A Faint Positive Move of the Needle at Most
How have shared equity housing models created positive impacts on the supply of affordable housing?
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By Kent Watkins
To the extent that shared equity and other alternate forms of homeownership have been utilized, a faint positive move of the needle at most has occurred. Scale is still lacking and why is an important policy issue. The various shared equity models and others such as rent-to-own have been tried through and around HUD (HOPE VI, FSS, Moving to Work, HOME, 5H) and in States and local programs (ARCH Seattle; community land trusts; deed-restricted houses and condominiums that I have visited in Boulder, CO) for many years, especially in order to help public housing and other low-income populations have this choice.
For extensive literature, one should visit the National Housing Conference/Center for Housing Policy webpage regarding this, the Ford Foundation/NCB report, and the Fannie Mae report that differentiates Shared Equity from Shared Appreciation homeownership programs.
For a comprehensive description of these models and their advocacy, a must-read is Shared Equity Homeownership: The Changing Landscape of Resale-Restricted, Owner-Occupied Housing by John Emmeus Davis (National Housing Institute).
Some of the rhetoric is based on the assumption that homeownership is part of the American dream but this can lead to unintended consequences, or as some would remind us, foreseeable ones. Such debate has gone on for decades. I can remember the hearings involving Senators Charles Percy and Robert Kennedy and their ‘berating’ then Secretary Robert Weaver, my boss, for not more fully embracing homeownership over rental occupancy. Weaver’s cautionary words and those few who echo him today continue to provide the necessary brakes on what tipping points public policy needs to define on a continuing basis.
This should not prevent us from trying to use both shared equity and rent-to-own models as arrows in the quiver of homeownership outcomes, but the basic assumptions of risk, credit-worthiness (whatever that might mean), and sustainability need to be considered as part of that.
Now, the private sector has entered big-time to take advantage of the under-water mortgage situation. Will that effort be sustained beyond the short-term and the end of a weak housing market? National Academy of Housing and Sustainable Communities members generally answer, probably not. In fact, even today, the lack of standards on mortgages for securitization and the still looming over-hang of second equity mortgage principal payoffs, increased student loan debt, and the lack of write-downs in current bail-out programs, despite their marginal tinkering, hamper any short-term or sustained contribution on the private sector side.
At last month’s regular luncheon of the Academy, Lisa Sturtevant summarized and updated her (and Jeanette Chapman’s) Housing the Region’s Future Workforce 2012-2032. Although it was about the Washington metropolitan area, some of the findings are most likely similar in other places. They paint a picture of a homeownership downward trend over the next 20 years, due to high debt and lower economic development (wages for the middle class, e.g.). That evidence-based research will no doubt be included in future public policy debate as to how much we as a country want to continue to increase the home-ownership levels through various subsidies.
Kent Watkins is the Chairman of the National Academy of Housing and Sustainable Communities.
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