Principles as set forth in Bylaws:
Article VII(3). The Resale Formula. Whenever its purpose is to preserve affordability, the Corporation shall restrict the price that ground lessees may receive when they sell housing and other improvements located on the land that is leased to them by the Corporation. A policy establishing such restrictions in the form or a “resale formula” adopted by the Board of Directors and the Regular Members of the Corporation, in accordance with the following principles:
The members of the NHOM Project Review Committee did an extensive analysis of different resale-formula methods in use by community land trusts throughout the United States. Their research revealed that there are a variety of formulas in use and each had its pros and cons. There is no single method that clearly stands above the rest. The most frequently used formula is an appraisal-based formula and a variation of that method was chosen and recommended to the Board of Directors who approved its use on May 30, 2007.
The approved formula uses a 2-step process to incorporate the above principles from the Bylaws. The first part of the formula establishes a ratio based on the price the NHOM Homeowner pays for the property and the fair market value at the time of purchase.
This first step incorporates Bylaws principle (a) noted above in the introduction by taking into account the amount of subsidy received which will vary based on the income category of the buyer established in the Residential Workforce Housing Policy of the County of Maui. The ratio gives a homeowner in the higher income brackets a higher return because they paid a higher purchase price and as a result received less of a subsidy at time of acquisition. The formula also contains a provision for recapture of investments in capital improvements that is in accordance with principle (a).
The second part of the formula establishes the Homeowners share of appreciation based upon the number of years of ownership ranging from 25% to 50%. The analysis done by the Project Review Committee showed the greatest risk to Bylaws principle (b) above - future affordability - came from resales that occurred after a short ownership period during a rapidly appreciating market. A longer period of ownership reduced the risk for future affordability. The proposed formula gives the maximum 50% share of equity after 14 years of ownership.
The approved formula is:
|5 years or less from date of acquisition||SAF = 25%|
|More than 5 years but less than or equal to 6 years||SAF = 27.5%|
|More than 6 years but less than or equal to 7 years||SAF = 30%|
|More than 7 years but less than or equal to 8 years||SAF = 32.5%|
|More than 8 years but less than or equal to 9 years||SAF = 35%|
|More than 9 years but less than or equal to 10 years||SAF = 37.5%|
|More than 10 years but less than or equal to 11 years||SAF = 40%|
|More than 11 years but less than or equal to 12 years||SAF = 42.5%|
|More than 12 years but less than or equal to 13 years||SAF = 45%|
|More than 13 years but less than or equal to 14 years||SAF = 45%|
|More than 14 years||SAF = 50%|
|Initial Purchase Price(IPP)||$ _________|
|Plus Homeowner’s Share of Appreciation (HSA)||+ $ _________|
|Equals Base Formula Price (BFP)||= $ _________|
|Plus Capital Improvements Credit (CIC), if any||+ $ _________|
|Less Excessive Damage Charge (EDC), if any||- $ _________|
|Equals Formula Price(FP)||= $ _________|