Introduction

Shared equity homeownership combines stable, affordable housing payments with most of the benefits of ownership, including control of one’s physical environment and opportunities to build equity. Shared equity homeownership also provides families with protection against drops in home values and preserves the buying power of public subsidies over time to help one generation of homeowners after another.

Under shared equity homeownership, a government or nonprofit agency acts as a co-investor with a new homebuyer, investing substantial public funds to reduce homeownership costs to an affordable level. In return, homebuyers agree to limit their equity appreciation in order to preserve affordability for future lower income buyers.

A New Option for Homebuyers
Imagine a lower income household that wants to buy a home and can qualify for a $125,000 30-year fixed rate mortgage. If starter homes in their area generally cost more than $200,000, this family would be forced to choose between borrowing more than they could safely afford or remaining in rental housing. If, instead, they partnered with a local shared equity program, the family would take out a $125,000 mortgage and the program would invest the remaining $75,000.

In exchange for this assistance, the family would agree to later resell the home at an affordable price to another lower income buyer. The family would have a home of their own with stable affordable payments. They would build equity each month as they paid off their mortgage. In addition they would be able to realize limited price appreciation as the affordable price increased over the years. And were the market to decline, the program would share in the loss, helping to protect the family’s equity.

Hundreds of thousands of families across America have decided that this kind of shared equity arrangement makes sense for them. For many low-income households in higher cost housing markets, it offers the only realistic avenue to homeownership. For others, even in slower growth markets, shared equity homeownership offers a safe way to build equity and save for traditional ownership.

Preserving Public Investment
Where typical local downpayment assistance programs offer homeownership to one lucky family, the same public investment in a shared equity home can help one family after another. Each year, as additional public money is invested, the portfolio of shared equity units grows, making it possible to help more and more families with limited resources.

Shared equity homeownership can be implemented through a variety of different structures including limited equity housing cooperatives, community land trusts, and deed restricted houses and condominiums. Some communities use shared appreciation loans which, instead of limiting resale price, require homeowners to repay a share of any market price increase and then reinvest these recaptured funds to make the homes affordable to future buyers. Nonprofit or resident owned mobile home parks also offer individual ownership while preserving ongoing affordability for future generations.

Lasting Stewardship
Whatever the legal and financial mechanism, shared equity homeownership involves a commitment to balancing the twin goals of preserving housing affordability for future generations and offering today’s homeowners a dependable opportunity to build wealth. In each case, a public or nonprofit agency shares some of the rights, responsibilities, risks and rewards of ownership. The homeowners are not entirely on their own. The sponsor of the program stands behind the owners, protecting them from predatory lending and foreclosures, ensuring that they have access to affordable financing for improvements, helping them to eventually sell the home. But at the same time, the sponsor serves as steward of the public investment by ensuring that owners occupy their homes as their primary residence, encouraging regular maintenance and protecting ongoing affordability at the time that homes are resold. It is this long term stewardship of the public investment in affordable homeownership that is the defining characteristic of shared equity homeownership.

Learn More

  • Survey: Community land trusts lower risk of losing homes to foreclosure
  • Homeowners in community land trusts (CLTs) across the country are much less likely to lose their homes to foreclosure than owners of market-rate homes, according to survey results released by the National CLT Network and the Lincoln Institute of Land Policy. The new data show 2008 closing with a slight 0.52 percent foreclosure rate among […]

  • Burlington Resale Study
  • picture-51This 2004 study of the first 100 home resales conducted by the Burlington Community Land Trust (now known as the Champlain Housing Trust) is the only formal study of program outcomes for shared equity homeownership completed to date. The study documents significant asset building outcomes for homeowners as well as success in preservation of affordability for future buyers.

  • American Planning Association: Affordable Forever
  • planning0309This article from Planning Magazine profiles a number of community land trusts and describes how local planners are turning to CLTs as a means for preserving long term affordability of homeownership units.

  • Fannie Mae: Guidelines for Resale Restricted and CLT Properties
  • Fannie Mae has developed a thoughtful set of guidelines that allow lenders to originate mortgages for buyers of shared equity homes. The guidelines are designed to protect the lender's security interest in the property right to repayment while still allowing local affordable housing programs to protect affordability for the longest term possible. The guidelines allow for resale price restrictions that survive foreclosure by the mortgage holder.

  • WA Housing Finance Commission: CLTs Come of Age
  • picture-31The Washington Housing Finance Commission published this 8 page overview of Community Land Trusts in Washington and the growing role that they are playing in implementing the state's affordable housing goals. Kim Herman, Executive Director of the Commission and past president of the National Council of State Housing Agencies, writes ...

  • Shared Equity Homeownership: the Changing Landscape of Resale-Restricted, Owner-Occupied Housing.
  • sharedequityhomecoverhis 150 page report produced by the National Housing Institute (NHI) was the first to group together several models of resale restricted homeownership under the general term "shared equity homeownership." The report focuses on three models of housing tenure that use durable contractual controls to perpetuate the occupancy, eligibility, and affordability of homes that are owned and occupied by low- and moderate-income households: the community land trust, the limited-equity cooperative, and deed restricted housing with covenants lasting 30 years or more.

  • Washington Post: Shared Equity Homeownership in DC
  • While there is plenty of blame to go around for this mess, the goal of expanding homeownership is still an important one and should not be sacrificed. It can be done responsibly and should remain a priority. In fact, one of the best examples of how it can be done is right here in the District.