Class 1 cities may create land trusts for affordable housing

A Class 1 municipality may create one or more nonprofit community land trusts by ordinance. The authorization applies only to Class 1 municipalities in Alabama and to trusts organized as Alabama nonprofit corporations. The trust must operate within the organizing municipality's jurisdiction. The trust's bylaws must provide public membership and open membership meetings. The seven-member board must meet the appointment, experience, independence, and conflict-of-interest rules in the act. The trust must receive an annual audit, and the audit must be made public. The authorization applies beginning October 1, 2026.

A community land trust may acquire, build, lease, and manage housing for low- and moderate-income households through ground leases lasting up to 99 years. A qualifying lessee must be an individual or family whose income is no more than 120 percent of area median income, with low-income households defined at 80 percent or less. Each lease must state the term, resale limits, occupancy rules, lease fee, and conditions for fee increases. The trust and organizing municipality must receive purchase options for the home's improvements, subject to superior mortgage or other property rights. A qualifying tenant may renew without another income check. If both purchase options are declined or expire, the owner may sell subject to other restrictions and the ground lease. The trust has 90 days after receiving notice of a triggering event to use its purchase option; the municipality then has an additional 90 days if the trust does not use it.

Qualifying community land trust property may receive partial or temporary exemption from ad valorem property taxes. The rules cover residential property owned by a community land trust that is intended for affordable housing, including property under a ground lease. Property not yet under a ground lease may be exempt for three years while the trust builds, rehabilitates, transfers, or leases it for affordable housing. Property under a ground lease may be exempt from 20 percent of property taxes for 20 years. The 20-year exemption applies only while the property remains affordable housing. The three-year exemption applies to qualifying property before a ground lease; the 20 percent exemption applies for up to 20 years after the property is subject to a qualifying ground lease.

Community land trusts must follow public-accountability rules and must transfer their ground-lease interests if they lose nonprofit status. The rules apply to each community land trust, its board, staff, contractors, and property interests held under ground leases. Trusts must publish selection rules, use fair competitive processes when appropriate, and document and approve certain sole-source awards. Trusts may not engage in political activity, lobbying, or related advocacy about their operation, financing, or organization. A trust that loses nonprofit status must transfer its ground-lease interests to the organizing municipality or an eligible designated organization without financial compensation beyond incidental costs. The annual report is due by May 1; after nonprofit status is lost, the transfer must begin within 120 days, or the interests transfer to the organizing municipality by operation of law.