Shared equity homeownership promotes sustainable wealth-building opportunities and lasting affordability for lower-income households, according to new research published by the Lincoln Institute of Land Policy in partnership with Grounded Solutions Network.
The 2019 working paper, Tracking Growth and Evaluating Performance of Shared Equity Homeownership Programs During Housing Market Fluctuations, is the largest study of shared equity homeownership to date and evaluates the performance of more than 4,000 housing units across 20 states over three decades.
“Shared equity homeownership provides opportunities for families of color to access quality housing, build wealth, and counter systemic racial housing disparities,” said Grounded Solutions CEO Tony Pickett, citing how the median shared equity household accumulates approximately $14,000 across all housing cycles, compared to a median initial investment of $1,875 made at purchase.
“We believe this study validates shared equity as a sustainable housing model, and our focus is on growing the scale of shared equity housing to a level where increased numbers of lower-income families view it as something they can participate in and benefit from.”
Comparing 58 programs across the country with data from Grounded Solutions’ HomeKeeper National Data Hub, the study measures impact of the shared equity housing sector over 33 years, from 1985-2000 (pre-housing bubble), 2001-2006 (housing boom), 2007-2012 (housing bust), and 2013-2018 (housing recovery). It finds that 95 percent of shared equity mortgages are affordable for households earning 50 to 80 percent of area median income, and the share of minority households living in shared equity homes increased from 13 percent between 1985-2000 to 43 percent between 2013-2018.
“Shared equity programs unlock stable housing opportunities and provide a foothold for people who would not otherwise be able to access homeownership, one of the main wealth-building vehicles in the United States,” said George W. “Mac” McCarthy, president of the Lincoln Institute of Land Policy.
Under the shared equity housing model, lower-income residents are provided the opportunity to own a home-either directly or indirectly-at a lower cost than the open market rate. When a shared equity home changes hands, the resident reaps a portion of the gains and a portion stays with the property, providing a perpetual subsidy and allowing others to purchase the same home at below-market cost.
The study covers three types of shared equity homeownership: community land trusts, deed-restricted housing, and limited-equity cooperatives. In community land trusts, a nonprofit corporation owns the land and provides a long-term lease to the resident, who owns the structure. In deed-restricted housing, the resident owns the entire property, but the resale price is restricted to preserve affordability. In a limited-equity cooperative, the residents own a share of a corporation, which wholly owns the property.
In addition to wealth-building and affordability, the study explores other dimensions of homeownership including the demographics of homeowners served, the structure of different programs, the levels of public and private funding, and the frequency with which participants sell their home. “Shared equity housing programs maximize a one-time public investment to achieve homeownership for families who would otherwise be unable to afford a traditional market-rate home,” added Pickett, sharing that shared equity homeowners move less frequently than the general population and that in the majority of moves, the homeowner purchases another home.
“We are expanding equitable housing choices and creating new avenues for lasting affordability, resulting in the use of public assets for public benefits that serve families in perpetuity.”
NOTE: Tracking Growth and Evaluating Performance of Shared Equity Homeownership Programs during Housing Market Fluctuations, is available for download online.