The land trust also plans to help smooth the path for some applicants by establishing relationships with area lenders, Diener said. The land trust requires that applicants be educated about the process and, when applicable, work to improve their credit.
Under the land trust, homeowners have all the typical responsibilities, such as paying property taxes, and are responsible for the property's upkeep. They can build up equity and make improvements. What they can't do is sell their home for the market price.
The home can be inherited as long as the heirs meet the income guidelines and are qualified. Otherwise, it must be sold back to the land trust or to a qualified buyer.
If the residence is resold, a formula is used to limit profit so it stays affordable. Only 20 percent to 30 percent of the acquired equity can be tacked on to its previous sale price. That exact percentage is yet to be determined at this point.
The search for land in Wilmington already is under way. About 10 noncontiguous lots on North Fourth Street appear promising. "We're looking at making an offer on that land by the summertime," Diener said. "One idea that we want to take a big look at is providing urban housing.
"We basically could develop like any other developer," Diener said. The land trust could offer a mix of single-family and multifamily residences.
Eventually, they plan to offer housing in Brunswick and Pender counties as well as New Hanover. In urban areas like Wilmington, the land trust likely will look for infill lots, which may cost less.
Rising housing costs in the area prompted regional interest in the land trust model, Diener said, adding that Wilmington is more than 90 percent built-out, limiting housing opportunities.
Saffo said land costs in Wilmington are continually on the rise, making it more difficult for new homeowners. The land trust will "give them an opportunity to get started and have a home," he said.
Currently, the city of Wilmington is the land trust's only benefactor.
In May, the city approved $220,000 in startup funds for land acquisition and $40,000 for administration costs, both from distribution of affordable housing funds.
In the city's proposed budget for the 2008-2009 fiscal year, the land trust has two appropriations totaling $31,500 through its fiscal agent, Cape Fear Habitat for Humanity. That amount is less than the $71,000 requested by Diener for operating costs. A vote on the budget is scheduled for Tuesday.
"They're very supportive of the land trust initiative," Saffo said of council members.
Diener said land trusts often receive public money. "Typically, I'd say 90-plus percent of land trusts are funded for their first two to three years fully by the governments and municipalities that they serve," she said. "It allows us to build our first properties and, obviously, become sustaining from property management fees and ground lease fees."
Once established, the land trust will begin to apply for grants and look for opportunities like land donations, she said. The land trust model has been in existence nationally for at least 40 years, Diener said, but she first became familiar with the concept as it's implemented by the Orange County Community Housing and Land Trust.
That land trust has helped provide affordable homes for employees at the University of North Carolina Chapel Hill, among others, said Tara Fikes, housing and community development director for Orange County.
"They get most of their funding from public sources, mainly the county and towns," she said. "Last year, they actually sold 18 houses to first-time homeowners. ... So, they've accomplished their mission."
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