(January 29, 2025)

As we enter 2025, we are excited to share the latest updates to our Covenant Program – a cornerstone of our mission to provide equitable housing solutions for our year-round community.

Growing the Covenant Program: Supporting More Island Families

This year, our Covenant Program includes 120 properties across Nantucket, providing accessible housing options for year-round residents. Each of these homes represents a step forward in addressing the island’s housing challenges, ensuring our community members can continue to live and thrive here.

Updated Maximum Sales Price for 2025

In 2025, the Maximum Sales Price for Covenant homes is set at $760,278. This figure is carefully calculated to ensure affordability, using a formula that factors in 30% of the gross annual income for a household earning 125% of Nantucket’s Median Family Income. The resulting monthly payment for a 30-year fixed-rate mortgage at 7.5% ensures that housing costs remain manageable for local families within this income bracket.

The Maximum Resale Price will adhere to this year’s cap or revert to the original purchase price if it is higher. This helps to safeguard an owner’s investment while balancing affordability for future buyers.

All transactions in 2025 incur a $3,801 transaction fee from the seller, which is half a percent of the Maximum Sales Price and covers the program’s administrative costs. 

Program Qualifications and Benefits

To qualify for the Covenant Program in 2025, household income must not exceed $229,650, with unrestricted assets below $380,139. These thresholds open the door for more year-round residents to find a home on Nantucket, strengthening our vibrant community and local economy. The household must currently reside on the island full-time or provide proof of their intent to do so once they own the property. Stiff penalties apply for violations. 

How Interest Rates, Income, and Land Costs Shape Affordability

As we analyze trends in the Covenant Program since its inception in 2004, we can see how interest rates and median income directly impact the Maximum Sales Price for qualified buyers.  

The Role of Interest Rates and Income

• Interest rates matter: When rates are high, the maximum allowable sales price decreases. When rates are low, the maximum price increases.  
• Income levels impact affordability: Higher median incomes provide greater buying power for qualified purchasers, positively affecting the maximum sales price.  
• How median income is determined: Published annually by the federal government, the median family income for Nantucket is based on a five-year look back using census data. This number serves as a benchmark for affordability calculations.  

Land Sales and Affordability Challenges

Some property owners carve off a portion of their land, creating a secondary lot for sale to an income-qualified buyer through the Covenant Program. However, selling land under the Covenant Program presents unique challenges:  

• Financing considerations: Banks evaluate the asset as a fully developed property, meaning the buyer must be able to afford both the cost of land and construction while staying under the maximum sales price.  
• High construction costs: Recent surges in building costs make it difficult for buyers to afford land and build a home within program limits. Sellers may not be in a position to discount land prices enough to make the purchase feasible for a covenant buyer.  

A Multi-Tiered Approach is Essential

Some have suggested increasing the income eligibility limit for purchasing a Covenant home. However, Housing Nantucket does not support this approach. Here’s why:  

Nantucket’s affordable housing crisis is immense, and no single program can meet the needs of all income levels. Instead, a layered approach ensures that different income brackets have access to housing opportunities tailored to their financial realities.  

• 80% AMI and below – Programs like Habitat for Humanity and 40B lotteries provide homeownership opportunities at this level.  
• 150% AMI and below – The Covenant Program serves this tier, helping middle-income residents achieve homeownership.  
• Up to 240% AMI – Newer initiatives, like our Honeysuckle Drive homes, now extend assistance to higher income earners.  
• No income cap, but year-round restriction – The Affordable Homes Act allows the Town to place year-round occupancy restrictions on homes, ensuring they remain in the hands of local residents without limiting investment potential.  

The Risk of Raising the Covenant Income Limit

If the maximum income cap for the Covenant Program were raised to 240% AMI, it would disproportionately benefit higher earners while eliminating opportunities for those in lower income brackets. Here’s how:  

1. Low- and moderate-income buyers would be priced out. Expanding the buyer pool to include higher earners would make it nearly impossible for lower-income households to compete, effectively pushing them out of homeownership opportunities through the Covenant Program.  
2. Existing Covenant homeowners would see a windfall. Increasing the income cap would inflate resale values, as a broader range of higher-income buyers would now qualify, driving up demand and prices.  
3. Equity across income levels would be lost. Each housing program is designed for a specific income range. Raising the Covenant cap would disrupt the balance, making it even harder for those earning 150% AMI or below to access stable, affordable housing.  

By maintaining distinct income tiers across different programs, we can ensure that housing remains accessible at multiple levels. Our focus is on expanding opportunities within each bracket, not shifting eligibility in a way that disadvantages those with lower incomes.  

Seeking Solutions

At Housing Nantucket, we remain committed to preserving the integrity of the Covenant Program while working to develop new solutions for homeownership across income levels. For example, we are actively exploring ways to increase the availability of vacant covenant land parcels. By addressing financing challenges and construction costs, we aim to create more opportunities for income-qualified buyers to build and own homes on Nantucket.  

Stay tuned for updates as we work to expand homeownership opportunities through the Covenant Program and continue to advocate for policies that support year-round residents at every stage of the housing spectrum.

More details about the Covenant Program, including how to apply or sell a property into the program, is linked here.