Community Land Trusts use housing industry, real estate and legal language that can be confusing to the potential homebuyer. The following definitions should help to clarify some of the terms used throughout this web site.
Affordable - when applied to housing means that monthly occupancy cost of a particular housing unit generally does not exceed 30% of household income.
Appreciation - is the increase in the value of an asset such as real estate.
Area Median Income (AMI) - The median household income in a particular metropolitan statistical area (MSA) or Parish, as calculated and adjusted for household size by HUD.
CDBG Grant - The Community Development Block Grant, one of the longest-running programs of the U.S. Department of Housing and Urban Development, funds local community development activities such as affordable housing, anti-poverty programs, and infrastructure development.
Debt to Income Ratio (DTI) - means the maximum percentage of income that a particular lender will allow a household to spend on Housing Costs.
Equity - is the value of property above and beyond any debt secured by the property.
Ground Lease - A lease, usually long term, whereby the rights to use and possess a parcel of land is transferred from the owner of the land (lessor) to another party (lessee) for a limited (but often lengthy – e.g. 99-year period). Usually a ground lease provides for outright ownership of improvements on the land by the lessee.
Ground Lease Fee - is the amount of money that the ground lessee is obligated by the terms of the ground lease to pay to the ground lessor for use of the leased land. Usually paid on a periodic basis, monthly, quarterly or annually.
Household Income - is the combined gross income of all the members of a household who are 15 years old and older. It includes every form of income, e.g., salaries and wages, retirement income, near cash government transfers like food stamps, and investment gains.
Housing Cost - when measuring the affordability for single family ownership, the sum of the monthly payments due on the mortgage (principal & interest); plus the property taxes due on the property; plus the hazard insurance policy; plus the ground lease fee.
Improvements - when applied to real estate, means buildings or other permanent products of human effort that increase the usefulness or value of a parcel of land. When applied to buildings, additions to or modifications of the structures that increase their value (distinguished from replacement or repairs that replace but do not increase value).
Moderate Income - means a household whose combined gross annual income, adjusted for household size does not exceed 80% of the Median Income for the area in which the housing is located as defined by HUD.
Resale - Any sale of improvements on CLT land after the initial sale to the initial ground lessee.
Resale Formula - A formula determining the maximum price for which the ground lessee may sell improvements on CLT land.
Right of First Refusal - The right to purchase a property for a price offered by a third party and accepted by the owner. If an owner grants a right of first refusal and subsequently receives an acceptable offer from a third party, the owner must give notice to the holder of the right and give the holder an opportunity to purchase the property for the offer price before the property can be sold to the third party.
Subsidy - Gift, grant or deferred loan used to reduce the cost of housing for the occupants.