Shared equity housing programs are designed to provide a key to those who are locked out of homeownership, whether because of fast-rising housing prices, stagnant incomes, or a history of discriminatory policies. As new research shows, the programs do just that.
In the Lincoln Institute of Land Policy working paper “Tracking Growth and Evaluating Performance of Shared Equity Homeownership Programs During Housing Market Fluctuations,” Ruoniu Wang of Grounded Solutions Network and his coauthors study the performance of more than 4,000 shared equity housing units across 20 states over three decades—the largest study of shared equity to date. They demonstrate that shared equity housing promotes sustainable wealth-building opportunities and lasting affordability for lower-income households, and serves an increasing number of minority households.
“Shared equity homeownership provides opportunities for families of color to access quality housing, build wealth, and counter systemic racial housing disparities,” said Grounded Solutions CEO Tony Pickett, citing how the median shared equity household accumulates approximately $14,000 across all housing cycles, compared to a median initial investment of $1,875 made at purchase.
“We believe this study validates shared equity as a sustainable housing model, and our focus is on growing the scale of shared equity housing to a level where increased numbers of lower-income families view it as something they can participate in and benefit from.”
Comparing 58 programs across the country with data from Grounded Solutions’ HomeKeeper National Data Hub, the study measures the impact of the shared equity housing sector over 33 years, from 1985–2000 (pre-housing bubble), 2001–2006 (housing boom), 2007–2012 (housing bust), and 2013–2018 (housing recovery). It finds that 95 percent of shared equity mortgages are affordable for households earning 50 to 80 percent of area median income, and the share of minority households living in shared equity homes increased from 13 percent between 1985–2000 to 43 percent between 2013–2018.
“Shared equity programs unlock stable housing opportunities and provide a foothold for people who would not otherwise be able to access homeownership, one of the main wealth-building vehicles in the United States,” said George W. “Mac” McCarthy, president of the Lincoln Institute.
Under the shared equity housing model, lower-income residents are provided the opportunity to own a home—either directly or indirectly—at a lower cost than the open market rate. When a shared equity home changes hands, the resident reaps a portion of the gains, and a portion stays with the property, providing a perpetual subsidy and allowing others to purchase the same home at below-market cost.
The study covers three types of shared equity homeownership: community land trusts, deed-restricted housing, and limited-equity cooperatives. In community land trusts, a nonprofit corporation owns the land and provides a long-term lease to the resident, who owns the structure. In deed-restricted housing, the resident owns the entire property, but the resale price is restricted to preserve affordability. In a limited-equity cooperative, the residents own a share of a corporation, which wholly owns the property.
In addition to wealth-building and affordability, the study explores other dimensions of homeownership including the demographics of homeowners served, the structure of different programs, the levels of public and private funding, and the frequency with which participants sell their home.
Will Jason is associate director of communications at the Lincoln Institute of Land Policy.
Brandon Frazier is director of communications at the Grounded Solutions Network.
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