Shared Equity Programs NHC Webinar Topic
Are home ownership programs really the answer to closing the wealth gap in the United States and is home ownership available to more Americans?
According to the panelists who presented during a National Housing ConferenceThis week’s webinar, the question isn’t whether shared action programs work. The question is how to preserve and create more of these programs.
Titled “Federal Funding, Local Impact: Shared Equity as a Housing Solution,” the program examined how shared equity programs preserve affordable homeownership and advance equality for people of color.
What is Shared Equity?
According to Fannie Mae, home equity programs preserve affordable homeownership opportunities by allowing borrowers to purchase homes at below-market prices. In exchange, borrowers agree to sell the property only to other qualified buyers and/or share the appreciation of the home with the organization that subsidized the purchase.
Kristin Siglin, Vice President for Policy and Partnerships at National Community Stabilization Trust and program moderator, noted that equity sharing programs were created to bring the wealth-creating benefits of home ownership to more families in a very tight housing market.
“They are a response to housing market challenges including rising construction costs, rising land prices and rising construction prices,” she said.
Shared equity involves the use of a form of resale restriction that keeps that home affordable when the owner decides to sell the property. The seller receives a portion of the equity or appreciation resulting from the sale, while the remaining amount stays in place to ensure the home remains affordable for purchase by another family.
“Shared housing models balance the benefits of individual affordable homeownership with the community benefit of having land and housing that remains affordable and accessible to residents over time,” said Shanti Abedin. , Director of Shared Housing at NeighborWorks America.
Forms of shared capital
These programs encompass different forms, including community land trusts, housing co-ops, and manufactured home communities. CLTs ensure that ownership of the home is shared between the landlord and a non-profit organization that represents the community. The community organization owns the land and a family or individual purchases the home improvements or the house structure itself.
Housing co-ops involve multi-unit properties, with each family or individual owning a share at an affordable price. “The shared ownership structure is part of what makes each unit accessible and affordable,” Abedin said. “Each family or individual can sell their share to future residents when they are ready to leave.”
Tony Pickett, CEO of Network of rooted solutions, highlighted that housing co-ops are the largest segment of affordable housing created through equity sharing programs. According to research by the Grounded Solutions Network, the number of homes created through these efforts remains relatively small, at just over 250,000 units nationwide.
“We all need to work together to create a transformation of our housing system so that the scale of the solutions we deliver really do match the scale of the problem,” Pickett said.
GSN data indicates that more than 37 million households spent more than 30% of their income on housing, and this was before the COVID pandemic. About 14% of these households are heavily cost-burdened and spend more than 50% of their income on housing.
Closing the Racial Wealth Gap
Siglin said shared equity programs not only increase the supply of long-term affordable housing, but they also help close the racial wealth gap nationwide and revitalize communities without the negative effects of gentrification.
GSN found that the programs served households that earned 63% of the region’s median income, and about 43% of them were headed by people of color. Pickett referenced a 2020 report from the Brookings Institute which indicated that the net worth of a typical white family was around $171,000, which was almost 10 times greater than the net worth of a black family at just over $17,000.
“These were numbers from 2016, so that gap will only grow over time if we leave it unaddressed,” Pickett said.
NeighbourWorks Montana got involved in shared equity programs about 10 years ago after seeing people in manufactured home communities across the state being displaced due to redevelopment, according to Kaia Peterson, executive director of the ‘organization. NeighbourWorks Montana worked with residents of prefab housing stock to form co-ops, called resident-owned communities, to buy their community and manage it for long-term affordability.
“Manufactured housing is one of the largest sources of unsubsidized affordable housing in the country, especially in a rural state like Montana,” Peterson said. “A lot of these homes are at risk of being redeveloped,”
The state now has 15 ROCs serving more than 600 homes and over 1,300 residents. ROCs provide resident autonomy and leadership, community control, and long-term accessibility. NeighborWorks Montana works closely with ROC United Stateswhich has more than 287 ROCs with 19,600 homes in 20 states.
“The long-term impact is what makes this a powerful model,” Peterson said. “But how do we take those models and implement them across the state and the country? This is what we mean by scale.
Neighborhood Partnership Housing Services uses a CLT structure with manufactured homes to provide a cost advantage to Southern California residents. Jenny Ortiz, vice president of design and development at Neighborhood Partnership Housing Services, said the organization buys manufactured homes at wholesale prices to resell to affordable housing developers and consumers. It also helps families and individuals obtain financing to purchase homes.
The organization built a demonstration site in San Bernadino, California through the Inland Empire Community Land Trust to find out what it takes to build prefab housing in the city. “We researched everything so that we could report and show our findings locally and nationally, and share the information with our partners,” Ortiz said.
The ENSP gained crucial knowledge about the permitting and development process and became familiar with local government housing staff. He established important relationships with local pre-engineered housing factories and local licensed contractors and retailers, and how to keep track of construction cost increases and fluctuations in MH supply and demand.
“The misconceptions and negative stigma of CLT models and manufactured homes have also provided an opportunity to educate municipalities and consumers,” Ortiz noted.
The webinar was sponsored by NeighborWorks America.