Housing 101: Deed Restrictions Explained

Housing 101: Deed Restrictions Explained

If you’ve been part of a housing conversation lately—at a public meeting or chatting with neighbors, chances are the term “deed restriction” has come up. It may sound like legal jargon, but it’s a tool that has been used for decades to help guide how housing is used and who it serves.

What Is a Deed Restriction?

A deed restriction is a legally binding agreement that limits certain aspects of how a property can be used. It “runs with the land,” meaning it stays in place when the property is sold or transferred. The two most common types are:

1. Income-Based Restrictions limit who can rent or buy based on income – typically for those making less than the average income within a community. This model is used mostly for rental housing, where rents are limited to ensure households spend no more than 30% of their net income on housing.
2. Local Employment or Residency- Based Restrictions (aka “Local-Worker Restriction) prioritize full-time workers or residents of a community. These may include higher income caps and support the “missing middle”—those who earn too much for traditional affordable housing but still can’t afford market-rate prices.

Why They Work – and Where They’re Used

In North Lake Tahoe-Truckee, deed restrictions have been part of the housing strategy for more than 20 years. Projects like Frishman Hollow, Sierra Village Apartments and Kings Beach Housing provide deed restricted for sale and rental housing for a range of local workers: teachers, first responders, ski lift operators, restaurant workers and more.

Other communities, like Vail Colorado, have expanded these efforts. Vail’s InDEED program offers up to $200,000 to homeowners in exchange for a local worker deed restriction – without resale limits or income caps. This model has preserved over 165 homes and demonstrates that flexible programs can work. More examples are featured in the 2023 Workforce Housing Report.

Not One-Size-Fits-All—Especially for ADUs

Deed restrictions aren’t one-size-fits-all, and in some cases, applying them too rigidly can backfire. That’s especially true for homeowners building ADUs. Large scale housing developers might be willing to take on 55-year deed restrictions, but expecting an individual homeowner to do the same can actually discourage participation.  

That’s why local programs are beginning to explore more flexible deed restriction models: shorter terms, rent caps, or incentive payments that still support local housing without placing too much burden on homeowners.

Resale Value for Deed Restricted Homes

For many homebuyers considering a deed-restricted property, it’s natural to wonder how a restriction might affect future resale value. Many deed restriction programs are designed to preserve affordability while also allowing homeowners to build modest, meaningful equity over time. For example, in some cases, resale prices for deed restricted homes are tied to changes in the area’s median income. In other cases, homeowners can sell their property at market value, if the buyer is a local worker.

A Proven Tool—When Applied Thoughtfully

Deed restrictions have been a proven part of housing strategies in communities across the country but like any tool, they aren’t one-size-fits-all. The most successful programs are those that apply deed restrictions where they work best—and are willing to modify or adapt them in situations where they may not. For a deeper look at how deed-restricted homeownership works and the different ways communities apply it, check out some of these resources.