If a homebuyer does not receive a direct subsidy, can a grantee impose a recapture provision with equity sharing if the property is transferred before the affordability period ends?

Date Published: October 2012

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The recapture approach to affordability can only be used when there is a direct homebuyer subsidy.  If there is no direct homebuyer subsidy, the grantee must impose a resale restriction.  It is not permissible to have both a resale and a recapture provision on the same unit.    

The NSP enabling legislation specifically allows equity sharing, which is typically enacted as a shared appreciation clause under the recapture approach to affordability. It is also possible to impose a shared appreciation clause under a resale restriction. However, this clause would need to be applied within the context of the resale agreement - the home would still need to be sold at an affordable price to an eligible buyer and the seller would need to receive a fair return. Thus, it is unlikely that there will be significant sales price appreciation under a resale restriction.    

If the grantee wishes to impose a shared appreciation clause in a resale setting, the grantee would need to include these requirements in its written agreement with the buyer, along with all of the standard resale restrictions. The text pertaining to the shared appreciation would need to describe how any increase in value, capped by the affordable sales price, will be divided between the owner and the grantee, while still ensuring a fair return to the seller.  

Alternatively, the grantee could make a direct subsidy for closing costs or other expenses, shifting the affordability method from resale to recapture at the beginning of the process.


Tags: NSP Program Requirements - Resale/Recapture