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HB404 ENROLLED
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HB404
QN6PN14-3
By Representative Rafferty (N & P)
RFD: County and Municipal Government
First Read: 05-Feb-26
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First Read: 05-Feb-26
Enrolled, An Act,
Relating to counties and municipalities; to authorize
Class 1 municipalities to establish and regulate a nonprofit
community land trust for the purpose of creating affordable
housing alternatives; to provide for qualifications and
appointment of members of the board of directors; to authorize
an annual audit of the trust by the Department of Examiners of
Public Accounts; to require the community land trust to
publish eligibility selection criteria; to allow a community
land trust to acquire and lease real property to qualified
low-income and moderate-income lessees through 99-year ground
leases; to require all leases to include an option for the
trust or organizing municipality to buy back the property
interest; to authorize ad valorem property tax exemptions for
certain community land trust property; and to establish
standards for ad valorem assessment.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This chapter shall be known and may be cited
as the Alabama Community Land Trust Act of 2026.
Section 2. This chapter applies only to Class 1
municipalities.
Section 3. When used in this chapter, the following
words have the following meanings:
(1) AFFORDABLE HOUSING. Any residential dwelling unit
that is part of a project subject to a legally enforceable
restriction limiting occupancy between one and four family
housing units or to households comprising at least 40 percent
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housing units or to households comprising at least 40 percent
of the units in a multifamily project, either based on an
income threshold or rent and housing cost limitation. For
purposes of this definition, a unit need not be restricted in
perpetuity. Any unit subject to a qualifying restriction for
any portion of its compliance or regulatory period shall
constitute affordable housing during that period and a ground
lease may have a term longer than such period. These
restrictions are applicable under any of the following
programs or through lease or land use covenants that are
substantially similar:
a. Low Income Housing Tax Credits (LIHTC) Units. Any
unit qualifying for low income housing tax credits under 26
U.S.C. § 42, including units qualifying under the income
averaging election, regardless of the applicable income limit
or any other percentage of area median income designated for
the unit under the averaging set-aside requirements under that
section.
b. Project-Based Section 8 Units. Any unit covered by a
Housing Assistance Payments (HAP) contract under 42 U.S.C. §
1437f, including Housing Choice Vouchers, project-based rental
assistance (PBRA) or project-based vouchers (PBV).
c. Other Federally Assisted Units. Any unit receiving
rental assistance, financing, or use restrictions under any
federal affordable housing program, including, but not limited
to, HOME Investment Partnerships authorized under 42 U.S.C.
Chapter 130, USDA Rural Development Section 515 or 538
programs authorized under 42 U.S.C. § 1485, HUD Section 202 or
811 programs authorized under 12 U.S.C. § 1701q and 42 U.S.C.
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811 programs authorized under 12 U.S.C. § 1701q and 42 U.S.C.
§ 8013, and public housing under the United States Housing Act
of 1937, 42 U.S.C. §§ 1437 et seq.
d. State and Local Program Units. Any unit subject to a
deed restriction, regulatory agreement, or other legally
enforceable instrument imposed by or in connection with a
state, county, or municipal affordable housing program,
inclusionary zoning requirement, or housing finance agency
financing.
e. Other Income or Rent-Restricted Units. Any unit
subject to an income restriction at or below 120 percent of
area median income (AMI) or a rent restriction requiring that
gross rent, including utilities, not exceed an affordable
level as determined by reference to AMI, HUD-published fair
market rents, or an equivalent benchmark established by a
governmental or quasi-governmental authority, provided that if
relying upon this restriction, at least 90 percent of the
units in the project must be subject to this restriction.
(2) BOARD OF DIRECTORS. The governing body of a
community land trust elected and formed in accordance with the
bylaws of such entity, subject to the requirements of this
act.
(3) COMMUNITY LAND TRUST. An entity that:
a. Provides affordable housing to low-income and
moderate-income families through ground leases; and
b. Is organized by a Class 1 municipality.
