How does the Community Equity share work?

Methow Housing Trust (MHT) retains ownership of the “Community Equity Share,” which is the difference between the home’s Fair Market Value and its sale price.

1. Silent Equity Holder Role:
   MHT acts as a silent partner, becoming involved only when:

   • The homeowner decides to sell, or

   • There is a violation of Housing Easement restrictions.

2. Equity Growth Rate:
   The Community Equity Share grows at the lesser of:

   • The Methow Valley median home price appreciation rate, or

   • The appreciation of the home itself (based on original and final appraised values).

3. Risk and Appreciation Sharing:

   • MHT and the homeowner share the risk of market declines.

   • Any increase in value beyond market trends (e.g., from capital improvements, known as "forced appreciation") goes to the homeowner’s equity.

4. Payment Timing:
   This retained equity is only payable when the home is eventually sold.

For example

Taking the example home above, and assume that the home has been maintained, but not improved over a 10 year ownership tenure, and that the Methow Valley housing market has appreciated at 3% per year. Here what these transactions look like:

What happens at the next sale? And the next one?

When an owner decides to sell, MHT either:

(A) Accepts the right of first opportunity, finds and assigns the purchase to another eligible buyer.

In this, most-likely scenario, MHT keeps the “Community Equity” in the home, finding another interested and eligible buyer at the below-market price, willing to adhere to the Housing Easement occupancy and use requirements.

Utilizing this option enables MHT to ensure the conservation outcomes have permanence.

(B) Declines the opportunity to purchase at Fair Market Value, and is paid the current value of the “Community Equity” from the proceeds.

In this, unlikely scenario, MHT may choose to liquidate the Community Equity share, and repurpose the capital to further the mission of MHT and for community benefit.