Re: Affordable (Co)housing | <– Date –> <– Thread –> |
From: R Philip Dowds (rphilipdowdsme.com) | |
Date: Tue, 20 Apr 2021 05:52:06 -0700 (PDT) |
I would offer a bit of input based on our Cornerstone experience: At Cornerstone, Cambridge MA, we have four “affordable” units and 28 market-rate units. Purchase and sale of affordable is municipally mandated and controlled, at prices well below (one-half or less) market rate. Officially, these four units are known as “limited equity” units — meaning the purchaser can realize a modest gain at time of resale, but cannot reap huge “profits” from real estate appreciation. So buying and residing in a limited equity unit is financially better than renting (where all your rent money goes to the landlord) … but not as good as investing in something that appreciates at market rate. Some think that the limited equity program is supposed to provide a “starter home”, from which financially successful households can eventually graduate to a better, market-rate unit. The below-market price of the unit sale is initially subsidized by the developer. Which in our case means the 28 market-rate units, for which the sales price of origin was set higher to include the subsidy. One might think that the cost of subsidy should be distributed more broadly across the general public, but the Cambridge theory of “inclusionary zoning” is that developers are (relatively) rich and competent, and can make their financial pro formas work for inclusion of a few below-market units. In Cambridge, which has a very strong real estate market, the average of residential property prices tends to inflate at about 6% per year (or, appx 3% relative to inflation). Meanwhile, over the last decade, the DJIA has inflated about 12% annually (or about 9% relative to inflation). (Some think that the DJIA is an important indicator of national financial health; others do not …) Two of our affordable units continue in occupancy by the purchasers of origin, selected by the City more than 20 years ago. Two have turned over, at least once. By deed restrictions, the City controls the price of resale and the selection of the buyer. Cornerstone is not allowed, and does not seek, to “interfere” with buyer selection — and both the City and Cornerstone are fully committed to implementing “fair housing” laws that prohibit “discrimination" along defined demographic attributes. In addition, over the years, the City and Cornerstone have developed a pretty good working relationship in the mutual hope of matching municipally qualified buyers to the atypical characteristics of the cohousing lifeway. A personal comment based on this information: Is it a financially “dumb” move to buy into a limited equity unit, if a market-rate unit is (barely) within reach? The historical evidence suggests No. In terms of household wealth-building, it looks like toughing it out in a limited equity unit could release cash for investment in stocks and mutual funds, which often offer far higher returns. This might explain why some households choose to remain in limited equity units for a long time. Thanks, Philip Dowds Cornerstone Village Cohousing Cambridge, MA 02140 mobile: 617.460.4549 email: rphilipdowds [at] me.com > On Apr 20, 2021, at 7:43 AM, Diana Carroll <dianaecarroll [at] gmail.com> > wrote: > > “ How do they build equity? If they stay for many years do they eventually > own the unit?” > > Yes. It’s regular ownership. They have a regular mortgage from a regular > bank. Every dollar they pay towards the principal builds their equity. If > they get a 30 year mortgage, they will own the house outright in 30 years. > > The only thing different about their ownership from a standard unit is a > restriction on who they can sell to and how much the can sell for. (And the > former is negotiable—if they are unable to find a qualified buyer within a > certain time frame, they can sell to anyone.) > > > On Tue, Apr 20, 2021 at 7:36 AM Sharon Villines via Cohousing-L < > cohousing-l [at] cohousing.org> wrote: > >>> On Apr 19, 2021, at 9:06 PM, Diana Carroll <dianaecarroll [at] gmail.com> >> wrote: >> >>> They still get some cushion. They will get back all the equity they have >>> built up, meaning their downpayment and the amount they have paid down >> the >>> mortgage. If they started with 5% down (that's what our program requires) >>> and lived there for several years, maybe they could leave with 15% or >> more >>> back in cash. That would help them have the 5% down for another similar >>> property, or plenty for first/last/security if they go back to renting. >> So >>> it isn't a total loss. >> >> It sounds like they do get something. >> >> How do they build equity? If they stay for many years do they eventually >> own the unit? >> >> Sharon >> ---- >> Sharon Villines, Washington DC >> >> "The forest was shrinking, but the trees kept voting for the Axe, for the >> Axe was clever and convinced the Trees that because his handle was made of >> wood, he was one of them." -- Turkish proverb >> >> _________________________________________________________________ >> Cohousing-L mailing list -- Unsubscribe, archives and other info at: >> http://L.cohousing.org/info >> >> >> >> > _________________________________________________________________ > Cohousing-L mailing list -- Unsubscribe, archives and other info at: > http://L.cohousing.org/info > > >
- Re: Affordable (Co)housing, (continued)
- Re: Affordable (Co)housing Ann Zabaldo, April 19 2021
- Re: Affordable (Co)housing Diana Carroll, April 19 2021
- Re: Affordable (Co)housing Sharon Villines, April 20 2021
- Re: Affordable (Co)housing Diana Carroll, April 20 2021
- Re: Affordable (Co)housing R Philip Dowds, April 20 2021
- Re: Affordable (Co)housing Sharon Villines, April 28 2021
- Re: Affordable (Co)housing Bob Leigh, April 30 2021
- Re: Affordable (Co)housing Sharon Villines, May 1 2021
- Re: Affordable (Co)housing Sharon Villines, April 20 2021
Results generated by Tiger Technologies Web hosting using MHonArc.