(4) GROUND LEASE. A lease between a community land
trust and a tenant of real property owned by a community land
trust that is designed to ensure that the property remains
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trust that is designed to ensure that the property remains
affordable housing.
(5) LIMITED EQUITY PRICE. A price for the sale of any
improvement located on community land trust-owned land which
is determined by means of a resale-restricted formula.
(6) LOW-INCOME FAMILY. A family household with an
aggregate income at or below 80 percent of the metro
statistical area median income adjusted for family size, as
determined by the Department of Housing and Urban Development
(HUD).
(7) MODERATE-INCOME FAMILY. A family household with an
aggregate income at or below 120 percent of metro statistical
area income adjusted for family size, as determined by HUD.
(8) ORGANIZING MUNICIPALITY. The Class 1 municipality
creating the community land trust pursuant to this chapter.
(9) PREEMPTIVE PURCHASE OPTION. The right of a
community land trust or the organizing municipality to
purchase the improvements constructed on the community land
trust-owned real property pursuant to a ground lease prior to
any other party.
(10) PROCEED-SHARING PROVISIONS. The resale formula
provisions in the ground lease which establish the maximum
resale price and determine the allocation of sale proceeds
between the seller and the preservation of affordability for
future buyers.
(11) PUBLIC RECORDS. Shall have the same meaning set
forth in Section 41-13-1, Code of Alabama 1975, as if the
community land trust was a subdivision of government and the
community land trust's transactions constituted public
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community land trust's transactions constituted public
business. Public records shall include any document that
reflects the community land trust ownership, acquisition or
leasing of real property, contracts with and records of
vendors, and correspondence with any person or entity.
(12) QUALIFYING LESSEE. An individual or family that
meets the criteria of low-income family or moderate-income
family, as defined in this section, on the effective date of
the lease.
(13) REAL PROPERTY. Both land and improvements,
including a leasehold interest in real property.
(14) RESALE-RESTRICTED FORMULA. A formula designed to
keep community land trust-owned real property affordable, or
the requirements included as part of the program which
determined the property as affordable housing.
(15) SPECIFIED INTEREST. The leasehold interest in the
real property and associated structural improvements as
distinct from the fee simple interest in the land retained by
the community land trust.
Section 4. The governing body of a Class 1 municipality
within the State of Alabama may create, by ordinance, one or
more community land trusts to operate within its jurisdiction.
A community land trust shall be organized as an Alabama
nonprofit corporation.
Section 5. (a) The purpose of a community land trust is
to:
(1) Promote long-term affordable housing for low-income
and moderate-income families;
(2) Promote productive use of land through ground
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(2) Promote productive use of land through ground
leases; and
(3) Promote investment in affordable housing for
long-term community benefit.
(b) The bylaws of a community land trust shall provide
all of the following:
(1) The organization is membership-based.
(2) Corporate membership is open to the general public.
(3) Membership meetings are open to the general public,
including nonmembers.
(c) The board of directors shall consist of seven
directors serving four-year terms. No director shall be a
municipal, county, or state elected official and no immediate
family member or member of the official's household shall be a
director. If an existing director or other individual becomes
an elected official, thereby disqualifying that individual or
another from serving as a director, that existing director
shall promptly tender his or her resignation.
(1) Three directors shall be appointed by the governing
body of the organizing municipality and shall have expertise
and experience in careers or activities involving real estate,
property management, finance, real estate law, transit
planning, residential contracting, banking, architecture, or
city planning.
(2) Three directors shall be appointed by the mayor of
the organizing municipality. One director shall be a
professional in the finance or banking industry with
experience in affordable and low-income housing, lending,
finance, or tax credits for residential and commercial
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finance, or tax credits for residential and commercial
properties. One director shall be a registered architect,
landscape architect, or city planner with experience in long-
range planning and neighborhood/community master planning. One
director shall be a specialist in housing-related activities
with experience in developing affordable housing for
low-income and moderate-income families.
(3) One director who meets the requirements of
subdivision (1) of this section shall be appointed by the
Board of Directors of the Alabama Housing Finance Authority.
