Shared Equity Homeownership is a Stepping Stone
How have shared equity housing models created positive impacts on the supply of affordable housing?
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By Emily Higgins
Shared equity homeownership provides sustainable and affordable housing that really works for families of modest means, while also delivering a dramatic return on a relatively small public investment. This model creates a stock of permanently affordable, owner-occupied homes that balance private wealth-building with community benefits. The way it works is simple: income-qualified buyers receive assistance to purchase, and in exchange for that help, they share a portion of the market appreciation with the next buyer when they sell. We recycle and leverage public funds by capturing and reinvesting this appreciation in the homes, thus ensuring that the homes stay affordable for each subsequent buyer.
Champlain Housing Trust (www.getahome.org) has built a portfolio of 537 shared equity homes over the past 30 years, which through resale of those homes, has boosted 921 households into ownership. An estimated $3 million in public investment has resulted in close to $90 million in mortgages. Buyers of these homes succeed because they are educated, prepared, and we stick with them. We provide ongoing counseling, workshops, loans, and most importantly, we step in when times get tough. The Urban Institute has documented that more than 90% of our shared equity owners still own after five years, either with us or on the open market, whereas for first-time buyers on their own, that rate is 50% or below. We have only lost two homes from our portfolio due to foreclosure since 1984, a 0.2% loss rate. Nationally, loans on shared equity homes outperformed all others loans through the housing crisis, and were ten times less likely to be in foreclosure, according to a study done by the National Community Land Trust Network in 2011.
The organizations who do this type of work serve a broader community development role. For example, Champlain Housing Trust also owns and manages 2,100 affordable rental homes, 839 of which we built new or substantially rehabbed since 2000. We are one of 222 Community Land Trusts across the country who have created more than 25,000 permanently affordable homes, including co-ops and apartments.
Shared Equity homeownership provides a middle ground, and a stepping stone, between rental and homeownership. More than two thirds of our sellers built enough equity (an average 30% internal rate of return) to buy their next home without our assistance. Shared equity has proven to be a durable and effective form of tenure. Key policymakers and funders such as the Social Innovation Fund, the Ford Foundation, and NeighborWorks® America, have taken notice and are working to standardize practices and take this model to scale (www.affordableownership.org). If existing public expenditures prioritized shared equity, its impacts on the supply of affordable housing would be exponentially increased.
Emily Higgins is the director of Homeownership for Champlain Housing Trust. Champlain Housing Trust 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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