Advancing the Supply of Affordable Housing
How have shared equity housing models created positive impacts on the supply of affordable housing?
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By Emily Thaden
Shared equity homeownership models — including community land trusts, inclusionary housing or deed-restricted programs designed for lasting affordability, limited equity housing cooperatives, and shared appreciation loan programs that increase and reinvest second loans on the same properties— arguably advance the supply of affordable housing better than commonly used affordable housing models or programs.
First and foremost, a one-time investment creates an affordable home that maintains its affordability in perpetuity, resale after resale. Unlike down payment assistance, which frequently creates a “windfall” for one household but loses the public’s investment after sale, shared equity homeownership programs retains the public’s investment in the property to help household after household.
Second, resale-restrictions or shared appreciation provisions, allows the public investment in the property’s affordability to keep pace with the market, in effect, growing the public investment over time. Hence, re-subsidizing affordable homes is rarely necessary. In contrast, federally- and locally-funded affordable owner-occupied production predominantly utilizes down payment assistance or subsidies that are granted, forgivable, or recaptured; in all of these instances, reoccurring subsidization is necessary to maintain the unit as affordable.
Third, if housing values in the surrounding neighborhood drastically increase, existing shared equity homes remain affordable without additional funds. Hence, shared equity models help build inclusive communities and buffer the adverse effects of gentrification while enabling lower income households to access asset-rich neighborhoods.
Fourth, shared equity homeownership programs typically steward their homes and support their homeowners pre- and post-purchase. For instance, these programs frequently review and approve home purchase, refinance, and home equity loans; provide ongoing education and financial counseling; offer support with home repairs or capital improvements; and detect delinquencies. Hence, their portfolios of homes are rarely lost to foreclosure. Traditional approaches for providing affordable owner-occupied homes have rarely provided these levels of ongoing resident engagement and stewardship; hence, a number of these units have been lost to foreclosure resulting in an overall decrease in the affordable housing stock.
Emily Thaden is the Research & Policy Development Manager for the National Community Land Trust Network
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