Shared-equity homeownership ensures that homes remain affordable to lower-income households on a long-term basis by restricting the appreciation that the owner can retain, thereby preserving affordable housing in areas where rising prices are forcing low-income households out of the market. At the same time, by placing the owner within a community-based support system, such as a community land trust or limited equity cooperative, shared-equity homeownership can mitigate the risks of owning a home, potentially increasing the benefits of homeownership for both the owner and the neighborhood. In general, shared-equity homeownership divides the housing asset among several owners and a management entity.

Three types of structures fit under the shared-equity umbrella. First, in a housing cooperative, each household (known as a member-owner) controls an equal vote and a proportionate membership interest or share of the development, entitling the household to possess, but not outright own, the unit. This equity share must be offered back to the cooperative at a predetermined price if the member-owner decides to move. Second, in a shared-equity condominium, the resale value of the asset is restricted through the mutually agreed-on bylaws of the condominium association. The third type of shared-equity structure is a community land trust, which comprises land owned by a nonprofit corporation organized to own land for community benefit and to secure access to affordable housing for community residents. The residents lease the land from the trust, and the land value is not included in the resale price of the unit.
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Shared-equity housing has played a significant role as a viable affordable housing alternative in the United States during times of housing shortages and crises. During the past 30 years, the shared-equity housing model has been underutilized, even as the federal government and the real estate, banking, and finance industries have sought to extend the benefits of homeownership for working families. Amid the rush to expand traditional homeownership and wealth creation for low- and moderate-income households, housing cooperatives, shared-equity condominiums, and community land trusts have had limited, yet successful, application. Shared-equity housing provides occupants with tax benefits and operating cost savings through multifamily ownership, while simultaneously preserving public investment in affordable housing.

This is an excerpt from The NEXT American Opportunity. The full text can be downloaded as an Adobe PDF Document.