By Arthur Acolin, Alex Ramiller, et al., Photo: Imagenet/Shutterstock, Housing Matters, January 26, 2022
Homeownership is a key tool for wealth building, particularly for households with low and moderate incomes, for whom homeownership is often their primary means of asset building. Yet barriers to entry, including down payments and other borrowing constraints, prevent many households from accessing and equitably benefiting from homeownership.
Shared-equity homeownership (SEH) programs are one potential tool for expanding access to homeownership to low- and moderate-income households and people of color, who have lower levels of homeownership because of systemic racism and ongoing market barriers. SEH programs make homes affordable (PDF) by investing funds to reduce initial purchase prices. The homes remain affordable to all future homebuyers through resale restrictions. One primary type of SEH is the homeownership model of community land trusts (CLTs): nonprofit, community-based organizations governed by a board of CLT residents, members of the broader community, and public representatives. CLT homes are priced well below market values because homeowners only purchase houses on CLT-owned land, and they lease the land from the CLTs in a long-term, renewable lease.
Under all SEH types, homeowners agree to pay the opportunity forward by reselling their homes below their market values, so these homes remain affordable to subsequent lower-income households. The original homeowner builds wealth by paying down the mortgage and capturing a portion of the appreciation. Because the homes are resale restricted and less subject to market fluctuations, shared equity is referred to as a “third sector” of housing that sits between renting and private-market homeownership.
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