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Builders and residents question 25% resale cap as interest rates rise
Summary
Committee members raised concerns that the CLT resale formula—owner keeps down payment and 25% of appraisal increases—could leave owners with negative net gain at current mortgage interest rates; members asked for amortization modeling and alternative cap scenarios.
Ken Jones, a local property owner who said he reinvests fishing profits into redevelopment, told the committee that a 25% cap on appreciation may not produce sufficient equity for buyers at today’s higher interest rates. "If you cap somebody at 25% of the growth, there's a good chance that person's gonna lose money when you start to factor in 8% interest rate," Jones said, urging the group to evaluate a higher cap or run amortization scenarios at multiple interest rates.
Randy Huey, the CLT director, responded that the 25% formula is common and has worked for many CLTs historically but acknowledged Cordova’s local financing context may require different calculations: "I can't say, well, it's worked for us and everything because we haven't had that experience yet... many of the entities ... have a variety of formulas." Committee members recommended producing sample amortization tables and inviting a mortgage/lending expert at the next meeting.
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