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Amazon's New Housing Initiative: What Realtors Need to Know

Amazon, the e-commerce behemoth, has recently ventured into the housing sector with its new pilot initiative.

While the company touts this as a step forward for underserved communities, realtors should approach this development with a discerning eye. Here's what you need to know:

The Basics of the Initiative

Amazon, in collaboration with the National Housing Trust (NHT), has launched a pilot initiative aimed at assisting individuals and families from underserved communities in purchasing homes. Currently, the targeted areas for this initiative are Washington state’s Puget Sound, Arlington, Virginia, and Nashville, Tennessee. Amazon's commitment to this project is a whopping $40 million, with the goal of aiding moderate-income families in their journey towards homeownership and generational wealth.

The pilot initiative is a branch of the Amazon Housing Equity Fund (HEF), which was established in 2021. Until now, HEF's primary focus has been on creating or preserving rental homes with guaranteed affordable rents. With this new initiative, Amazon is shifting its focus slightly towards homeownership, aiming to make it more feasible for underserved residents to buy homes.

NHT, a nonprofit organization, is dedicated to providing affordable homes to promote racial equity and diminish economic disparity. With Amazon's funding, NHT plans to collaborate with local organizations to construct and offer affordable homes for sale. The target? To facilitate homeownership for approximately 800 individuals and families, primarily those earning below 80% of the area's median income.

Community Land Trusts

Amazon's recent foray into the housing sector has garnered attention, especially with its exploration of the community land trust (CLT) model. While CLTs have been praised for their potential to provide affordable housing, there are nuances that realtors and potential homeowners should be aware of. Let's delve deeper into the implications of Amazon's use of CLTs.

Understanding Community Land Trusts

In the CLT model, the land is owned and managed by nonprofits or community-based organizations, while residents own their physical homes. By separating the ownership of land from the house, the idea is to make homes more affordable. The land's cost is not part of the home's purchase price, which can significantly reduce the upfront cost for potential homeowners.

The Potential Upsides

  1. Affordability: As mentioned, by removing the land cost, homes can be more affordable, making homeownership accessible to those who might not have been able to afford it otherwise.

  2. Community Stability: CLTs can help prevent displacement in rapidly gentrifying areas, ensuring long-term residents can remain in their communities.

  3. Long-term Affordability: CLTs often have resale restrictions to ensure the home remains affordable for future buyers.

The Concerns for Realtors and Homeowners

  1. Equity Limitations: One of the significant downsides of CLTs is the potential limitation on equity growth. Because of the resale restrictions, homeowners might not benefit from the full appreciation of their property. This could hinder their ability to build generational wealth, which is often a primary motivation for homeownership.

  2. Loss of Control: While homeowners own their physical homes, the land is owned by the trust. This can lead to potential conflicts regarding land use, modifications, or other decisions typically left to homeowners.

  3. Resale Challenges: The resale restrictions can make it challenging for homeowners to sell their property, especially if they want to move to a non-CLT area where housing prices might be higher.

  4. Potential for Exploitation: Large corporations venturing into CLTs, like Amazon, might prioritize their interests over those of the community. There's a risk that the model could be manipulated in ways that don't truly serve the residents or the broader community.

A Realtor's Perspective

For realtors, understanding the intricacies of CLTs is crucial. While they can offer a unique selling proposition in terms of affordability, it's essential to educate potential buyers about the potential long-term implications. Homeowners might be sacrificing future equity growth for immediate affordability.

Furthermore, realtors should be vigilant about corporate involvement in CLTs. While Amazon's initiative might seem promising, the company's primary allegiance is to its shareholders. It's crucial to question whether such ventures truly align with the best interests of the community and potential homeowners.

In conclusion, while the CLT model presents an innovative approach to housing affordability, it's not without its challenges. Realtors should approach Amazon's initiative with a discerning eye, ensuring they provide comprehensive advice to their clients.

Would you advise your clients to purchase a home in a CLT? Why or why not? Let us know in the comments below or share with a colleague in an upcoming CE Class!

References Amazon Staff. (2023, September 13). Amazon and the National Housing Trust are helping moderate-income residents become homeowners. Amazon.

Disclaimer: The Amazon logo is a registered trademark of Amazon. Our use or mention of it in this content is for informational purposes only and does not intend to infringe upon that trademark or suggest any affiliation with or endorsement by Amazon.

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