Cohousing-L Mailing List: capping resale prices

[C2pattee (C2pattee]

I, too, believe that artificially holding down the resale price of a person's 
home can have unintended, and very negative, consequences.  However, Hartford 
(CT) Area Habitat for Humanity (and maybe the method is universally used by 
Habitat chapters)has a method to capture the "excess profit", if any, from 
resale of a home whose initial cost was subsidized by volunteer labor and 
donation of materials.  

Habitat houses are sold at cost of construction, which works out to about 
$80,000 for 'simple, decent housing', with 3-4 bedrooms and no garage.  Habitat 
sells the house to the homeowner with a no-interest morgage.  The key element 
for recapturing 'profit' above the sale price, should the homeowner choose to 
sell, is a second morgage that is repaid *only* if the new sales price is above 
the original price.

In the city of Hartford itself, this is a pretty moot issue, since we literally 
couldn't give away houses in certain areas of the city, and it's unlikely that 
any Habitat house in Hartford would sell for the actual price of construction 
(which is why the city fathers love us.  We're almost the only orgaization 
putting up new housing in the city, and we finally learned that even poor 
people want to be in a single family house, in a safe part of town.)  On the 
other hand, in the wealthy town of Farmington, just outside the city, we built 
two homes on scraggy little pieces of land that the town wouldn't even sell to 
us (they are leased for 99 years at $1/yr) because of past scandals in other 
towns with get-rich-quick resales of affordable housing.  I doubt those 
families will part with their houses any time soon, but if they did, they would 
go for much more than the original price - the morgage would be paid, the 
family would get back their already-paid principle, and Habitat would claim the 
remainder via the second morgage (which i think decreases over a 20 year period 
so the family will be able to benefit from real estate market appreciation to 
some degree).

This system obviously requires an organization with resources for initial 
capitalization and a long term time frame for implementation.

Christine Pattee
late of Greater Hartford Cohousing.

In a message dated Sun, 14 Jul 2002 8:15:02 PM Eastern Standard Time, 
cohousing-l-request [at] cohousing.org writes:

> Many times one will hear of cohousing groups which require that a unit be
> sold for no more than was paid for it.  While I understand the desire to
> eliminate the profit motive, I believe that in its pure form this rule is
> likely to be quite poisonous.  Suppose an owner wants to improve the unit
> in a way that will cost $15,000.  If they are not alowed to recoup those
> costs when they sell, then the rule basically forces them to donate that
> money to the next owner.  For many people, myself included, this would
> not be acceptable, and I probably wouldn't make the improvement.  Similarly
> the rule demotivates maintenance, since those costs can't be recovered either.
> 
> This rule was proposed for River Rock but (wisely, I 
> believe) never passed.
> I personally wouldn't have joined if it had.
> 
>    Howard A. Landman
>    River Rock Commons
>    Fort Collins CO
> 
> --__--__--


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