Re: Affordable (Co)housing
From: R Philip Dowds (
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 
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.

Philip Dowds
Cornerstone Village Cohousing
Cambridge, MA 02140

mobile: 617.460.4549
email:   rphilipdowds [at]

> On Apr 20, 2021, at 7:43 AM, Diana Carroll <dianaecarroll [at]> 
> 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]> wrote:
>>> On Apr 19, 2021, at 9:06 PM, Diana Carroll <dianaecarroll [at]>
>> 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
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