Deed Restriction

What Is a Deed Restriction?

A deed restriction is a legal limit on how a property may be used. It is written into the deed or into a covenant recorded in the county land records. Because it “runs with the land,” it binds every later owner until it expires or is released.

In housing policy, an affordability deed restriction does two things. It caps what the home can rent or sell for, and it limits who can live there, usually by household income. It is the main legal tool that keeps subsidized or inclusionary homes affordable after they are built.

How It Works

Rental housing. The restriction sets maximum rents and tenant income limits for a fixed period. Federal law makes this mandatory for the Low-Income Housing Tax Credit: each property’s extended low-income housing commitment must bind all successors and be recorded under state law as a restrictive covenant.

Homeownership. The restriction sets a resale formula, and the program often holds the right to buy the home first at that price. Common approaches include:

Term. According to InclusionaryHousing.org, a Grounded Solutions Network resource, only 7% of inclusionary programs require affordability for less than 30 years. The site uses Montgomery County, Maryland, to show why that matters. The county started with a five-year term, and about 9,400 of the roughly 14,000 inclusionary homes built there over 40 years reverted to market rate as their controls expired. The county has since raised the terms to 99 years for rentals and 30 years for ownership units, and it records a new 30-year restriction each time an ownership unit is sold.

Why It Matters for Workforce Housing

A deed restriction can target any income band, so it works for households above traditional subsidy limits. Davidson’s program, for example, prices homes for households below 120% of median income.

Restrictions can also control who lives in a home rather than what it costs. Vail, Colorado, launched its InDEED program in 2017. The town pays owners to record a permanent restriction requiring that at least one occupant work 30 hours a week or more for a business in Eagle County. See Workforce Housing in Resort and Rural Communities.

Criticisms and Limitations

• Owners give up some appreciation, which limits wealth building.
• Restrictions only work if someone monitors and enforces them. Practitioners stress that legal documents alone are not enough without ongoing stewardship.
• Affordability deed restrictions are not the same as racially restrictive covenants, which barred people of specified races from buying or occupying a home. Courts have not been allowed to enforce those since the Supreme Court decided Shelley v. Kraemer in 1948, and the Fair Housing Act of 1968 outlawed racial discrimination in housing sales and rentals.