Roger Lewis, former Executive Director of the CLT Network, contributed to this post.
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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Shared equity homeownership is a promising strategy for future homeownership. It has succeeded in both hot and cold markets as documented by Community Land Trusts (CLTs) over the most recent market decline. Despite the financial crisis, most shared equity homeowners have retained their equity gains. Shared equity homeownership can provide homebuyers with a successful homeownership experience, but there must be an adequate supply of homes to meet the demand.
With launch funding from the District of Columbia, City First Homes has the ambition of providing thousands of homes over time, but it is in an early expansion mode and most CLTs are not operating at scale, holding only a limited number of deed restricted homes and apartments. What can be done to scale up shared equity? Here are a few ideas to consider:
- Collaboration: strong local, state and regional organizations need to work together to increase the number of shared equity homes. This collaboration should be driven by the intended impact and a commitment to quantifiable outcomes such as the success of current and future homeowners and viable stewardship organizations. There are many capable for- and non-profit providers of affordable rental and homeownership housing. Each community should reflect on how it can draw upon them to create a critical community asset, a pool of permanently affordable homes.
- Financing/access to capital: Shared equity homeownership requires access to mortgage financing and capital for organizations to develop or acquire these homes. Lenders should be encouraged to lend to these homebuyers, arguably with pricing discounts given the incredible performance of these borrowers – the CLT foreclosure rate over the past few years has been less than 0.6%. Federal, state and local grant funds should give these projects priority when selecting projects to fund given that these funds are supporting multiple homeowners. Lenders should be encouraged to participate in the development or acquisition financing of these projects, perhaps by being awarded extra CRA credit.
- Standardization: The shared equity sector must establish best practices and systems that will support scale. The National CLT Network and NCB Capital have been working on this. They have developed management software for stewarding shared equity homes that follows the home buying work flow. Property management software helped the rental sector to scale up in the 1990’s with the development of specialized property management software, and the shared equity sector should follow in its footsteps in the 2010’s.
Shared equity homeownership promotes healthy communities, empowers homeowners to succeed, creates equity for low income families, promotes social equity by helping to close the wealth gap and promotes greater economic opportunity for all. With these above changes in place, we could have 100,000 or more new households accessing this successful homeownership model in the next decade. Bill Kelly is President and Co-Founder of Stewards of Affordable Housing for the Future (SAHF).
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