What are the resale and recapture approaches to affordability?

Date Published: October 2012

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The recapture and resale approaches are the two methods that the HOME program uses and adopted by NSP to ensure continued affordability of assisted housing for homeowners. The HOME regulations at 24 CFR Part 92.254 describe these rules in greater detail.  

Generally, resale is designed to require that if the homebuyer needs to sell the home during the affordability period they must sell it to an income eligible person. This process is most useful in markets with substantial price appreciation, where a resale restriction on a unit ensures the unit stays available for LMMI buyers.

The recapture approach allows the grantee to recapture a predetermined amount of the proceeds of the sale of any property before the affordability period ends. This method often fits better in stable markets, where the grantee can use recaptured funds to help make another house affordable for an eligible homebuyer. Recapture can only be used where there is a direct subsidy to an individual homebuyer that can be repaid through a soft second mortgage or other lien on the property.

Recapture can only be used when the following conditions are met:

• An NSP subsidy is provided directly to a homebuyer or lease purchaser; and
• An amount can be recaptured.

The NSP grantee chooses to implement either resale or recapture requirements but not both. The grantee must then specify the approach chosen in its NSP action plan. The resale method is advantageous because it can be used for any NSP-assisted homebuyer. If NSP assistance is provided solely in the form of a development subsidy (subsidy between total development cost and current market value,) then only the resale method can be used. Resale works better in markets with rising property values. For markets in which the resale method is inappropriate, it is permissible for grantees to make a modest direct subsidy to avoid the mandatory imposition of the resale method when only a development subsidy has been made. Please see the HOME Resale and Recapture chart for more information.

Tags: NSP Program Requirements - Resale/Recapture

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