Positive Impacts on 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 Robert Burns
Shared equity housing models have created positive impacts on the supply of affordable housing, especially for low-income homebuyers. One of the positive impacts includes a decreased risk of foreclosure rates. There is solid evidence supporting the sustainability of homeownership for low-income homebuyers for at least five years. In a study done by the Urban Institute on seven shared equity programs, over 90% of their homebuyers were still homeowners after 5 years compared to the national average of 50% (Urban Institute, Price, Temkin, Theodos). Organizations that had a higher percent of homeowners being seriously delinquent on mortgage payments was still less than homeowners who had FHA-loans (Urban Institute, 2010, Price, Temkin, Theodos).
One reason for lower foreclosure rates is due to homebuyers purchasing a home at below-market price. This protects a homebuyer from losing a large sum of money if the home price decreases. It also makes it more difficult for a homeowner to lose money on their home because the price of the home must decline significantly more. In the same study, households in all seven organizations earned good returns on their homes despite the resale price restrictions. Along with decreased foreclosure rates, homeowners are able to invest in other assets such as retirement and education because they have spent less than they would on a market rate home.
Another reason is the risk involved if a home does go into foreclosure. Not only does the homeowner lose their home, but the program loses the property and any public subsidies invested. Occupancy restrictions and affordability are lost as well. Because the program is also invested in the property, they want to make sure the homeowner is secure in their ability to maintain the home. One way of doing this is through stewardship. Stewardship is defined as the conducting, supervising, or managing of something; especially the careful and responsible management of something entrusted to one’s care. Activities involved in stewardship include offering workshops, trainings, discounts, and helpful resources directed to assist the homeowner’s needs, approving major home improvements, and assuring the homeowner has all necessary information about the rights and opportunities of owning a home under the shared equity program. All the activities involved with stewardship emphasis a personal engagement between the program and homeowner. Therefore, the activities are easier to accomplish and much more effective in preventing foreclosure because positive, trusting relationships are formed between the two parties.
Robert Burns is the president and CEO of City First Homes. City First Homes is a Capital Impact Partners’ Cornerstone Homeownership Innovation Program (CHIP) program subgrantee. CHIP is funded by the federal Social Innovation Fund and the Ford Foundation to provide capacity -building grants and technical assistance to homeownership programs across the country with a commitment to long-term affordability.
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