Issue #149, Spring 2007
Toward a Common Agenda
Growing shared-equity housing
By John Emmeus Davis
NHI's recent research and advocacy regarding shared-equity homeownership has rightly focused on issues that cut across the organizational boundaries separating one model from another. LECs, CLTs, deed-restricted housing and their many variations are treated as a single sector, where their similarities matter more than their differences, especially when it comes to designing their programmatic components, crafting public policies to support their expansion, or judging the effectiveness of resale-restricted, owner-occupied housing vis-à-vis more conventional forms of public or private ownership. These commonalities of program, policy and performance are the basis on which a common agenda might be forged for eventually bringing shared-equity homeownership to scale.
Practitioners promoting a particular form of shared-equity housing
seldom acknowledge these similarities, however. CLTs rarely look to
LECs for insights into designing their programs, nor do LECs look to
CLTs. Nonprofit organizations or municipalities employing deed covenants
to preserve the long-term affordability of owner-occupied housing seldom
turn for guidance to other forms of shared-equity homeownership. Each
model has evolved largely in isolation, uninformed by the experience
of other practitioners pursuing similar ends, facing similar challenges
and making similar choices.
Parochialism in the public sector is especially widespread. Not only
do municipal officials who are charged with crafting use and resale
controls for housing created through inclusionary zoning or another
municipal means seldom look to LECs and CLTs for practical advice; they
seldom consult with their counterparts in other cities. Whether out
of a sense of rivalry or a lack of knowledge-or merely because, unlike
LECs and CLTs, there exists no national network for the sharing of information
and the setting of standards for the regulation and administration of
deed-restricted housing-city officials are more likely to invent their
own affordability covenants and administrative systems from scratch
than to embrace what another city has done.
These islands of innovation have been good for diversity, but not so good for improving practice or raising productivity. If LECs, CLTs and deed-restricted housing are to be brought to scale, there must be a closer assessment and wider dissemination of best practices among (and within) the separate enclaves of shared-equity housing. There must be a deeper understanding of what works well-and what does not. There must be more consistency in service delivery. There must be a higher degree of standardization, making it easier for private lenders and public funders to invest in these unconventional models of homeownership. Such sector-wide changes in program are necessary, I believe, if we are ever to grow this sector to significant size.
In many municipalities, however, and in many first-time homebuyer programs
receiving state or federal subsidies, there persists a deep-seated bias
against shared-equity housing among those who design and administer
such programs. This is not a bias that is model-specific; it does not
really matter whether long-term controls over occupancy, eligibility
and affordability are being maintained through an LEC's corporate documents,
a CLT's ground lease or an affordability covenant attached to a deed.
It is the controls themselves-and the duration of these controls-that
many public officials find intolerable.
In these jurisdictions, LECs, CLTs and deed-restricted housing have
developed slowly-if at all. Shared-equity housing is either starved
for public funding, with most homeowner subsidies being directed toward
market-rate homeownership, or undermined by being valued and taxed as
if it were the same as market-rate housing.
Where such impediments exist, the practitioners of competing models of shared-equity homeownership have a common interest in promoting a more supportive policy environment. If a jurisdiction is going to use its dollars or powers to bring the price of housing within the reach of lower-income homebuyers, the affordability of these homes should be preserved for many years. Subsidies invested in making homeownership affordable should be retained in the housing, neither wholly removed by the departing homeowner nor partially recaptured by a public agency. Moreover, the publicly subsidized affordability of these homes should not be steadily eroded by forcing homeowners to pay property taxes on market-based gains they can never realize. Durable affordability, subsidy retention and equitable taxation are the nourishing rain for shared-equity housing. Where these policies are absent, the sector seldom thrives. Where these policies are present, shared-equity homeownership has a good chance of growing into a significant percentage of the local housing stock.
In my own research into shared-equity homeownership, summarized in
the report that was published last fall by NHI, I have identified five
sets of benefits that would seem to hold the greatest potential for
demonstrating the sector's distinctiveness and effectiveness: affordability,
security, wealth, involvement and improvement. Shared-equity housing
does a superior job of expanding access to homeownership for lower-income
households, especially in high-priced markets. Equally important, it
preserves this opportunity for the same class of people over a very
long period of time, while preventing the loss of the public (and private)
subsidies that made this housing affordable in the first place. Shared-equity
housing, in most of its forms, also enhances security of tenure by pooling
risks, sharing responsibilities and providing support in times of trouble,
improving the odds that first-time homeowners will actually succeed.
Community stability is enhanced as well because shared-equity housing
insulates a portion of a neighborhood's residential property against
damaging cycles of investment and disinvestment.
There is evidence, too, that low-income homeowners build wealth, improve
their lives and participate in their communities beyond what would have
been likely had they not purchased a shared-equity home. Not only does
shared-equity housing serve as a springboard for individual improvement,
moreover. It has often been a vehicle for community improvement as well,
helping to revitalize neighborhoods in which the poor have been concentrated
or to diversify neighborhoods from which the poor have been excluded.
These are distinctive benefits that are regularly delivered by LECs, CLTs and deed-restricted homes-but how dependably and how widely? Do they deliver these benefits in both hot markets and cold markets, in small towns and large cities, in affluent suburbs and impoverished neighborhoods? Do they always perform better for persons and communities of modest means? Too little research has been done to answer any of these questions conclusively. They must be answered, however, if shared-equity homeownership is to have any hope of competing for a larger portion of the private and public purse.
Such growth can occur not only through the construction of new housing,
but through the conversion of existing housing. Indeed, the greatest
opportunity for expanding the amount of shared-equity housing-and the
greatest need for cooperation among the disparate practitioners of shared-equity
housing-may lie in coming up with a common strategy for saving much
of the affordable housing that is presently at risk under different
structures of ownership. There are millions of units of publicly subsidized
rental housing with affordability controls that are due to expire during
the next decade. There are 10 million owners of market-rate homes with
adjustable rate mortgages and over seven million homeowners who pay
more than 50 percent of their income for housing, households whose security
of tenure may be jeopardized by fluctuations in interest rates, utility
bills or personal earnings. There are more than nine million households
who own manufactured homes, most of them located on leased lots in aging
"parks" that may be sold by their absentee owners at a moment's
notice. Converting even 10 percent of this at-risk housing into shared-equity
homeownership would enhance the residential security of several million
households, while tripling the number of homes under the stewardship
of an LEC, a CLT or a long-lasting affordability covenant.
Each of these models makes a unique contribution to a locality's housing
tenure ladder. Giving lower-income households a variety of models from
which to choose enhances the likelihood of their housing security and
increases their potential mobility. But each model must offer housing
in sufficient quantity to make these choices real. So far in the United
States, that hasn't happened. Working separately may be the best way
for each model to establish its own identity and to root itself in the
American landscape of affordable housing. Working together, however,
is probably the best way for all of these models to grow.