Shared Equity Housing Models Stabilize Neighborhoods
How have shared equity housing models created positive impacts on the supply of affordable housing?
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By Peter James Elkowitz
Long Island Housing Partnership is a not-for-profit housing organization that has created over 500 shared equity homes in the last 25 years. These homes were built across 2 Counties, 2 Cities, 10 Towns and 2 Villages on Long Island, New York.
There are various shared equity housing models. Three of the most common models are deed-restricted homes (where restrictions are placed on the deed to ensure that the target population is served and that the home remains affordable), community land trusts (where, for example, a not-for-profit entity owns the land and the buyer purchases the structure), and limited-equity cooperatives (where a buyer pays less than market value, and the buyer’s equity in the cooperative is limited). All of these shared equity models have a positive impact on affordability.
The deed-restricted model is widely used. In this model, various restrictions are placed on the deed to ensure, for example, that the home is used as the buyer’s primary residence, that it is not rented, that it is maintained, that the resale price is limited and/or that the resale is restricted to an income eligible buyer. In addition, eligibility restrictions on future purchasers can be applied as can a right-of-first refusal that would allow the not-for-profit seller to buy back the home at a predetermined fixed price.
Soft notes and mortgages can also be combined with the deed restrictions that would recapture government and other funds. One of the keys to the success of the deed-restricted model is that the restrictions must be monitored and enforced. The deed-restricted model can successfully ensure that the target population is served; that the home remains affordable for 30+ years (even if it is resold); and in this time where government funds are scarce, the home remains in the affordable pool.
Community land trusts are also effective in providing affordable housing. Because the buyer only purchases the structure, not the land, the cost is relatively low. The ground lease establishes the various restrictions that keep the home affordable (e.g., restrictions on price, resale, maintenance, etc.) Community land trusts can be very effective at providing long-term affordable housing. Again, it is essential that the homes be monitored and the restrictions be enforced to ensure that the target population is served and the home is maintained.
Limited-equity cooperatives are an effective shared equity model that also have a positive impact on the supply of affordable housing. This model allows the target population, who may have very limited funds, to put down a small amount of money for a limited share of the co-op. Homeowners are allowed a modest growth in equity between initial purchase of shares and resale of the shares. Like the other two models, the limited-equity cooperative also provides restrictions on the resales, occupancy, and the like.
In short, shared equity housing models have created significant positive impacts on the supply of affordable housing while stabilizing neighborhoods. The purchaser shares in the rights and responsibilities of homeownership while recognizing many of the benefits of homeownership.
Peter James Elkowitz is the president and CEO of Long Island Housing Partnership, Inc. The Long Island Housing Partnership 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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