Posted by:
Steve Dubb
Shared equity advocate John Davis outlines long-term benefits of stewardship
The Winter 2009 issue of the community development journal Shelterforce examines at length a wide range of issues facing housing and community development practitioners in the current economic crisis.
Among the topics covered: a critique of foundations’ response to the crisis by Rick Cohen, a call by Pablo Eisenberg to raise the foundation payout requirement from five to six percent, a policy proposal regarding the foreclosure crisis by Jim Carr of the National Community Reinvestment Coalition, a vision of a social housing policy by Peter Marcuse, and an analysis of the Neighborhood Stabilization Program by Peter Werwath.
All of these articles are well worth reading, but the focus here is on John Emmeus Davis’ article, which examines community land trusts and related forms of “shared equity” housing from the theoretical perspective of how society can create “homes that last.”
Some key highlights of Davis’ argument:
• Policy makers have made a critical error in designing housing policies that work in the “sunny middle of the business cycle.” But they do not work well when prices are rapidly rising or falling.
• Affordable housing policy needs to be designed so that “lower-income families can stay in their homes, neither nudged out by rising costs nor forced out by foreclosures.”
• The solution, Davis argues, is “counter-cyclical stewardship.”
Davis points out that the principles of counter-cyclical stewardship are common in rental housing programs where:
* affordability is perpetuated for many years, either through the nonprofit ownership of rental housing or through long-term regulatory agreements between public agencies and private landlords by which rent increases are moderated and income-eligibility is maintained;
* the safety, soundness, and condition of rental housing is preserved through the imposition of housing quality standards and through mandated maintenance and replacement reserves; and
* security of tenure is enhanced by careful screening of prospective tenants, by requirements for just cause eviction, by vacancy reserves that insulate owners against financial hazard if tenants default, and by periodic, third-party review of the records and practices of private landlords receiving public money to provide affordably priced rentals for lower-income people.
Yet, Davis notes, while “protections like these have become standard practice in the rental sector, homeownership programs have been slow to follow suit. We have continued to lavish public resources on helping lower-income households to attain homeownership with little regard for what happens to these homes after they are purchased. This hands-off approach may be appropriate in places with stable real-estate markets and in periods of gradual economic growth. Such places and periods are hardly the norm, however, even though most of our homeownership assistance programs have been designed as if they are.”
The article goes on to outline stewardship responsibilities that are performed by community land trusts, limited equity cooperatives, and others in three primary areas: preserving housing affordability, promoting housing quality, and protecting housing security [avoiding foreclosures], as well as identifying a wide range of potential funding mechanisms that could involve a mix of private lender, public, and homeowner financing.
“Although stewardship has been slow in coming ... there are signs this may be changing,” writes Davis towards the end of his article. Still, making stewardship a core principle of affordable home ownership is only half the battle. “Stewardship means different things to different people,” Davis cautions. Public subsidy recapture programs may preserve public dollars, but, “Recapture programs make no provision for protecting either the quality of owner-occupied housing or the security of lower-income homeowners ... It is poor public policy when dollars are saved, but homes are lost.”