Shared-Equity Homeownership

Origins of Shared-Equity Homeownership

Housing cooperatives trace their origins to 1844, when a group of weavers in Rochdale, England, adopted a set of principles on which the modern cooperative movement is based. The first housing cooperatives in the United States were organized in New York City in the 1870s. Community land trusts draw their inspiration from the garden cities of England and moshav communities in Israel, pioneered in the first half of the 1900s, and from the Gramdan villages of India, established in the 1950s. The first CLT was organized in the United States in 1969. Deed covenants have been widely used to preserve the affordability of owner-occupied housing since the 1970s, when the proliferation of housing trust funds and inclusionary zoning led a growing number of municipalities to look for ways to moderate the resale prices of homes that public dollars or public powers had brought into being.

While the signature models of shared-equity homeownership have a long history, the term itself is fairly new. Other generic names have been used in the past to describe homeownership whose afford-ability is contractually preserved for many years: limited-equity housing,nonspeculative homeownership,permanently affordable homeownership, and, more recently, homes for good and homes that last. Shared-equity homeownership has been in general use only since 2006, when the National Housing Institute (NHI) published a book by that name. NHI had noted that most policy research and academic writing about homeownership was stubbornly focused on mechanisms for removing credit barriers or lowering mortgage payments for the purchase of market-rate homes. Little attention was being paid to nonmarket models of homeownership that restricted the price of publicly assisted, privately owned homes across multiple resales, maintaining their affordability for many years.

NHI set out to correct this oversight, beginning with an assessment of what was known—and not known—about these unconventional forms of tenure. An advisory committee of academics and practitioners recruited by NHI to oversee this research came to the conclusion that a new term was needed to describe these models, settling eventually on shared-equity homeownership. They were attracted to the term by its emphasis on how the appreciating value of residential property is routinely created and to whom it rightfully belongs. Only part of a property's unencumbered value is a product of an owner's personal investment in purchasing and improving the property. The rest is a product of the community's investment: equity contributed at the time of purchase in the form of a public grant, charitable donation, or municipally mandated concession from a private developer; and equity accruing to the property over time because of the public's investment in necessary infrastructure and society's overall growth and development.

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