Why would someone choose this over outright ownership?
They wouldn't. As the name suggests, the aim is to offer homes for living, not speculation. Anyone who can afford to buy on the open market will probably prefer that option, as then they benefit from price rises as well as having somewhere to live.
The attractions of non-speculative ownership are for the growing group of people whose only current option is private renting: this group faces ever rising costs, insecure tenure, no freedom to modify their home, and the prospect of being forced out if their area improves.
How would the land rental charge be calculated?
The land rental charge would initially be set at a fixed percentage (eg. 20%) of the private rental value of the whole property (building plus land). From then on, the rental charge would fluctuate in proportion to the local market for residential building plots.
What if local house prices rose and the resident could not afford the increased land rent?
The land rent would be calculated to increase or decrease in proportion to the local market for residential building plots. To give the resident some comfort, the land rent could be capped at (say) twice the initial amount, adjusted for inflation.
In case of hardship, the resident could be offered equity release or charitable aid.
Half the open market price is still a lot of money, and mortgage lenders might not like the restricted ownership model. What could a resident do if they cannot obtain a mortgage?
The CLT would offer "rent to buy", whereby the resident buys an ownership stake a little bit at a time, and rents whatever proportion they don't yet own.
Is the resident exposed to the risk of a house price crash?
Technically yes, but much less so than under open market ownership, since house prices would need to decrease dramatically to make homes under the scheme unattractive and therefore difficult to sell on.
How would the Housing Trust obtain land?
We envisage four possibilities:
- donations from well meaning private land owners, or
- donations from private owners undertaking a commercial development, who are obliged by the planning authorities to provide a certain proportion of affordable housing.
- buying agricultural land which has no prospect of gaining planning permission apart from for affordable housing, or
- buying public land (eg. from the council or other public bodies) at less than market rates, because there is political pressure to develop more affordable housing.
What's your inspiration?
We have many:
- We believe there should be a Land Value Tax, much like that championed by Winston Churchill and David Lloyd-George in the 1911 People's Budget. Read Churchill's rousing speech on LVT here. The land rental charge we propose is a sort-of privately administered LVT.
- The Rent-to-Buy model, which was featured - although probably not first proposed - in the Liberal Democrats' ill-fated 2015 manifesto.
- Bernie Sanders (the US senator) was one of the pioneers of Community Land Trusts in his native Burlington, Vermont.
- We don't believe that homes should be seen as speculative investments or financial instruments that enable those with the greatest access to mortgage finance to charge the rest of us rent for the rest of our lives. We believe, funnily enough, that homes should be for living, and little else.