Legal Definitions - limited equity housing

A Limited Equity Housing Cooperative (LEHC) is a unique type of affordable homeownership arrangement where residents purchase shares in a non-profit cooperative corporation that owns the entire property, rather than directly owning their individual unit.

The defining characteristic of an LEHC is that it places restrictions on the amount of profit, or "equity," a member can earn when they sell their shares. This limitation is crucial for preserving the long-term affordability of the housing for future residents. The resale price is typically determined by a specific formula set by the cooperative, often allowing for the original purchase price plus a modest increase for inflation and approved improvements, but not the full market value.

Here are some examples of how Limited Equity Housing Cooperatives work in practice:

• Urban Revitalization for Essential Workers: Imagine a city struggling with high housing costs, making it difficult for teachers, nurses, and firefighters to live where they work. A non-profit organization converts a vacant downtown office building into residential units, establishing it as an LEHC. Essential workers purchase shares in the cooperative to live in these units. When a teacher decides to retire and move, they can sell their shares for their original investment plus a pre-determined percentage increase for inflation and any approved renovations they made. They cannot sell at the soaring market rate of comparable units nearby. This ensures that the unit remains affordable for the next teacher or essential worker who needs housing in the city, rather than becoming an expensive market-rate condominium.

• Senior Living in a Changing Community: In a popular coastal town, property values are skyrocketing, making it difficult for long-time senior residents on fixed incomes to stay in their community. A local housing authority develops a new senior living complex structured as an LEHC. Seniors buy into the cooperative, gaining the security of homeownership without the burden of a full mortgage on an individual unit. If a resident passes away or needs to move to a higher level of care, their shares are sold back to the cooperative or to another qualifying senior at a price capped by the LEHC's formula. This prevents the units from being converted into luxury properties and ensures that the complex continues to serve its original purpose of providing affordable housing for seniors in the community.

• Preserving Rural Community Access: A small, picturesque mountain town is experiencing an influx of wealthy seasonal residents, driving up housing prices and pushing out local families who work in the town's service industries. A community land trust partners with residents to establish an LEHC for a cluster of homes. Families purchase shares in the cooperative, gaining stable housing. When a family needs to move, the resale price of their shares is calculated to provide them with a fair return on their investment and any approved improvements, but it is significantly lower than what the open market would bear. This mechanism ensures that these homes remain accessible to local working families, preventing them from being bought up as vacation homes and helping to maintain the social and economic fabric of the community.