The appointed director may be a member of that board.
(4) The board of directors shall reflect the diversity
of the community served by the community land trust to the
extent practicable. No board member shall be an employee or
independent contractor of the community land trust or have any
immediate family member or household member who is an employee
or independent contractor of the community land trust, except
that the executive director shall be an ex officio member of
the board of directors. A director may be removed by the
appointing authority in the same manner as the original
appointment. The board of directors shall adopt, review
annually, and revise if necessary, a conflict of interest
policy binding upon the board and staff of the community land
trust.
(d)(1) The board of directors may establish, through
resolutions or bylaws, provisions for director compensation,
including salary, per diem, and travel expenses.
(2) The board of directors may employ staff through
resolutions adopted by the board. Employees of the community
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resolutions adopted by the board. Employees of the community
land trust shall not be subject to the Merit System Act. The
community land trust shall not employ an elected municipal,
county, or state official or any immediate family member or
member of an official's household as an employee or
independent contractor.
(3) Meetings of the board of directors, including
quorum requirements and participation by electronic means,
shall be governed by Sections 10A-3-2.11 and 10A-3-2.13, Code
of Alabama 1975.
(4) Directors shall be immune from civil liability for
reasonable acts or omissions made within the scope of their
official duties, except for acts or omissions involving
willful misconduct, negligence, or fraud.
(5) The community land trust shall not: (i) engage in
political activity, lobbying, political consultation, or
public advocacy relating to the operation, financing, or
organization of the community land trust; or (ii) employ any
person or engage any vendor to engage in any material part in
political activity, lobbying, political consultation, or
public advocacy relating to the operation, financing, or
organization of the community land trust.
(6) The community land trust shall be audited annually
by the Department of Examiners of Public Accounts, with the
cost paid by either the sponsoring municipality or the
community land trust. The audits shall be made publicly
available on the sponsoring municipality's website and
promptly provided to the public upon request.
Section 6. (a) Subject to the restrictions of this act,
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Section 6. (a) Subject to the restrictions of this act,
a community land trust shall have all the powers permitted to
a nonprofit corporation under Chapter 3 of Title 10A, Code of
Alabama 1975.
(b) Notwithstanding subsection (a), the powers and
purposes of the community land trust include, but are not
limited to:
(1) Acquiring real property with the intention that the
property will be used for residential purposes;
(2) Leasing affordable housing;
(3) Constructing or providing for the construction of
improvements to real property to constitute affordable
housing;
(4) Entering into ground leases with qualified lessees
and any other agreements or real property transactions related
to the purposes of the community land trust;
(5) Engaging in other activities related to the sale,
leasing, management, maintenance, and preservation of
properties owned by the community land trust. This includes
mortgaging the trust's interest in real property, or entering
into or subordinating its rights to third parties through land
use restrictive covenants or similar instruments concerning
affordable housing;
(6) Accepting funding from the organizing municipality
and any other source authorized under Chapter 3, Title 10A,
Code of Alabama 1975;
(7) Subordinating the community land trust's interest
in ground leases to parties financing affordable housing on
the related property, by entering into lease addendum with or
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the related property, by entering into lease addendum with or
agreements with financing parties, agreeing not to terminate a
ground lease except as mutually agreed with such parties;
(8) Performing any other act or exercising any other
power that is consistent with or incidental to this act, or
the operation or administration of the community land trust.
(9) Provide pre-purchase counseling and homeownership
education to prospective tenants and qualifying owners related
to the community land trust's housing programs, in accordance
with HUD-approved housing counseling standards;
(10) Conduct outreach, distribute public information,
and facilitate communications about the community land trust's
housing programs, eligibility criteria, and application
procedures;
(11) Work with and provide technical support to
lenders, nonprofit organizations, and other housing entities
to promote the community land trust's affordable housing
goals.
