limited equity housing

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A limited equity housing (also known as LEHCs) is a special form of residential arrangement that is managed by a nonprofit cooperative corporation. The arrangement usually puts restriction on the amount of equity that a member may earn upon resale of the unit to preserve its affordable price.

The United States introduced LEHCs in the mid-20th century when the federal government converted wartime housing into residential complexes for low-income families. LEHCs allow low-income households to share ownership in buildings for multiple families. To sustain the arrangement’s affordability, the co-op takes out a blanket mortgage covering the entire property and allow residents to buy its shares. The owner’s equity is usually dependent on a pre-determined formula following the co-op’s rules. The owners may also increase their sales price to account for inflation as well as any agreed-upon costs that the owner incurs. Because LEHCs only restrict equity appreciation and not necessarily the owner’s income, sometimes residents with moderate income continue to reside in the property even after their income level does not qualify for affordable housing.

[Last updated in June of 2020 by the Wex Definitions Team]