Myths

MYTH #1: CLT Homeowners don’t receive any equity when they sell.

Fact: CLT Homeowners receive any equity they’ve earned by paying down their mortgage, as well as a portion of the appreciation gained on the home’s value during their time of ownership. North Star Neighbors utilizes a shared-equity resale formula that sets the percentage of appreciation gained by the Homeowner at 25%. In the unlikely event that a home depreciates, this formula is also applied and CLT homeowners only lose 25% of that depreciation rather than the full amount.

What’s most important when considering equity is remembering that CLT buyers typically wouldn’t have been able to become homeowners without the CLT’s support, so their financial gain should be measured compared to renting as opposed to market-rate homeownership. Compared to paying rent with no return, gaining equity and a portion of appreciation is a clear advantage.

MYTH #2: The CLT receives 75% of each home’s appreciation at resale.

Fact: While a CLT Homeowner’s resale price is set through the shared-equity resale formula that returns 25% of appreciation to the CLT Homeowner who is selling, the remaining 75% of appreciation does not go to the CLT, that value remains with the home, keeping the sales price affordable for the next buyer. This is what makes CLTs so special – they take a one-time subsidy investment and use it to make a home affordable for generations to come!

MYTH #3: CLT Homeowners are not allowed to make changes to their homes or land

CLT Homeowners have the title to their home. While the CLT retains title to the land, rights to the use of the land are conveyed to the CLT homeowner. In both cases, as long as modifications are in line with local zoning requirements, CLT homeowners can make any improvements to the home or land. When it comes to valuing improvement, CLT’s have a Capital Improvements Policy that provides a credit to the Owner at resale, rather than improvements being subject to the 25% shared-appreciation resale formula. It is important for CLT homeowners to understand this policy, as improvements need to be approved by the CLT in advance in order to receive their credit.

MYTH #4: CLT homes bring down surrounding property values

From an appraisal standpoint, CLT homes should not be used as “comparables” to market-rate homes because restrictions make them exactly what you’d imagine – not comparable. When it comes to the impact of having CLT homes in the neighborhood or a market-rate home, research has actually shown that there was no negative impact on the values of market-rate homes surrounding CLT homes. In many cases, CLT homes actually increased home values of surrounding market-rate homes by improving the overall quality of housing in the neighborhood.