Equity caps
From: Rich Lobdill (richardlsilcom.com)
Date: Thu, 12 Aug 1999 11:40:56 -0600 (MDT)

In the planning stages of Tierra Nueva, we discussed equity caps at some
length. At that time (with about 8 families out of an eventual 27) I'd say
we had a majority of members who were at least sympathetic with your second
'world view'. We were also concerned with people buying into the project for
quick turn profit (our land was donated and we _thought_ our houses would be
below market value, hah!). We also considered a CPI cap which would last for
say, five years and then the houses would float to market. That would weed
out the quick sales.

Long-story-short: We worked our butts off to get to 80% pre-sold so we could
start construction. The majority of those who came later would fit more into
your first 'world view'. But I'd say the biggest practical issue had to do
with the banks. The banks view was that they were not going to end up owning
a house (after foreclosure) which had a resale value linked to CPI or
anything other than market value. They would not loan on it. If they did the
appraised value (in their eyes) would be much less than market rate and
hence the loan you could get would be a small percentage of the actual cost.

I suppose you could find a small subset of banks in the U.S. which might
have a charter to support your second world view but we just saw that the
more we deviated from generally accepted home ownership schemes, the more we
limited our pool of possible buyers and the pool of funding sources.

I realize that this can sound like a sell-out to corporate America but
somewhere along the line we realized we had to choose our battles to be able
to build our neighborhood. And we did, and we did.

Rich Lobdill
Tierra Nueva
Oceano, California.

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