Cohousing-L Mailing List: Re: Limited equity options

[David L. Mandel (75407.2361]

Last of three things I'm putting out there tonight before I turn into a total 
nerd: 

Dan Everett of Georgia writes:

>We are drawing up our documents, and are considering a clause which grants 
>the community the option to buy any member's lot at a "limited equity value,"
>equal to the money they put into their house plus inflation, before they
>can sell it elsewhere at a higher price.

>The intent of this clause is to prevent the value of these lots from rising
>so rapidly that they are no longer affordable to moderate-income families.
>(As community living becomes the trendy lifestyle of the future!) 

>We also wish to attract people who see this as a place to live rather than 
>as a lucrative real-estate investment.

>Does anyone have experience with such a provision? How well has it worked
>out for you?

                        
It's a great idea, but it may not be legal, so check carefully. When we're 
talking about fee simple ownership, capitalism gets very uptight about 
anything that smells like a "restraint on alienation." For you non-lawyers, 
that means restrictions on how and to whom you can sell your private property.
Laws will vary from state to state, and I don't know Georgia. 

Now if you were a co-op as opposed to condo, there would be no problem. It's 
been done a lot. But the conventional wisdom is that it's harder to find 
initial financing for co-ops. Probably true, though Winslow did it (without 
the limited equity component).

Another way it can be done, and we did this in Southside Park (Sacramento), is
to have some subsidy as part of a government program for affordable housing 
that allows that kind of restriction. Eleven of our 25 units were bought by 
people whose incomes were low enough to qualify for silent second mortgages 
from a city agency. Within a certain time frame (10 or 30 years, depending on 
the level of subsidy), they are allowed to sell only to someone in the same 
income category and for a price no more than their initial purchase adjusted 
for inflation. 

Other units have no such restrictions, and after the 10/30 year period, all 
are lifted, so our success in maintaining affordability is medium-term at 
best. But it's something.

I spoke about this at greater length in the financing panel at the Boulder 
conference in October, as did others. So anyone interested in this type of 
thing might want to order the tape. Also, we're happy to share some of our 
documents with other groups for the cost of photocopying. And let's hear from 
others who have done or are considering similar plans.

Long live affordable cohousing!