shared equity: overview » introduction » implementation
The following are some of the key issues that need to be addressed when developing a shared equity policy:

Converting existing subsidy programs to a shared equity approach: By their nature, shared equity approaches require a significant up-front subsidy - both to make homeownership affordable to the target population and to allow the home to be sold for a price that is sufficiently below market to ensure there is demand for the home despite the restrictions on equity build-up. In the long run, however, this approach may be less expensive than other approaches that cost less initially but do not preserve affordability or the value of subsidies over time. Converting existing homeownership programs to shared equity homeownership is a common starting point for jurisdictions interested in shared equity homeownership. Such conversions often stem from a desire to preserve the value of government investment as per-household subsidy amounts rise to keep up with increasing housing costs.

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Using inclusionary zoning and other indirect funding sources: The up-front subsidy for a shared equity approach to affordable homeownership may be funded directly, through such sources as the federal HOME or Community Development Block Grant program, or indirectly, through contributions of city-owned land or incentives or requirements that lead developers to include a modest share of affordable units within a market-rate development. Such policies - commonly known as inclusionary zoning or inclusionary housing - often provide developers with a density bonus that allows them to build more units than otherwise permitted or other offsets to cover the costs associated with the below-market units. When designed well, such policies can be used to create an inventory of below-market homes that could be fed into a shared equity system.

As with direct subsidies, it is important to preserve the value of implicit subsidies over time by requiring long-term or permanent affordability. Some inclusionary zoning policies require that affordable units stay affordable for a minimum length of time - say 10, 20 or even 30 years - but then allow the units to be sold at market rates. While such policies are effective in helping the individual beneficiaries build assets, they ultimately do not add to the stock of homes that remain affordable over the long-term. By making the affordability covenants permanent, putting the units into a community land trust or attaching to the home a shared appreciation mortgage requiring the implicit subsidy to be repaid along with a share of home price appreciation upon resale, communities can successfully add to the stock of shared equity homeownership opportunities at minimal cost to the jurisdiction.
Solutions in Action
Since 1992, the San Francisco Inclusionary Affordable Housing Program requires developers to sell 15 to 20 percent of the units in a project as “Below Market Rate” (BMR) units affordable to low- or moderate-income households. The program places a resale restriction on each BMR home, keeping it affordable to future low- and moderate-income buyers. Currently, the resale restriction formula allows BMR home prices to change at the same rate as the area median income in the San Francisco metropolitan area, helping to keep housing costs in line with incomes. By using this formula, the program creates permanently affordable homes for working families in the Bay Area, one of the most expensive housing markets in the U.S.

Click here to leave this website and learn more about the San Francisco Inclusionary Affordable Housing Program.

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Ensuring ongoing stewardship
While well structured shared equity approaches help to preserve the value of public homeownership investments in the face of rising home prices, they are not entirely cost-free after the initial investment. Someone needs to enforce the resale restrictions in a subsidy retention model or the repayment clauses in a shared appreciation mortgage. In addition, grants or reduced rate loans for home improvement needs must be available to help maintain the permanently affordable housing stock.

In some cases, properties may need to be acquired and renovated if they have not been kept up adequately, or perhaps sold if they are no longer located in a desirable area. The costs required for a selected entity to execute these functions should be anticipated and budgeted for as part of the shared equity calculus to ensure the portfolio remains intact and an enduring asset for the community. The possibility of declining home values and how to structure sales during a down market should also be considered when thinking about long term and ongoing stewardship.

Click here [PDF] to leave this site and access materials on ongoing stewardship prepared for the December 12, 2007 Symposium on Taking Shared Equity Homeownership to Scale, co-sponsored by NeighborWorks America and NCB Capital Impact.

Solutions in Action
Between 2006 and 2008, the city of Minneapolis allocated $10 million in funds raised through tax increment financing, to city neighborhoods for affordable housing production. City neighborhood councils, such as the Fulton Neighborhood Association (FNA), had the discretion to use the funds as they saw toward this purpose. The City of Lakes Community Land Trust (CLCLT), a provider of permanently affordable homeownership in the Minneapolis-St. Paul area, reached out to the FNA because of the Fulton neighborhood's affluent population and lack of affordable housing, to inform them about the community land trust model as a way to promote greater housing affordability.

Initially, the FNA expressed concerns about whether low- and moderate-income families would be able to afford and maintain homeownership, whether CLCLT homeowners would be good neighbors, and the costs of supporting this type of affordable homeownership. The group was also reluctant to release the $150,000 allocated to them by the city for low- and moderate-income families to purchase permanently-affordable homes through the CLCLT.

In response to this, CLCLT developed a comprehensive outreach strategy to work with the FNA and gain members' support and trust. As part of their strategy, the CLCLT invited current land trust homeowners speak directly to the neighborhood association about their experiences working with and purchasing a home through the CLCLT. The strategy worked, with the FNA eventually releasing the full $150,000 to support three families in purchasing community land trust homes. The strategy proved so effective, in fact, that CLCLT hired one of their own land trust homeowner as a full-time Outreach Coordinator. The Outreach coordinator serves as a spokesperson for the CLCLT, establishing and maintaining relationships with CLCLT homeowners and related community groups.

Click here to leave this site and learn more about the City of Lakes Community Land Trust

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Implementing shared equity approaches
Key issues related to designing a shared equity policy.

Also in this section:

Harold Washington Unity CoopShared appreciation loans
Homebuyersthat receive these "silent" second mortgages make no payments untilsale of the home, at which time the full loan is repaid plus a share ofthe home price appreciation.

Orchard at Cold SpringSubsidy retention strategies
Subsidy retention programs subsidize the unit, rather than the buyer, ensuring a specific home remains affordable over the long term.

27 Elm StreetResident acquisition of manufactured home parks
By facilitating the cooperative purchase by residents of manufactured home parks, communities can preserve affordable housing opportunities and help residents gain stability and build assets.

Click here to view other resources related to shared equity homeownership.