An Innovative Approach to Affordable Housing is Gaining Momentum

Early this week my New America colleague, Rourke O'Brien and I wrote an op-ed in the Washington Post on the benefits of shared equity homeownership. Shared equity is a unique approach to homeownership that helps bridge the large gap between renting and traditional homeownership for low- and moderate income families in high-cost housing areas.

The way it usually works is a local government or nonprofit provides funding to an eligible family to purchase a home. In exchange for the funding the public entity receives a portion of any price appreciation in the home when the family sells it. The public entity then uses its share of the price appreciation to help the next eligible family purchase a home.In the op-ed, we specifically look at a new shared-equity homeownership project right here in the District. City First Enterprises, a nonprofit affiliate of City First Bank of D.C., is planning to create 1,000 new units of affordable housing using the shared equity model. This would be one of the largest shared equity projects in the country.

At the same time there is also a proposal that will be going before the Obama Administration and Congress soon that would create a national shared equity homeownership demonstration project. The project is being led by NCB Capital Impact and would test the viability of shared equity with 5,000 households in 8 to 10 housing markets around the country. It would cost $125 million and specifically focus on the feasibility of taking this model to scale.

The demonstration also has the potential to help with efforts to remedy the current foreclosure crisis. Some homeowners facing foreclosure could be given the option to convert their traditional mortgages into shared equity ones. Homes that have already been foreclosed on could be resold more easily using shared equity, helping to stabilize neighborhoods. Not to mention the fact that the construction activity and jobs created as a result of the demonstration would add to the impact of any larger government stimulus investments and projects.

Overall, shared equity is a promising, timely and cost-effective method for helping low- and moderate income families share in the important benefits of both homeownership and asset building. The demonstration project is a prudent next step which should be approved by Congress and the Obama Administration.