Under this very common approach, the subsidy is applied to reduce the purchase price to a level affordable to homeowners at the target income level. Then, restrictions are put into place requiring that the units be sold to buyers meeting certain qualifications – for example, incomes below 80% of AMI – at an affordable price as defined according to a formula set in the deed restriction or covenant. While these agreements are sometimes assumed to be self-enforcing, experience suggests they need to be actively monitored by an entity with an interest in maintaining ongoing affordability.
- Preservation of Affordable Homeownership: A Continuum of Strategies
- Commercial Mortgage Insight: Shared Equity Gains Acceptance
- Fannie Mae: Guidelines for Resale Restricted and CLT Properties
This report, one of several related resources published by the Center for Housing Policy, provides an overview of the strategies available to help communities preserve affordability of assisted homeownership units and explains the pros and cons of different approaches. The report describes grants, forgivable loans, deferred loans, shared appreciation loans, deed restrictions/covenants, community land trusts […]
This article from Commercial Mortgage Insight explains how mortgage brokers and lenders can participate in the growing trend toward shared equity homeownership. The greatest benefit of shared-equity ownership is that it presents the opportunity to both generate substantial wealth for individuals and allow communities to create a stock of permanently affordable ownership housing. Historically, the only housing options available have been renting or traditional homeownership, where the buyer reaps all the rewards of ownership, but also bears all of the burdens. More often than not, those burdens are too great for low- to moderate-income individuals.
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.
- Montgomery County, MD Mandates Affordable Homes
- Shared Equity Homeownership: the Changing Landscape of Resale-Restricted, Owner-Occupied Housing.
- Washington Post: Shared Equity Homeownership in DC
Montgomery County's Moderately Priced Dwelling Unit Program, one of the nation's first inclusionary zoning programs, has created over 12,000 affordable housing opportunities. The program preserves affordability of new homeownership units with a shared equity resale price restriction.
his 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.
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.