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Simple English definitions for legal terms
limited equity housing
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A quick definition of limited equity housing:
A limited equity housing is a special type of housing where people can share ownership of a building with other families. It is managed by a nonprofit cooperative corporation and is designed to be affordable for low-income families. When someone wants to sell their share of the building, they can only make a limited amount of money to keep the price affordable for others. This type of housing was created by the government to help low-income families have a place to live.
A more thorough explanation:
Limited equity housing (LEHCs) is a type of housing arrangement managed by a nonprofit cooperative corporation. It is designed to provide affordable housing to low-income families.
LEHCs were introduced in the mid-20th century in the United States when the government converted wartime housing into residential complexes for low-income families.
In a LEHC, residents share ownership of a building with multiple families. To maintain affordability, the co-op takes out a blanket mortgage covering the entire property and allows residents to buy shares. The amount of equity that a member can earn upon resale of the unit is limited to preserve its affordable price.
For example, if a resident buys a share in a LEHC for $10,000 and sells it for $15,000, they may only be able to keep a portion of the profit, as determined by the co-op's rules. This ensures that the unit remains affordable for future low-income residents.
LEHCs are beneficial for low-income families who cannot afford to buy a home on their own. They provide a way for families to build equity and invest in their future while still maintaining affordable housing.