(c) In conducting its activities, the community land
trust shall use good faith efforts to:
(1) Use competitive, transparent processes to offer for
lease real property or improvements on real property; and
(2) No later than May 1 of each year, publish a report
that includes: (i) activities for that year; (ii) the status
of any real property owned by the trust during the year; (iii)
details of contracts worth fifty thousand dollars ($50,000) or
more related to real property interests; (iv) sources of
funding for the trust; (v) a list of employees, board members,
and independent contractors along with their compensation; and
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and independent contractors along with their compensation; and
(vi) any other material matters requested by the Alabama
Housing Finance Authority. This report shall be posted on the
sponsoring municipality's website and sent to the Alabama
Housing Finance Authority.
(d) The community land trust shall promptly post
selection criteria, scoring methods, and eligibility
requirements when using competitive processes for affordable
housing eligibility. When merit-based decisions are not
suitable or when there is over-subscription due to high
demand, the trust will adopt lottery or wait-list processes as
appropriate, ensuring they prohibit discrimination and
favoritism. Sole-source awards, or other noncompetitive
contracts or grants awarded to a single developer, contractor,
or entity should be avoided, and if used, must be documented,
justified in writing, and approved by the board of directors.
Section 7. (a) A community land trust may lease real
property only for the primary purpose of affordable housing.
(b) For multifamily projects or individual housing
units on a tract of real property owned by the community land
trust, multiple tracts that are contiguous, located close
together in a geographic area, or within the same platted
subdivision are considered a single tract.
(c) An individual or family tenant who is qualified to
live in affordable housing at the effective time of the lease
may renew the lease without redetermining the tenant's
qualifying status. When a qualifying lessee is an entity
rather than an individual or family, the real property subject
to the ground lease shall be occupied by individuals or
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to the ground lease shall be occupied by individuals or
families who meet the income requirements of the applicable
affordable housing program, as defined in Section 3(1).
Section 8. (a) Each ground lease shall grant the
community land trust and the organizing municipality the right
to purchase all improvements to the real property, subject to
any rights held by or granted to a mortgagee or other holder
of an interest in the real property, including under land use
restrictive covenants or other restrictive agreements.
(b)(1) The community land trust shall have 90 days to
exercise its purchase option from the date when notice of the
event that triggers the purchase option is received.
(2) If the community land trust fails to exercise its
option within those 90 days or declines the option subject to
any superior rights, the organizing municipality shall have an
additional 90 days to exercise the purchase option from the
date when notice is received that the community land trust has
not performed or declined its purchase option.
(3) The community land trust shall act in an
expeditious manner in all matters related to negotiating
purchase agreements under this subsection.
(c)(1) Subject to any superior rights, the community
land trust may assign its purchase option to a third party
that agrees to operate the improvements as affordable housing
regardless of any other criteria established in the ground
lease for the transfer of an interest in residential real
property. Any sale pursuant to the assignment must be
completed in the same time frame applicable to the community
land trust.
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land trust.
(2) Subject to any superior rights, the organizing
municipality may assign its purchase option to a qualifying
owner regardless of any additional criteria established in the
ground lease for the transfer of an interest in residential
real property. Any sale pursuant to the assignment must be
completed in the same time frame applicable to the organizing
municipality.
(3) The community land trust shall act in an
expeditious manner in all matters related to the assignment of
its purchase agreements under this subsection.
(d)(1) Subject to any superior rights, including the
payment in full of any mortgages, the failure of a community
land trust to exercise the preemptive purchase option does not
prohibit the community land trust from exercising any other
right established in the ground lease, including the right to
share in the proceeds of the first sale to a purchaser
following the failure of the community land trust to exercise
its right to repurchase.
(2) If the community land trust and organizing
municipality both fail to exercise or decline their purchase
option within the specified time period, the qualifying owner
shall be allowed to sell the improvements to any buyer at a
negotiated price, provided that a sale does not violate any
other restriction, mortgage, or interest affecting the real
property.
(3) Only the initial arm's-length, third-party
transaction of the specified interest in real property,
occurring after the community land trust and organizing
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occurring after the community land trust and organizing
municipality either fail to exercise or decline their purchase
option, is subject to the purchase option and pro-rata sharing
provisions of the ground lease.
