Madison Area Community Land Trust Selling Home on Herminia Street: Making Housing More Affordable

11152021MACLT

Olivia Williams, the executive director of the Madison Area Community Land Trust, stands in front of the property on Hermina Street that the organization is selling.

By Jonathan Gramling

Since 1990, the Madison Area Community Land Trust has been striving to create more long-term affordable housing in the city of Madison. Typically when one purchases a home, there are two parts to the value. One is the structure or improvements on the property like a house. The other is the land beneath the house. And sometimes the land beneath a structure becomes so valuable that the land and building are purchased only to have the new owner demolish the building and build a new structure in its place. MACLY seeks to eliminate the escalating impact of the market on the affordable housing it creates.

“For single-family homes, what we do is separate the ownership of the land from the home,” said Olivia Williams, executive director of MACLT. “A homeowner would buy a house from us and we retain ownership of the land. And they lease the land from us for a minimal fee. That means the house is subsidized and they only pay for the price of the house. They have a ground lease with us that says they agree to pay that forward to the next homeowner. There is a resale formula that specifies how their resale value is calculated. They get some of the market appreciation that would come from a conventional house. They get 25 percent of that market appreciation, plus they get back anything they have invested in the house and their principle. Typically what that means is people usually save $50,000 or more on a house.”

There are a lot of positive reasons — outside of making an investment that rises in value — that homeownership is the right thing to do for low-income families.

“Homeownership is really a lot about stability in your life and not having a landlord to have a year-to-year lease with you or not renew your lease if they don’t like you,” Williams said. “We really don’t have very good rental protections in Wisconsin. If you could afford to buy one of our homes, it could be a really great way to get out of moving from place to place, especially if you have kids and you need more space and you need a stable home life and not move between school districts.”

As MACLT is in the business of increasing low-income family homeownership, it has special policies and procedures in place to ensure that the properties remain affordable from one owner to the next.

"Usually our homes are 30 percent below the market rate,” Williams said. “We sell to low-income people. And we have a special process and policies in place for putting the most marginalized at the top the list if you will, a kind of equity-based selection criteria process. And again, once the homeowner is ready to sell, we have a list of interested people and they are all low-income and then that house is really affordable again. We get subsidies from the city of Madison for this program and their one-time subsidy to bring down the cost of a house will affect many generations of homeowners.”

In the last decade, Madison has seen an escalation in its property values as more and more people are attracted to Madison for its high quality of life. But with rising property values comes the loss of affordable housing to the extent, like San Francisco, essential and service workers will be forced to live outside the city of Madison and endure longer commutes every day.

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“That’s the key for us, keeping land and housing permanently affordable because a lot of homeownership programs don’t do that,” Williams emphasized. “They might be one-time affordable, but then it takes even greater subsidy to further the affordability of that house for the next homeowner. Or that house will just go back to the market even if it was affordable for that one homeowner. And that means that people are getting displaced further outside of Madison or even maybe to other cities. For some people, it’s just going to be hard to find places to live. And we are seeing increased homelessness and housing instability. And this is one way to preserve affordability, at least for moderately to low-income homeownership opportunities. And we’re seeing that it is getting harder and harder to buy a home even for people who could have afforded one five years ago.”

While it is not situated to meet the housing needs of all low-income families due to economic realities, MACLT is able to make a difference for some families that want to own a home, but fall short in the traditional mortgage market.

“With our funding sources, we are required to sell below 80 percent of the area median income, which for a single person, that’s around $55,000,” Williams said. “That’s not the lowest income bracket, although we try to make our homes as affordable as possible. And so we can sell down to 45 percent of AMI or 50 percent of AMI, which gets it in a much lower bracket. But this is a program really for first-time homeowners or people who have only really been able to afford to rent, but they have access like they could get a mortgage. It’s just that the home prices are just so expensive that they are stuck renting. And so this is for moderately low-income people rather than the lowest income who might be best supported by rentals. It’s one of the tools in the toolbox for affordable housing.”

Right now, MACLT owns about 70 units spread throughout the city of Madison and typically has about five houses come up for sale in any given year. However, Madison has intensified its efforts to expand the amount of affordable housing within its city limits and so it has appropriated additional funds to create more affordable housing. MACLY has another tool in its affordable housing toolbox.

“Recently, we were awarded affordable housing funds from the city of Madison, which is the first time that the city has used this fund from the tax levy,” Williams said. “We’re using those funds to buy and rehab some homes on the north and east side. With these funds we got from the city, we could be adding 2-3 more of these acquisition/rehab homes in the next year or two.”

The first of those homes at 3138 Hermina Street on Madison’s east side is now coming onto MACLT’s low-income housing market

“The home at 3138 Hermina Street is now for sale,” Williams said. “We partnered with Operation Fresh Start to rehab that house. Everything is in really good shape over there. It is two bedrooms. There is also a basement room that is 144 sq. ft. And the main floor is 746 sq. ft. It’s a small, two-bedroom, one-bath house with hardwood floors. There is a new roof. There is a built-in garage, a basement and a laundry room. It has a large backyard and porch with a garden. There are all new appliances and fresh paint. There is also new insulation. And it’s cute.”

While actual monthly housing costs vary due to variables like credit history, Williams gave a scenario for the Hermina Street house to give a range of possible monthly costs.

“With insurance, mortgage and interest, it should be around $850,” Williams said. “Our homeowners pay reduced taxes because we have an agreement with the city on the tax rate being tied basically to the value that we set on the house rather than the market value. That would make the taxes a little lower than normal. And if you factor in other costs, it might go up to $1,200 or so a month. But the mortgage would be close to $850. On the upper end, the house should be affordable to $50,000, but depending on other factors, it should be affordable to someone making quite a bit less than that.”

MACLT is holding an open house for the Hermina Street property on November 18th, although people can make arrangements to view the home through November 24th.

“People can email us at housing@maclt.org or look at our website, www.maclt.org for more information on getting on our list of people who are interested and eligible for our programming,” Williams emphasized. “And we also do orientations to talk through the program and answer any questions people may have. And I am always available to talk on the phone with people about it at 608-280-0131. We ask people to complete a pre-application, which is available on our website to consider their eligibility as a first step to getting on this list.”

Your homeownership dreams could become reality with an affordable home from MACLT. Check it out today.