Workforce Deed Restrictions: How Are They Monitored?

With housing costs up (and wages not so much), some cities need to give working people a hand. As financial barriers to homeownership continue to frustrate so many wage earners, workforce housing is one way to make deeds attainable. It’s for households earning too much to qualify for standard government subsidies, but who can’t pay market rates for homes in this time of rising property values.

A deed restriction can ensure that a buyer is under a specific income cap. It can make a home available at a discount. But how does this work? Who actually enforces a workforce deed restriction, to make sure the homes are filled with people who really do need them? How can towns keep everyone in compliance without being too strict in individual situations?

Running deed-restricted housing initiatives is complicated.

First, What Makes Up a Workforce Deed Restriction?

“Affordable housing” is a common catch-all phrase, used to mean subsidized housing and workforce homes. Workforce housing is designed for working residents with “middle” or modest incomes.

In short, workforce housing comes at a discount for households that don’t rely on traditional subsidies.

(Workforce housing is distinct from Section 8 housing, although Section 8 vouchers can be used to buy them).

Workforce housing initiatives are carefully planned. Local governments arrange regulatory breaks for developers. Local, state, and federal tax breaks are available, too.

Grants are often needed to help buyers put money down. Community engagement and transparency is vital, because these initiatives do best when locals support them. Outreach often includes public meetings where developers meet social organizers in the area.

The developments come with deed restrictions and related documents that spell out what the deed holder may do with the property.

Buyers typically agree to work in the area where they’re buying. Workforce housing deed restrictions bind buyers, and future buyers too. They keep attainable homes in a neighborhood, so essential workers and others with modest incomes can live where they work. To this end, most workforce housing restrictions set income caps for applicants. They might also put a cap on the home’s future property value assessments. Specifically, you might find restrictive covenants that say:

• The home must be the buyer’s primary residence.

• The owner must follow certain rules when renting out any part of the home or accessory units.

• The home keeps its discounted value for a certain period. If the initial buyer sells, the covenants continue in force (for a 30-year period, for example).

Buyers might nab these homes through locally run lotteries, and they might need to agree to complete buyer courses.

Good communication sets them up for success. If there’s clarity from the start, new homeowners fully understand the value of workforce housing, and tend to respect the deed covenants. 

Urban Example: Philly’s Workforce Housing Is Looking Good.

Philly’s current housing action plan calls for adding thousands of housing units for people of modest earnings. Workforce housing is part of this. Creating the homes starts with Philadelphia’s Land Bank and its Redevelopment Authority. Together they work to locate vacant city properties in up-and-coming neighborhoods. From these beginnings, the city has created 200 new workforce homes so far.

Francis Villas is a set of sixteen 1,200-square-foot row houses. These homes are meant for households earning no more than 20% more than the area’s median income. The prices are substantially discounted from the surrounding Francisville neighborhood, where most homes sell for $300K plus. 

And yet the developer (who pays a fee to the city to handle the work) has been able to produce homes that fit in with the homes that surround them. The homes boast high ceilings and hardwood floors.

Philly’s stylish workforce residences suit an emerging affordability philosophy. Towns and cities are focusing on attractive housing, situated in clusters, geared to blend into their surrounding neighborhoods.

In Smaller Towns, Enforcement Is a Pain Point. Can Technology Assist?

More than 500 deed-restricted homes pepper Gunnison County, just south of Aspen, Colorado. But are the restrictions being followed? Some property owners could be renting out deed-restricted houses for tourists, for example. Unless a system is created to check in on the deed holders, how would the town know that working people are being accommodated as intended?

Local officials have mailed out forms for owners, but the response rate hasn’t been great. And what could local government do about violations in any case? Deed restriction violations may wind up with local governments directing residents to sell their homes to people in actual need. Would the local Housing Authority be prepared to hire legal experts to deal with these cases?

The Housing Authority carried out a compliance check just once. It lacked the time to follow up with its ownership program regularly. At some point, local officials knew, consolidating all the deed restriction documents would have to happen. Here’s how they’re getting it done:

• In 2021, a local ordinance passed, requiring notarization for these documents. But that didn’t necessarily ensure compliance. Finally, in early 2024, managers established an electronic database to store every  deed restriction document online. This lets officials retrieve the basics for compliance checks.

• The local Housing Authority is getting ready to start using Quickbase. This new online platform can hold all deed restriction information in one system. It can automate the routine checks on deed holders, and fetch responses.

• The new system will roll out town by town, starting with Crested Butte. The town will pitch in $56K to have the platform installed.

• After that, other towns in the county will come online. Ultimately, each will chip in according to its total number of workforce homes.

• The timeline continues into 2025, when the Housing Authority will carry out a compliance check of all Crested Butte’s workforce housing. People will receive details by postal mail. Then, forms will be emailed out (although paper forms are also available).

A new hire will be helping to carry out the compliance cycles. And these will take place every year.

There’s a Lot More to Picking a Home—And Every Household’s Needs Are Unique.

Today’s online platforms will help housing managers connect working people with deeds for decades to come. Buyers who respect the deed restrictions will help others succeed, just as they did. That’s what a town needs to do to run an effective workforce housing plan. 

Of course, compliance isn’t the only thing buyers of workforce housing need to be aware of. Because everyone’s household and finances are unique, we encourage our readers to meet with their licensed professionals to discuss the tax, legal, family and financial implications of any decision to buy real estate. We offer this discussion for informational purposes only.