In an era of dwindling affordable housing resources, communities are looking for ways to use what they have more efficiently.
Advocates for shared equity homeownership programs have long argued that preserving long-term affordability helps public funding go further; in fact, new data shows that public funds invested in shared equity homes have been growing at an annual rate of almost 5 percent, even in the wake of the housing market collapse.
Cornerstone Partnership’s Sector-wide Social Impact Report shows how 53 shared equity programs across the country invested $252 million in mostly state and local housing subsidy to make homeownership accessible for 4,100 lower income families. Where typical homeownership assistance programs offer grants or forgivable loans which require new subsidy for each additional family served, shared equity programs structure the public funds as an investment which grows as home values increase. The report shows that assisted buyers were able to purchase homes at a median discount of 35 percent below their market value. In exchange, buyers agreed to return a portion of future appreciation to help other lower income buyers.
Of the families that purchased these homes, nearly 800 so far have chosen to move and resell their affordable homes. The HomeKeeper data shows that the shared equity programs were able to recycle the public investment to serve additional lower income buyers. In most cases the public share of home equity grew over time so that more money was available to subsequent buyers than had been initially invested. The value of the public investment grew at a median annual rate of 4.8 percent.
This rate of growth was enough to not only maintain affordability, but to gradually improve it over time. The typical home had a market value of more than $175,000 but was sold for $115,000. This discount meant that overall, homes that would have been affordable to households earning at least 73 percent of an area’s median income were now affordable to households earning 57 percent of median income. At resale, these same homes were affordable to households earning a median of 54 percent.
At the same time, the families that purchased these affordable homes were able to create significant wealth. The typical family that stayed in their home for five years or longer invested just over $2,000 at purchase and received $17,500 at resale, including the $9,000 they paid down on their mortgage and almost $3,000 in profit from their share of appreciation. This represents a 7.97 percent annual rate of return on the typical downpayment. For most families, the gain alone, excluding the retired mortgage principal, was significantly more than what they could have earned had they invested their downpayment in the stock market. 62 percent of sellers went on to purchase market rate homes with no public assistance.
This data is the result of an ambitious 5-year effort to collect key performance data from shared equity homeownership programs across the US, including community land trusts, deed restriction programs, shared appreciation loan programs, and limited equity housing cooperatives. It provides the first-ever nationwide snapshot of how well affordable homeownership programs are doing at meeting the needs of underserved buyers and preserving the affordability of homes as they resell.
The Social Impact Report is a key outcome of Cornerstone’s HomeKeeper project (myHomeKeeper.org). HomeKeeper is a software tool created by Salesforce.com that streamlines the job of managing a portfolio of long-term affordable homes. Over 60 organizations are using HomeKeeper to manage nearly 100 different programs. As a byproduct of facilitating the implementation of these programs, HomeKeeper captures key data on program performance. Anonymous transaction-level data rolls up from individual HomeKeeper organizations into the HomeKeeper Hub data warehouse where it provides insight into the social impact of these programs.
Cornerstone uses the aggregated data in the Hub to produce standardized social impact metrics that were developed with feedback from over 100 experienced practitioners. Each HomeKeeper user receives a confidential report highlighting the social performance of their specific program as well as benchmarking data that allows them to compare their performance to their peers. This benchmarking makes the results more tangible and actionable.
Without comprehensive data over a longer period of time it is hard to evaluate the net effectiveness of complex social interventions, but this report documents how these programs have succeeded in preserving affordability under diverse local housing conditions and across several market cycles.
(Photo credit: Image from Homestead Community Land Trust website)