In practicing land use law in Boston, I see income-restricted homeownership opportunities arise from:
- the City's Inclusionary Development Policy, which requires a percentage of units in many new market-rate developments to be affordable;
- land disposition agreements and long-term ground leases that transfer formerly-public property to developers with use and other restrictions;
- government financing designed to support affordable housing production; and
- mission-driven developer efforts that innovate long-term affordable homeownership.
Typically, the purchase price is discounted in exchange for the homeowner not being able to sell at market value later. From a policy perspective, restricting the resale price on these homes creates a renewable resource. An income-qualified family pays no more than a third of their household income toward housing costs. When that family sells, the next income-qualified family buying the house gets the same deal (i.e., paying no more than a third of their household income toward housing costs).
From the perspective of a particular family, affordable homeownership provides housing stability by exiting the world of rent increases and rent burdening, or homelessness. Often there are foreclosure protections. However, housing stability is one prong of conventional homeownership. The other prong is wealth building. For the sake of affordability to the next family, wealth building might be limited by the affordable sale price in periods of fast rising home values.
There's more. Typically:
- the cost of basic home improvements can be recovered, although not specialty improvements, and of course not all of the market value increase on account of the improvements;
- homeowners cannot sell to a child who isn't also income-qualified (e.g., if my adult children have higher incomes than my qualified income, which is always the goal, they probably make too much to be able to own our income-restricted home in name); and
- homeowners are expected to live in the home for most of the year (e.g., approval would be needed to rent out the home, to meet family care responsibilities by moving in elsewhere as a caretaker, or to spend half-years in Florida as a retiree).
Renting as a common alternative has upsides and downsides. About a quarter of Boston's renters spend half or more of their household income on housing costs under market pressures. Homelessness is all downside. That said, relief from market pressures in an affordable home comes at the cost of limited market upsides. Affordable homeowners should go into it with eyes wide open and realistic expectations of what the opportunity can deliver and what it cannot.