(4) A second or later purchaser who acquires the
specified interest in an arm's-length, third-party transaction
at fair market value receives title free of any rights
established in the ground lease or deed of conveyance that
would otherwise be enforceable by the community land trust.
(5) Notwithstanding subdivision (4), if real property
is subject to a ground lease at the time a subsequent
purchaser acquires the specified interest after the community
land trust and organizing municipality have not exercised
their preemptive purchase options, the purchaser shall remain
obligated concerning any applicable ground lease payment for
the remaining lease term unless otherwise agreed to by the
subsequent purchaser and the community land trust or their
respective successors in interest.
(6) The community land trust, or its successor in
interest, shall not have the right to eject a mortgagee, its
purchaser at foreclosure, or a leaseholder by an assignment in
lieu of foreclosure, or the subsequent purchaser for any
reason other than failure to pay regularly scheduled rent
payments, not including any fees or other amounts resulting
from a default in payments.
Section 9. (a) A ground lease shall have a maximum term
of 99 years and may be renewed under conditions set forth in
the ground lease.
(b) A ground lease shall include, but is not limited
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(b) A ground lease shall include, but is not limited
to, the following provisions:
(1) The term and, if applicable, renewability of the
ground lease.
(2) The resale-restricted formula.
(3) A community land trust's preemptive purchase option
right.
(4) An organizing municipality's preemptive purchase
option right.
(5) Any term that, if violated, becomes grounds for
cancelling the ground lease, subject to any superior rights of
a mortgagee or other holder of an interest in the real
property, and in accordance with the provisions of Section
8(d).
(6) Occupancy requirements consistent with the basis
used to determine whether the specified interest is affordable
housing.
(7) The amount of the ground lease fee and the
conditions under which the fee may be increased.
(c) A community land trust shall record any ground
lease in its entirety.
Section 10. (a) For real property acquired for
residential purposes, owned by a community land trust, and not
subject to a ground lease, the real property shall be exempted
from all ad valorem taxation for a period of three years if
the community land trust intends the real property to be used
as affordable housing, and the community land trust is either:
(1) Conducting or causing the construction on the real
property, including, but not limited to, construction of a new
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property, including, but not limited to, construction of a new
residential property, rehabilitation of an existing property,
and related tasks; or
(2) Attempting to transfer or lease the real property
or specified interest in accordance with Section 5 of this
act.
(b) Real property subject to a ground lease used as
affordable housing included in any leasehold interest shall be
exempt from 20 percent of all property taxes for 20 years, as
long as it remains affordable housing.
Section 11. (a) A nonprofit organization that loses its
nonprofit corporation status may no longer operate as a
community land trust.
(b) After losing its nonprofit corporation status, the
organization must transfer, within 120 days and without
financial compensation other than incidental associated costs,
its interest in any ground leases, in order of priority, to
either:
(1) The organizing municipality; or
(2) A municipal entity or a nonprofit affordable
housing organization designated by the organizing municipality
that shares the purposes of the community land trust and has
received a determination under 26 U.S.C. § 501(c)(3).
(c) If the entity or organization that gives up or
loses its nonprofit corporation status fails to begin the
transfer of its interest in any ground leases or deeds of
conveyance within 120 days as provided in subsection (b), all
interests shall be transferred to the organizing municipality
effective immediately by operation of law and shall be
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effective immediately by operation of law and shall be
reflected by the organizing municipality by recording notices
of transfer in the real property records where the leases are
recorded.
Section 12. The provisions of this act shall control
where inconsistent with the provisions of another law.
Section 13. This act shall become effective on October
1, 2026.
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1, 2026.
________________________________________________
Speaker of the House of Representatives
________________________________________________
President and Presiding Officer of the Senate
House of Representatives
I hereby certify that the within Act originated in and
was passed by the House 31-Mar-26.
John Treadwell
Clerk
Senate 07-Apr-26 Passed
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