Attitudinal Change Needed to Move Housing Market Towards Normalcy

Do alternative forms of homeownership, such as shared equity models and rent-to-own programs, present viable alternatives for future homeownership? Can they be taken to scale in a way that can encourage stabilization of neighborhoods and housing markets?

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Adjustment is part of life. We adjust our education goals, our career plans, our relationship with family and friends and our lifestyle. Sometimes these adjustments are less of a voluntary nature and are made more out of necessity. That necessity is sometimes based on economic standing.

So too it is with homeownership. Our ideas on how to achieve it may need to be adjusted as income levels stagnate. With the homeownership rate continuing to fall, it is clear that single family neighborhoods across America require an attitudinal change by all involved. These neighborhoods and their existing homeowners value stability. Evictions, foreclosures, and empty houses that are slow to sell destroy that stability.

Allowing a young family to live in an established neighborhood as renters while they build the equity and income level that allows for ownership is a win for all involved. It allows the family to become a part of the community, the neighborhood has a resident that is responsible for the appearance of the property and the lender is gradually turning the renter into an owner.

Shared appreciation is another vehicle that offers promise. The lender can offer a lower fixed interest rate because a portion of the property’s future appreciation will accrue to the lender. The homeowner is able to obtain homeownership sooner and at a more affordable monthly payment in exchange for sacrificing a portion of future equity gains.

These alternative forms of homeownership will obviously work better in a stable housing market. And that stability in the market will allow these alternatives to grow in scale. However, the mere fact that they are available can help move the housing market towards normalcy while keeping neighborhoods stable as an attractive place to live.

Kevin Igoe is the owner of IGOE/Associates and serves as a legislative consultant to the Bipartisan Policy Center.

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