Resale formula
The rule that sets what you may sell a home for. It is why the home stays affordable for the household after you, and why your gain is capped.
Every term on this page describes a document that exists. Ask to be shown it rather than told about it — the lease, the share certificate, the deed, the ground lease. Being shown it is the answer; being told about it is not. Then ask who has lent on this before, because a structure nobody has ever financed is a structure that has not been tested.
A resale formula is the written rule that decides the price at which a resale-restricted home may be sold. It is the working part of affordable homeownership: without it, the discount a household received on entry becomes a windfall they take with them, once, and the arrangement is over.
The common shapes
Appraisal-based, improvements only. The seller keeps a share of the appreciation of the building but none of the land’s. Grounded Solutions Network’s technical manual describes the typical share as about 25%, noting that some trusts set it higher and some scale it with tenure — giving as an example a share rising from 5% after one year to 30% after thirty.
Indexed. The price rises with an index — area median income, or consumer prices — rather than with the market. Predictable, and it can drift away from affordability when incomes and prices diverge.
Fixed-rate. A flat percentage a year. Extremely simple, requires no appraisal, and lets an owner know today what they could sell for in 2041.
Itemised. The seller’s return is built up from their actual investment. Fairest in principle, heaviest to administer, and largely abandoned.
What to ask
Can it be changed? In the classic structure, a change cannot be imposed on leases already in effect — the homeowners themselves must agree to amend their own lease. Confirm that this is true of yours.
Show me the last three resales. A formula that has been used has been tested. Ask what each household actually received.
Who calculates it, and who checks? An appraisal-based formula depends on an appraiser understanding this kind of property, which not all do.
Sources & further reading
- 1 Resale Formula Design — Grounded Solutions Network (2011) — every formula type, with the trade-offs of each
- 2 What joining costs — the exit number, with a calculator
Written by EcoHubs members, with AI assistance for drafting and editing, and reviewed by a person before publication. Facts are checked against the sources listed; anything we could not verify is marked. How this is written
Related terms
A long lease of the land under a home you own. The mechanism that takes land off the market permanently and makes the house cheaper to buy.
Ownership where your return on exit is deliberately capped, so the home stays affordable to the next household rather than rising to market.
A non-profit holds land permanently and leases it to residents who own their buildings, separating the two so homes stay affordable after the first sale.