Increasing Affordable Housing Opportunities in Rural and Urban Markets
How have shared equity housing models created positive impacts on the supply of affordable housing?
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By Marcea Hosay Barringer
With S&P/Case-Shiller reporting home prices up 10.3% from a year ago, Freddie Mac predicting home prices will rise 5% in 2014, and affordable rental units available for only one out of every four families who needs them, it’s clear that there are not enough affordable homes in the US.
Shared equity housing models can be great options to increase the supply of affordable housing in specific situations. These models can work well in high priced urban areas, and in lower priced rural areas.
In shared equity housing models, the resident and another entity, often a nonprofit developer or community land trust, share ownership of a home and land. When the home is sold, the residents and the nonprofit or land trust share in the proceeds, or equity. Shared equity models can give lower income people the opportunity to own a home, while keeping prices affordable for the next homebuyer.
Shared equity models can create affordable housing options in expensive areas where there would be no decent affordable housing otherwise. NeighborWorks organization Asian Americans for Equality (AAFE) in New York City is currently developing a 19-unit cooperative in Little Italy in Manhattan. The property was foreclosed on by New York City, and has long been a neighborhood eyesore—even when it was occupied. AAFE is doing a gut rehab on the building. The original tenants will move back after the rehab, and six more moderate income families will buy the remaining apartments. The apartments will have resale restrictions so that they remain affordable to new owners in the future.
In less expensive areas, shared equity models provides homeownership to families who otherwise would not have that opportunity. NeighborWorks organization One Roof Community Housing, based in Duluth, Minnesota has sold almost 250 houses through its land trust. Emily, who bought a land trust home from One Roof in 2011 says, “The house was move-in ready and just right for our family. My mortgage for an 1,100 square foot house is only $3 more per month than I was paying in rent for a 300 square foot apartment.”
In the One Roof model, the nonprofit owns the land and the homeowner leases the land for a nominal fee of $28 a month. The homebuyer buys the house with a conventional mortgage, but the house prices are 20 to 30% below the market rate. When a land trust house is sold, the homeowner receives 100% of what they have paid off on their mortgage plus 25% of the increased value of the property. Homeowners also receive the full value for improvements they’ve made to the home.
Shared equity housing models are definitely not the be-all and end-all solution to the country’s limited supply of affordable housing. But as these two examples show, shared equity models can increase long term affordable housing opportunities in many different kinds of communities and markets—from rural Minnesota and New York City.
Marcea Hosay Barringer represents Neighborworks America.
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