#149 Spring 2007 — Shared-Equity Homeownership

Toward a Common Agenda

Growing shared-equity housing

NHI’s recent research and advocacy regarding shared-equity homeownership has rightly focused on issues that cut across the organizational boundaries separating one model from another. LEC’s, CLT’s, deed-restricted housing and their many variations are treated as a single sector, where their similarities matter more than their differences, especially when it comes to designing their programmatic components, crafting public policies to support their expansion, or judging the effectiveness of resale-restricted, owner-occupied housing vis-Ã -vis more conventional forms of public or private ownership. These commonalities of program, policy and performance are the basis on which a common agenda might be forged for eventually bringing shared-equity homeownership to scale.


Although every model of shared-equity housing has unique organizational and operational features, most of these distinctions disappear at the micro level of program design. Few of the contractual controls that regulate the use and resale of shared-equity housing are model-specific. Different models confront many of the same programmatic choices in dealing with eligibility, duration, decontrol, disclosure, occupancy, legacy, improvements, maintenance and financing. Different models employ similar methods for calculating resale prices, managing transfers and monitoring compliance.

Practitioners promoting a particular form of shared-equity housing seldom acknowledge these similarities, however. CLTs rarely look to LECs for insights into designing their programs, nor do LECs look to CLTs. Nonprofit organizations or municipalities employing deed covenants to preserve the long-term affordability of owner-occupied housing seldom turn for guidance to other forms of shared-equity homeownership. Each model has evolved largely in isolation, uninformed by the experience of other practitioners pursuing similar ends, facing similar challenges and making similar choices.

Parochialism in the public sector is especially widespread. Not only do municipal officials who are charged with crafting use and resale controls for housing created through inclusionary zoning or another municipal means seldom look to LECs and CLTs for practical advice; they seldom consult with their counterparts in other cities. Whether out of a sense of rivalry or a lack of knowledge-or merely because, unlike LECs and CLTs, there exists no national network for the sharing of information and the setting of standards for the regulation and administration of deed-restricted housing-city officials are more likely to invent their own affordability covenants and administrative systems from scratch than to embrace what another city has done.

These islands of innovation have been good for diversity, but not so good for improving practice or raising productivity. If LECs, CLTs and deed-restricted housing are to be brought to scale, there must be a closer assessment and wider dissemination of best practices among (and within) the separate enclaves of shared-equity housing. There must be a deeper understanding of what works well-and what does not. There must be more consistency in service delivery. There must be a higher degree of standardization, making it easier for private lenders and public funders to invest in these unconventional models of homeownership. Such sector-wide changes in program are necessary, I believe, if we are ever to grow this sector to significant size.


Much of the recent growth in share-equity homeownership has been due to the increasing support of city and county governments. Especially in jurisdictions with inclusionary-housing programs, where regulatory mandates or financial incentives have caused private developers to create affordably priced housing for lower-income homebuyers, these models have become a widely used administrative tool for preserving homeownership gains that government has worked so hard to create.

In many municipalities, however, and in many first-time homebuyer programs receiving state or federal subsidies, there persists a deep-seated bias against shared-equity housing among those who design and administer such programs. This is not a bias that is model-specific; it does not really matter whether long-term controls over occupancy, eligibility and affordability are being maintained through an LEC’s corporate documents, a CLT’s ground lease or an affordability covenant attached to a deed. It is the controls themselves-and the duration of these controls-that many public officials find intolerable.

In these jurisdictions, LECs, CLTs and deed-restricted housing have developed slowly-if at all. Shared-equity housing is either starved for public funding, with most homeowner subsidies being directed toward market-rate homeownership, or undermined by being valued and taxed as if it were the same as market-rate housing.

Where such impediments exist, the practitioners of competing models of shared-equity homeownership have a common interest in promoting a more supportive policy environment. If a jurisdiction is going to use its dollars or powers to bring the price of housing within the reach of lower-income homebuyers, the affordability of these homes should be preserved for many years. Subsidies invested in making homeownership affordable should be retained in the housing, neither wholly removed by the departing homeowner nor partially recaptured by a public agency. Moreover, the publicly subsidized affordability of these homes should not be steadily eroded by forcing homeowners to pay property taxes on market-based gains they can never realize. Durable affordability, subsidy retention and equitable taxation are the nourishing rain for shared-equity housing. Where these policies are absent, the sector seldom thrives. Where these policies are present, shared-equity homeownership has a good chance of growing into a significant percentage of the local housing stock.


