The Basics Part 1: Deed Restrictions in Plain Language
Your path to deed-restricted homeownership in Eagle County.
In just a few minutes, you will understand what deed restrictions are, what they typically require, and what to confirm before you apply or make an offer.
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Introduction
Deed restrictions can sound confusing at first. This page explains what they mean in plain and simple language. Plus, what to confirm, so you can decide if this path fits you.
When you buy any home, you get a deed: the official legal document that proves ownership. It’s publicly recorded and contains the legal description of your home.
A deed restriction (or covenant) is a set of rules attached to the home’s legal documents that stays with the property forever. This means the rules stay attached to the home and apply to every future owner, no matter who buys it next.
Pro Tip: When you’re ready to sign up for homebuyer classes or start looking for deed-restricted homes and current listings, head over to The Valley Home Store. They’re our trusted local team for one-on-one guidance and the right resources to help you through the real estate process.
Myths & Reality
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Reality: Deed-restricted housing serves a wide range of the local workforce and long-term community members.
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Reality: You are the owner. You hold title to the home. The deed restriction is a recorded agreement that sets rules to keep the home available for future residents.
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Reality: Many deed-restricted homes allow you to build equity, even if appreciation is capped. Every mortgage payment you make is an investment in your future, rather than a monthly expense to a landlord.
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Reality: Improvements are encouraged! Most programs allow you to add the cost of permitted upgrades to your home’s value when you sell. Just be sure to check your specific program guidelines to see which projects qualify for credit at resale.
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Reality: Deed-restricted homes are reserved for Eagle County residents. They are meant to be lived in as primary residences, ensuring that our housing stays available for locals who want a permanent home.
Short-term rentals are generally not allowed.
What Is a Deed Restriction?
A deed restriction is a permanent legal agreement tied to (and recorded against) the property. Its main job is to protect the home’s future occupancy, making sure it remains a dedicated resource for local residents.
In exchange for a lower purchase price, often supported by upfront program funding applied at closing (often called a buy-down), the homeowner agrees to follow certain rules.
Deed restrictions often cover:
Who can live there: Eligibility is often tied to local employment, residency, income limits, or household size.
Primary residence: The home must be your only residence where you live full-time and year-round.
Resale rules: Most programs include a maximum sales price formula and require selling to qualified local buyers.
Renting: The ability to rent out the home or rooms is typically limited, regulated, or prohibited.
Improvements: Renovations are often allowed with approval and may be credited toward your resale value.
Local program administrators, like The Valley Home Store, often monitor compliance through simple annual check-ins. The rules protect the community’s investment and preserve the opportunity for future local households. If a rule is missed, staff typically work with homeowners to correct it. Serious violations can lead to penalties, losing the home’s price appreciation, or a required sale. Rules vary by program and jurisdiction, so always review the deed restriction and program guidelines for the specific home you’re pursuing.
When you review a deed restriction, confirm these 5 things:
Primary residence requirement: Confirm how “primary residence” is defined and verified for that specific home.
Renting rules: Check if long-term rentals, room rentals, or subleases are allowed (short-term rentals are rarely permitted).
Resale process: Understand the price formula, required approvals, and who you are allowed to sell to.
Eligibility rules: Review income, employment, and residency requirements, as well as household composition rules.
Capital improvement policy: Find out what needs approval and what specific projects can be credited at resale.
Why deed-restricted housing exists
In a competitive market like Eagle County, it’s hard for locals to compete with outside buyers. Deed restrictions are a way of making sure that some homes stay dedicated to local residents and within reach.
Types of Deed Restrictions
Most deed-restricted homes fall into two common categories. Exact rules vary by program and jurisdiction.
| Feature | Price-Capped | Resident-Occupied |
|---|---|---|
| Main purpose | Keep homes within reach for locals | Keep homes lived in by locals |
| Resale price | Limited by a formula | Market-based |
| Primary residence | Yes, required | Yes, required |
| Income limits | Sometimes | Not usually |
| Owning other property | Not usually | Sometimes, depends on program |
Note: Most programs focus mainly on primary residency and your local connection, though some also use income limits. Always check the specific guidelines for the home you’re interested in.
Typical Trade-Offs
Deed-restricted ownership offers big benefits, but it comes with intentional limits:
Benefits
Lower entry price and stable housing in a high-cost area.
Build equity through mortgage paydown and (often) permitted capital improvements.
Support for local workforce families.
Trade-offs
Limited appreciation and equity growth compared to the open market.
More paperwork, approvals, and ongoing requirements.
Restrictions on renting, second homes, or free-market resale.
Types of Deed Restrictions: A Deeper Dive
If you want to go beyond the summary, use the sections below to understand how each type typically works and what to confirm in the guidelines.
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Goal: Keep the home available for local residents forever while preserving long-term affordability by limiting the resale price.
Resale and equity: Resale price is limited by a formula described in the deed restriction or program guidelines. Even with a resale limit, homeowners may still build equity through mortgage paydown, permitted capital improvements, and resale adjustments.
Common formulas allow 0-3% annual appreciation, either compounded or simple interest, and tie to wages or inflation. For example, if you buy at $500,000 and a formula allows 3% yearly growth, you might sell years later for more, while still keeping it affordable. Exact formulas vary; always check the specific guidelines.
Common eligibility rules: Rules vary, but price-capped homes often include additional eligibility requirements. These can include household income limits, local residency or employment requirements, and restrictions related to owning other residential property.
Good to know: Price-capped programs are designed for long-term community benefit. Before you apply, review the deed restriction and program guidelines, so you understand the resale rules, occupancy requirements, and what documentation you will need.
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Goal: Ensure the home is lived in by full-time locals and not used as a second home or short-term rental.
Resale and equity: Resale price is typically market-based, but owner-occupancy and local use requirements still apply. Rules vary by program, jurisdiction, neighborhood, and/or by the specific deed restriction.
Common eligibility rules: Resident-occupied homes usually require that the home be your primary residence and may include local residency or employment requirements. Some programs may also include additional rules related to household composition or owning other property.
Good to know: Resident-occupied restrictions can support local housing stability even when resale is market-based. Always confirm the exact requirements in the deed restriction before you apply or make an offer.
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Learn about the two buying paths and see a simple step-by-step checklist.
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