One of the foundational principles of the Equity Trust mission is that a great deal of the economic value of property comes from that property being part of a community rather than being inherent in the property itself. It’s also the basis of the community land trust movement: lower the price of a home so that a buyer pays only for the physical structure while the rest of the market price remains perma-nently in the community’s control, making home-ownership a possibility for people who are otherwise priced out of the housing market. In 2022, we had a hand in a community land trust project that demonstrated the value – and power – of community.
When the Valley Community Land Trust (in Franklin County, Massachusetts) identified a willing buyer, an immigrant family, for one of the homes in its portfolio but couldn’t complete the transfer because the buyer was not able to get a bank loan, they turned to Equity Trust for advice: How could they help this family purchase the home? Federal mortgage regulations make it difficult for Equity Trust to offer mortgage loans for individual residences so we couldn’t make the loan ourselves, but that’s when the community of which we are a part – both geographically and philosophically – came together to make something happen.
We brought our skills in aggregating loan funds, writing creative loan agreements, and administering loans; local organizers affiliated with the CLT recruited people willing to provide the loan funds that were needed; and the CLT itself stepped up to serve as the formal lender, using the assembled funds. We calculated how to blend the funds together to make the loan and redistribute them as the loan is repaid, translated that into the set of documents that describe the relationships between all of the parties, and then coordinated with attorneys for both the borrower and the lender to arrange closing on the home purchase. We are now collecting monthly loan payments from the borrower and sending them to the participating community lenders, removing the burden of administration from the CLT and greatly simplifying the lending process for the borrower and lenders.
There is a single loan agreement between the CLT as lender and the new homebuyer as borrower, with all of the actual money supplied by members of the community in amounts individually manageable for each of them and together adding up to enough to finance the purchase. Best of all, the interest rate is virtually zero due to the generous terms on which the participating lenders made their money available, enabling the borrower to repay the loan and build equity much more quickly than would be the case with conventional financing. A family gets a home of its own and a CLT welcomes a new resident – all made possible by people investing in their neighbors and supporting their local CLT.
We’re proud to be playing a role in this project, and the generosity and community spirit revealed by it has prompted us to begin exploring the creation of a truly non-extractive lending program for BIPOC, immigrant, and refugee communities that would be funded by local people – neighbors – willing to make no-interest, shared-risk loans that could be pooled and made available at no interest and with no collateral, with lenders and community members together helping to define the parameters of the loan fund and identifying and qualifying potential beneficiaries. It’s an exciting prospect! Let us know if you’d like to participate.