If LECs, CLTs and deed-restricted homes are to compete successfully for a portion of the private financing and public funding long lavished on more conventional forms of housing, shared-equity homeownership must be shown to benefit individuals and communities in ways that market-rate homeownership, market-rate rentals and publicly owned rentals cannot. It is not enough for resale-restricted, owner-occupied housing to be different. It must be better-not for every person in every place, but for enough people in enough places for the sector to be seen as an effective alternative to forms of housing tenure that have historically received the lion’s share of the nation’s investment in affordable housing.

In my own research into shared-equity homeownership, summarized in the report that was published last fall by NHI, I have identified five sets of benefits that would seem to hold the greatest potential for demonstrating the sector’s distinctiveness and effectiveness: affordability, security, wealth, involvement and improvement. Shared-equity housing does a superior job of expanding access to homeownership for lower-income households, especially in high-priced markets. Equally important, it preserves this opportunity for the same class of people over a very long period of time, while preventing the loss of the public (and private) subsidies that made this housing affordable in the first place. Shared-equity housing, in most of its forms, also enhances security of tenure by pooling risks, sharing responsibilities and providing support in times of trouble, improving the odds that first-time homeowners will actually succeed. Community stability is enhanced as well because shared-equity housing insulates a portion of a neighborhood’s residential property against damaging cycles of investment and disinvestment.

There is evidence, too, that low-income homeowners build wealth, improve their lives and participate in their communities beyond what would have been likely had they not purchased a shared-equity home. Not only does shared-equity housing serve as a springboard for individual improvement, moreover. It has often been a vehicle for community improvement as well, helping to revitalize neighborhoods in which the poor have been concentrated or to diversify neighborhoods from which the poor have been excluded.

These are distinctive benefits that are regularly delivered by LECs, CLTs and deed-restricted homes-but how dependably and how widely? Do they deliver these benefits in both hot markets and cold markets, in small towns and large cities, in affluent suburbs and impoverished neighborhoods? Do they always perform better for persons and communities of modest means? Too little research has been done to answer any of these questions conclusively. They must be answered, however, if shared-equity homeownership is to have any hope of competing for a larger portion of the private and public purse.

Growing Together

A focus on program, policy and performance turns the spotlight of research and advocacy away from features that distinguish one model of shared-equity housing from another and directs it, instead, toward vital concerns that unite them all. Attention is drawn to the ways in which proponents and practitioners of competing models can work together to improve their practice, prove their worth and increase the amount of private investment and public funding that all of them need in order to grow.

Such growth can occur not only through the construction of new housing, but through the conversion of existing housing. Indeed, the greatest opportunity for expanding the amount of shared-equity housing-and the greatest need for cooperation among the disparate practitioners of shared-equity housing-may lie in coming up with a common strategy for saving much of the affordable housing that is presently at risk under different structures of ownership. There are millions of units of publicly subsidized rental housing with affordability controls that are due to expire during the next decade. There are 10 million owners of market-rate homes with adjustable rate mortgages and over seven million homeowners who pay more than 50 percent of their income for housing, households whose security of tenure may be jeopardized by fluctuations in interest rates, utility bills or personal earnings. There are more than nine million households who own manufactured homes, most of them located on leased lots in aging “parks” that may be sold by their absentee owners at a moment’s notice. Converting even 10 percent of this at-risk housing into shared-equity homeownership would enhance the residential security of several million households, while tripling the number of homes under the stewardship of an LEC, a CLT or a long lasting affordability covenant.

Each of these models makes a unique contribution to a locality’s housing tenure ladder. Giving lower-income households a variety of models from which to choose enhances the likelihood of their housing security and increases their potential mobility. But each model must offer housing in sufficient quantity to make these choices real. So far in the United States, that hasn’t happened. Working separately may be the best way for each model to establish its own identity and to root itself in the American landscape of affordable housing. Working together, however, is probably the best way for all of these models to grow.


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