HIP is a homeownership program for low-to-moderate income households. Through HIP participating households receive two grants to help them purchase and rehab a home that is available on the open real estate market in Ramsey County. The grants are used to reduce the amount a household needs to purchase a home, and to ensure that the home purchased is structurally and mechanically safe and sound.
HIP Purchase Price Write-Down/Closing Cost Grant
HIP provides grant money to write down the purchase price of a house currently for sale in Ramsey County. The amount of the grant depends on need and eligibility of selected buyers.
The HIP Purchase Price Write-Down Grant stretches the amount of money a homebuyer can spend on a house.
HIP Rehab Grant
HIP provides grant funding for households to fix-up the houses they purchase through HIP. The grant is intended to ensure that HIP houses are decent, safe and mechanically and structurally sound. Rehab grant funds could be used for things like a new roof, a new furnace, and plumbing and electrical updates.
The HIP Rehab Grant takes care of major repair and maintenance issues that are present at the time of purchase. HIP homebuyers won’t have to worry about a large repair in their first few years of homeownership.
How HIP Adds up
Families and individuals selected to participate in HIP work with a real estate agent to find a house for sale in Ramsey County. Once a house is found Rondo CLT provides a free home inspection to see what types of repairs the house needs. If the HIP Rehab Grant can cover the cost of necessary repairs, the house is accepted for HIP. Necessary repairs are outlined in a scope of work. The home is then purchased. After closing, the homeowner works with Rondo CLT’s rehab specialist to hire contractors to do the rehab work outlined in the scope of work. Rondo CLT pays for the rehab.
Homes purchased through HIP become Rondo Community Land Trust homes — the homes are owned by the CLT homeowners, the land is held “in trust” so that affordable housing will be available to future generations of low-to-moderate income homebuyers. HIP homebuyers enter into the ground lease agreement with Rondo CLT.
Ground Lease Agreement
Home buyers participating in the HIP program purchase only the house and enter into a long term agreement with the Rondo CLT to lease the land. The agreement gives the CLT homeowner the exclusive right to use the land as they would if they owned it. Because Rondo CLT owns the land and the homeowner owns the home, Rondo CLT and the homeowner sign a ground lease that defines the roles and responsibilities of both parties. The ground lease allows the homeowner secure, long-term rights to use the land. CLT homeowners have exclusive use of the land, and they have full responsibility for the property.
Rondo CLT charges $15/month as a lease fee to all CLT homeowners. The lease fee gives the homeowner full use of the land and support services from Rondo CLT. The ground lease is renewable, can be transferred to the homeowner’s heirs, and ensures full rights of privacy. The ground lease requires that the home be owner-occupied at least eight months out of the year. The ground lease also provides a resale formula that is used to determine the sale price, if and when the homeowner decides to sell their Rondo CLT home.
Assuming the house has retained or increased its value, a Rondo CLT homeowner who sells his or her home will get all of their equity (the amount of money that they used as a down-payment as well as the portion of the mortgage paid off) plus 25% of the appreciated value of the home.
The sale price for the house is determined using an independent appraisal of the value of the house and the resale formula outlined in the ground lease.
The following is an example of how the selling price for a CLT house would be determined:
- You purchase a home for $165,000
- You decide to sell your home and it is now worth $200,000 (assessed by an independent appraiser)
- Your home value increased by $35,000 ($200,000-$165,000). Your share of the increased value is 25% ($35,000 x.25= $8,750) or $8,750
- You agree to sell your home to another low to moderate-income family for $173,750
In this scenario, the seller receives the amount they paid off of their mortgage, their down- payment, plus $8,750 from appreciation.
The resale formula preserves the affordability for the next family who will buy the Rondo CLT house.
Essentially, by agreeing to the resale formula, a Rondo CLT home buyer is agreeing to help another limited income family purchase a house in the same way that they were helped in purchasing their house.
Rondo CLT’s programs are for families and individuals with limited incomes. Income limits vary by household size. The current limits are:
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If your total household income before taxes is below these limits, you can apply to Rondo CLT.