Limited Equity Cooperatives (LECs) are a form of cooperative housing that is price restricted, often created initially through government construction or mortgage interest subsidies. Affordability is maintained in perpetuity by capping the transfer value of cooperative shares to limit the equity that owners can extract from their units. As a type of collective ownership, LECs enable homeownership without the risk of debt financing or the responsibility of maintenance. Cooperative members receive the same tax advantages as traditional homeowners, assessed on shares of the cooperative rather than a single unit. The restriction on share resale values keeps LECs affordable to multiple generations of purchasers and enables renters to become homeowners without having to qualify for traditional financing. LECs provide these benefits while spreading the risk and cost of homeownership across many shareholders (Saegert and Benitez 2003). Nearly 16 million U.S. households are severely cost burdened (spending more than 50 percent of their income on housing), a number that increased by two million between 2001 and 2004 (Joint Center for Housing Studies 2006). Neither the federal government nor the private sector has implemented an effective solution to the affordability crisis. By incorporating LECs into federal housing policy, an opportunity exists to ease the cost-burden of homeownership for low- and moderate-income households, promote mixed-income housing, and increase community engagement and civic capacity. LECs offer an alternative to market rate and subsidized housing, but are not appropriate for every population or every location.
Perkins, K. (2007). The future of limited equity cooperatives. Cornell Real Estate Review, 5, 1-5.