Permanently Affordable HousingWith housing in California becoming increasingly less affordable for people who live and work throughout the state, there is increased interest in creating housing that is affordable not only for the initial occupants, but for future occupants, as well. There are many ways to create housing that is permanently affordable. Rental housing that is owned and operated by housing authorities and nonprofit corporations are good examples of permanently affordable affordable housing. The rents for these units remain affordable because the purpose and mission of the owners are to provide affordable housing. There are also a number of models for creating of permanently affordable ownership housing. These models include (click on the label to jump to the section on each of these models): |
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Permanent Affordability vs Subsidy Recapture One of the ongoing debates concerning affordable ownership housing in California and the nation is whether newly created affordable units should be “permanently affordable” or whether the subsidy should be recaptured and made available to subsidize new units. Subsidy recapture can include deferred interest or shared appreciation to increase the amount that is available to subsidize future units. A Flash presentation that advocates for subsidy retention (permanent affordability) can be viewed online at: www.rjacobus.com/cpan/SubsidyRetention1.5.html Information on various models of permanently affordable housing is available below: |
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Deed Restricted Ownership Housing Under construction - please check back later. |
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The Community Land Trust or CLT model is designed to make housing more affordable by dividing the ownership of the home from ownership of the land. CLTs are nonprofit corporations that are dedicated to creating and preserving affordable housing. Individual home owners receive a deed for their homes and lease the land beneath their homes from the CLT. Learn more about CLTs at the following websites. General CLT Information Online CLT Articles
Individual CLT Websites
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Limited Equity Housing Cooperatives The Limited Equity Housing Cooperative or LEHC model is a form of group home ownership that provides many of the benefits of individual home ownership. In an LEHC, the members own stock or shares in the corporation that owns the housing. As co-op members, they have the right to occupy their individual unit. Like other home owners, co-op members qualify for the home owners exemption on their property taxes. They can also deduct their share of the co-op's mortgage interest and property taxes on their state and federal income tax returns. The simple answer is that an LEHC is a housing cooperative that places limits on the resale value of its memberships or shares. Under California law, co-ops are a form of real estate subdivision. They are generally subject to the same local planning requirements (Subdivision Map Act) and DRE disclosure requirements (Subdivided Lands Law) as condominiums. Rather than sell individual units, co-ops sell memberships or shares in the cooperative corporation, which owns and operates the property. Each co-op membership includes the right to occupy a specific unit. The deed to the whole project remains with the co-op – members do not receive deeds for their individual units. LEHCs are a special form of co-op that is defined under California law. The law limits the increase in resale value of membership in the co-op to 10% of their original sales price each year. LEHCs typically sell memberships for 5% to 10% of the market value of the individual units. So for a unit that has a market value of $300,000, the memberships would sell for $15,000 to $20,000. The co-op would borrow the balance using one or more blanket loans that are secured by the whole project. The monthly home owners’ dues in a cooperative generally include the mortgage payments and property taxes as well as everything else that condo HOA dues include – Individual co-op members can deduct their share of the mortgage interest and property taxes on their tax returns. They also qualify for the home owners' property tax exemption. Under state law, the annual appreciation for memberships can be no more than 10% of the original share value per year. This would be $1,500 per year for a $15,000 membership or $3,000 per year for a $40,000 membership. Some co-ops set lower increases in their bylaws. An LEHC that receives specified government financing and meets certain other standards can be exempt from DRE’s white report requirement. Visit the following websites to learn more about LEHCs. Material from David Thompson's Co-op Housing Seminar
General LEHC Information
Individual LEHC Websites
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The Mutual Housing Association or MHA model provides residents a high level of control over their housing without generally having an ownership interest. MHAs are nonprofit corporations that typically develop or purchase multifamily housing for their resident members. In California, MHA members are not considered home owners and therefore do not qualify for home owner tax deductions. However, MHA projects can qualify for Low Income Housing Tax Credits and California's Welfare Property Tax Exemption, which more than off-set the lack of tax deductions for low income members. Visit the following websites to learn more about MHAs. General MHA Information
Individual MHA Websites
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(c) 2004-5 San Luis Obispo County Housing Trust Fund - This page was last updated on 10/22/2007