Tracking Growth and Evaluating Performance of Shared Equity Homeownership Programs During Housing Market Fluctuations

Editor’s Note: This Working Paper was revised on May 6, 2019, to correct an error on page 12. School proficiency scores for census blocks with shared equity homes were compared to scores for the same state, not the same census based statistical area.

This study of 58 shared equity homeownership programs and 4,108 properties over the past three decades explores growth in the shared equity housing stock, the characteristics of households owning shared equity homes, and the performance of these programs across the nation. Using administrative data derived from the HomeKeeper National Data Hub managed by Grounded Solutions Network, performance metrics are compared across four housing market periods: 1985–2000 (pre-housing bubble), 2001–2006 (housing boom), 2007–2012 (housing bust), and 2013–2018 (housing recovery). Findings from this study not only confirm that shared equity models provide affordable homeownership to lower income families generation after generation, but also establish that the sector provides financial security and mitigates risks for homeowners facing housing market turmoil. In effect, shared equity homeownership mitigates the risks of traditional homeownership, strengthens residential stability, and promotes equitable wealth building. Key findings include:

• • The shared equity sector is increasingly serving people of color. The share of minority households has steadily increased from 13 percent in the pre-2001 period to 43 percent during the housing recovery period. During the housing recovery period, the racial composition of households in shared equity homes became similar to that of owners with the same income level and living in the same states.

• • Ninety-five percent of shared equity homes are priced affordably for families earning 80 percent of area median income (AMI) or below across all housing market periods. Overall, the median subsidy depth as a percentage of fair market price—including property subsidy that shared equity programs use to acquire a property and buyer subsidy that homebuyers use to purchase their homes—is 31 percent. In all housing market periods, the housing cost burden for a median income shared equity household is below 30 percent.

• • Affordability is achieved for both first purchases and resales of shared equity homes. All results around affordability measures are similar between first purchases and resales, including (1) the affordability level, calculated as the percentage of the AMI for households who could afford shared equity homes; (2) subsidy depth, calculated as a percentage of fair market price; and (3) housing costs, calculated as a percentage of household income.

• • The median shared equity household accumulates approximately $14,000 through their participation in shared equity programs across housing market periods. By comparison, the median equity investment at purchase is $1,875. Risk associated with homeownership remains, as evidenced by negative net appreciation for a typical shared equity homeowner during the recovery period. However, once the equity accumulated through principal repayment is taken into account, sellers overwhelmingly experience an increase in wealth during all housing market periods.

• • Shared equity models are effective in providing stable housing. The average annual move rate in the shared equity sample is 2.6 percent. By comparison, on average 6.9 percent of all homeowners and 14 percent of all households nationwide moved each year during the same period. When shared equity households sold their homes and moved, the majority (58 percent) choose to purchase again.

• • Public funding for shared equity programs, specifically state and federal dollars, substantially increased during the housing boom and bust periods, and significantly decreased during the housing recovery period. This trend aligns with the overall growth pattern in the shared equity stock.

• • Shared equity homeownership programs of all types—and across all geographies and housing market periods—tend to serve families with similar characteristics. The majority of purchasers are first time homebuyers, low-income (51–80 percent AMI), female-headed household, in their late 30s, and employed in office, retail or service industries.