Guest blogger Bob Zdenek discusses shared equity

The National Housing Institute (NHI) published a significant new study on Shared Equity Homeownership by John Emmeus Davis of Burlington Associates, a community development consulting group with a focus on providing technical assistance for community land trusts.  This was the first study that brought together to the practice and policies of limited equity coops; deed-restricted housing; and community land trusts under the umbrella of shared equity homeownership, a term that John Davis coined. 

The underlying premise of shared equity homeownership is to provide permanent affordable housing opportunities through subsidy retention for millions of low and moderate income families.  The shared equity models (deed-restricted housing; limited equity coops; and community land trusts) preserve and retain the public subsidy dollars to maintain the affordability of the housing for future generations.

While the shared equity model provides critical affordability opportunities for families, many low and moderate income families want to be first-time homeowners and benefit from the asset building opportunities that homeownership usually provides over the long term.  There has been growing asset inequality in the U.S. over the past 25 years and study after study demonstrates that many low-income families, especially families of color and single- breadwinner households, have negative assets.  First-time homeownership for families of limited income when coupled with financial education, credit counseling, and secure financing provides excellent opportunities for families to increase both their assets and economic stability.  Many homeownership practitioners and advocates do not want their appreciation capped, even though public subsidy sources are essential to downpayment assistance for new homebuyers.

But asset building/accumulation and permanent affordability with shared equity homeownership does not have to be an either/or scenario.  Low-income families can gain assets while properties affordability can be maintained.  Rick Jacobus and Jeffrey Lubbell in a recent paper presented at a shared equity homeownership symposium in Portland Oregon sponsored by NeighborWorks America and NCB Capital Impact raised the idea of “shared appreciation loans” as an interesting new strategy.. 

Shared appreciation loans allow the locality to capture a portion of home price appreciation (20 to 25%) at the time the assisted units are sold which can be used to help subsequent buyers purchase homes. The key point is to be flexible in offering products and tools that facilitate both asset building and preserve affordability and reuse of public subsidies.  Another example is that of Manna, Inc., a large community development corporation in Washington D.C., has helped over 1000 low-income individuals and families become homeowners and benefit from the appreciation in homeownership.  One of Manna’s recent initiatives, Syphax Village, provided homeownership opportunities to low income families several blocks from the new Washington Nationals Baseball stadium. The appreciation in the neighborhood was so significant that Manna placed a restriction that any new homeowner that sold their unit within the first five years paid Manna a portion of the appreciation, since Manna’s goal is to promote long-term homeownership and asset building.

Hopefully, there will be other models and tools developed that encourage both asset appreciation coupled with preservation of scarce public subsidies over the long horizon.  We need both individual asset building and community wealth to create healthy environments that benefit all of us.