Creating Affordability: Deed-Restricted Workforce Housing

Image of furniture in a house and the view out a window to a mountainous scene.

Buying a home is a major challenge for a large segment of our population, and many people can’t afford homes near the workplaces that need them. With the travel and hospitality sectors reopening for business, the problem is growing more obvious. There’s a home affordability crisis calling for remedies.

Where there’s a will, there’s a way. Or several. Some counties and towns are addressing the issue by dropping their single-family-only zoning rules. Another response is a flurry of permissions for homeowners to build accessory dwelling units (a.k.a. “in-law cottages)” on their properties. 

In this article, we’ll explore yet another partial solution: dedicated workforce housing. Counties can create deed restrictions that allocate homes to employees of local businesses. A deed restriction, recorded with the property deed, can limiting the ways a home can be held or conveyed to someone else.

Deed-Restricted Workforce Housing on the Rise

Let’s look at several hotspots where counties are taking action to integrate local employees in their housing policies.

Notoriously Pricey: Greater Sacramento, California

East Placer, just outside Sacramento, is home to Lake Tahoe’s mountain resorts and casino jobs, as well as several corporations in the medical sectors. In early 2021, the Placer County Board of Supervisors approved a plan to pay developers and buyers who agree to deed restrictions. Buyers can use the funds for down payments on the homes, or make upgrades once they move in. The restrictions last 55 years, and they’re automatically renewed when the home changes owners. Placer County has posted an overview online, including the income limits and other criteria.

Ski Meccas: Rocky Mountain States

In May 2021, in the resort town of Breckinridge, Colorado, Braddock Holdings was approved to develop deed-restricted primary residences for local employees up to a certain income level. Someone in the home must be employed in Summit County, Colorado (on the job site, or as a remote worker who needs to be in the county). Retirees may keep the homes under the 2019 deed restriction guidelines.

In southwest part of the state, near the renowned Telluride Ski Resort, is the scenic town of Mountain Village, Colorado. The town has cut its development fees for deed-restricted primary residences. The arrangement incentivizes developers to supply the homes at a deep discount. Mountain Village acted to sustain a workforce for its tourism industry, and so “key members of a complete community are able to live here.”

Park City, Utah is another popular mountain resort. It’s known for hosting the Sundance Film Festival. It offers a dedicated workforce housing plan for local workers’ primary residences. Participants may not convey their properties by deed, trust, or inheritance; they must go through a city process. The city reserves the first option to purchase when owner chooses to sell; otherwise, the property must go to a city-approved buyer. Even renting part of the home to a housemate needs permission from the city.

To preserve the affordability profile, the city caps the workforce homes’ annual property appreciation at 3%. Upgrades to the homes are limited to alterations that add value of no more than 5% of the purchase price.

Jackson, Wyoming, is a famous ski resort town in the heart of the Jackson Hole valley. The Jackson / Teton County Affordable Housing Department restricts deeds for eligible workers’ households. (Teton County posts its workforce deed restriction template here.) Home improvements must be approved in advance. Using any space in the homes for short-term rentals is off-limits. (The Affordable Housing Department may even come over and inspect a deed-restricted home as part of the bargain.)

Pro tip: Especially since the rise of the Airbnb model, developers and homeowners’ associations often create restrictions to limit rental use of homes and condos. Provisions in deeds can rule out basement apartments or the use of homes as short-term vacation rentals. When buying a home, ask the title company whether the deed has restrictions either presently, or in the past. Past restrictions can still bind owners.

How Does Deed Restricted Housing Differ From a Community Land Trust?

If you’re a regular reader, you may recall our discussion of community land trusts to preserve affordability. These trusts also own deed-restricted properties, and keep home prices from rising along with local market competition. So, what makes a land trust different?

In general, a land trust offers a more durable affordability. The typical land trust leases its home properties for 99-year terms, whereas a city or county deed restriction might last 30 years or less. 

With the land trust model, eligible buyers get mortgages for units on trust-owned land. Land trust homeowners hold general warranty deeds, modified to convey the title to the house — not the land underneath. They make monthly ground lease payments to the trust. Whenever a resident sells, the trust keeps a portion of the sale proceeds. A land trust may buy the home back, to convey it to another qualified applicant. By these means, a land trust preserves its land and can keep a local population stable for generations. Participants are free to take pay raises and still keep their homes, even with their higher incomes — a feature that promotes household wealth-building and future financial opportunities.

The Colorado Community Land Trust (Habitat for Humanity) notes:

Lack of affordable housing continues to be a major issue in metro Denver. In recent years (2012 – 2018), home prices in metro Denver have increased 72%, while wages rose only 12%. 

So, the land trust maintains a system of ownership and pays taxes on the land, while offering the homes to qualified households who cannot (or shouldn’t have to) compete in this runaway seller’s market. Some potential applicants might shy away from land trusts because they think real homeownership means land ownership. But land trusts can put their homeowners in a stronger position overall. City deed restrictions are rigid and one-size-fits-all, while ground leases can be modified to meet homeowners’ needs and goals.

We might say land trust arrangements come with a more people-friendly structure. They often include options for assisting residents who find themselves struggling to make their mortgage payments. Support for homeowners of modest means is rarely available with a city deed restriction.

The Ties That Bind

Some towns are now establishing workforce-friendly policies in their strategic plans. The benefits of deed-restricted workforce housing, and community land trusts as well, have ripple effects. When people have access to affordable housing, they can live near their workplaces. They can and do support other local businesses. They develop a vested interest in their towns. They become integrated into the social networks that bind communities and make them great places to visit, live and work.

Supporting References

Lindsey Toomer for Summit DailyBreckenridge Approves Permit for Braddock-Miller Workforce Housing Subdivision (May 27, 2021).

Town of Jackson / Teton County, Wyoming: Special Restrictions for Workforce Ownership Housing (template created 2020).

Colorado Community Land Trust (Habitat for Humanity of Metro Denver): About Us.

Joe Rubino for the Denver Post: Denver Communities Putting More Faith in Land Trusts Amid Affordable Housing Crisis (Jul. 8, 2019).  

David Abromowitz and Kirby White, Deed Restrictions and Community Land Trust Ground Leases: Protecting Long Term Affordable Homeownership (published by the Florida Housing Coalition in Dec. 2012).

Photo credits: Anete Lusina, via Pexels.