1. Shared Equity Housing and the DC Region
Brett Theodos January 17, 2018

2. The Need

3. No populous county in the United States has
enough affordable rental units for its extremely
low-income households
With federal rental assistance
Units per 100 extremely low-income renter households
Source: Poethig et al., Urban Institute

4. Rents are growing faster than incomes
Median Rent vs. Household Income,
Nominal dollars, indexed to 100
260
240
220
200
180
160
140
120
100
Median Rent, SA and Indexed Median Household Income, Indexed
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
Sources: Goodman et al. (U.S. Census Bureau Housing Vacancy Survey, U.S. Census Bureau Current Population Survey (CPS), and Urban Institute calculations .)

5. Most Americans have little to no liquid wealth
Housing challenges linked to trends in income & wealth:
Most Americans have little to no liquid wealth
Source: Hacker et al. 2011

6. Reasonable lending standards
The credit box has remained tight after the crisis
Default Risk Taken by the Mortgage Market, 1998Q1–2016Q3
Total default risk
Percent
18.0
16.0
Reasonable lending standards
14.0
12.0
Product risk
10.0
8.0
6.0
Borrower risk
4.0
2.0
0.0
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Sources: Goodman et al. (eMBS, CoreLogic, HMDA, IMF, and the Urban Institute.)

7. Homeownership by race/ethnicity
Source: Hendey 2017

8. An east-west racial divide
White
Black
Hispanic
Share of Population by Race or Ethnicity by Ward, 2010–14
Source: American Community Survey tabulated by NeighborhoodInfo DC
Source: Tatian

9. Households by income
Source: Tatian

10. Homebuyers of color have limited choice
White
Hispanic
Black
Share of Single-Family Homes and Condominiums Sales by Census Tract Affordable to First-Time Home Buyers at Average Household Income, 2010–14
Source: American Community Survey tabulated by NeighborhoodInfo DC
and DC Office of Tax and Revenue
Source: Tatian

11. Low-cost rental housing disappearing in DC
Renter-occupied units (1,000s)
180
160
140
120
100 80 60 40 20
Monthly rent ($2012)
$1,500 or more
$1,000 to $1,499
$800 to $999
$700 to $799
$500 to $699
Under $500
2005
2006
2007
2008
2009
2010
2011
2012
Source: Tatian

12. Homeownership out of reach for many
Home sales affordable to 1st time buyers in 2011
Software developer (f/t) inc=$110,000 / max price=$407,000
46%
99%
Food service mgr (f/t) + office clerk (p/t) inc=$75,000 / max price=$278,000
19%
75%
Preschool teacher (f/t) + son works (p/t) inc=$43,500 / max price=$161,000 3%
11%
Washington, DC
Wards 7 & 8
Building cleaner (f/t) + food service (p/t) inc=$38,900 / max price=$144,000 1% 4%
Source: Tatian

13. Shared Equity Housing

14. An intro to shared equity housing
Allows income-eligible families to purchase homes at below-
market prices
In return for subsidized purchase, the owner’s capital gains from resale are limited, creating a lasting stock of affordable owner-occupied units
3 programmatic models:
Community land trusts
Resale-restricted, owner-occupied houses or condominiums with
affordability covenants (e.g. inclusionary zoning programs)
Limited equity cooperatives

15. 5 resale formula examples
San Francisco: set with a formula that indexes sales price to the area median income
King County: based on changes to the average of the Seattle metropolitan area’s median income and a local real estate index
Atlanta (Wildwood): a fixed maximum annual increase in
share price for each year
Davis CA (Dos Pinos): share prices to increase annually by the prime rate at the beginning of the year
Duluth (One Roof Community Housing): sellers retain 30 percent of the market appreciation of the property
Source: Temkin, Theodos, Price 2013

16. Subsidy levels
In a 9-site study (including DC), They received, on average, 39 percent of its value in subsidies
Avg. unrestricted market value of purchased shared equity homes:
$241,000
Avg. subsidy: $94,000
Avg. down payments: $11,000
Avg. amt. financed: $138,000 (57 percent of the unrestricted market value)
Source: Theodos et al. 2017

17. Wealth creation $25,000 Median appreciation realized by seller
Median total of principal paid on mortgages (not including downpayment)
$20,000
$15,000
$10,000
$5,000 $0
Atlanta
Boulder
Burlington
Davis
Duluth
San Francisco
Source: Temkin, Theodos, Price 2013

18. Wealth creation (cont’d)
70%
Program IRR
60%
10-year Treasury Bonds IRR
S&P 500 Index Fund IRR
50%
40%
30%
20%
10% 0%
King County
Burlington San Francisco
Davis
Duluth
Boulder
Atlanta
Source: Temkin, Theodos, Price 2013

19. Affordability preservation upon resale
100%
Median income needed at
90%
purchase
Median income needed at resale
80%
70%
60%
50%
40%
30%
20%
10% 0%
% AMI
Boulder
Burlington
Davis
Duluth
King County San Francisco
Atlanta
Source: Temkin, Theodos, Price 2013

20. Security of tenure: seriously delinquent9%
% Currently seriously 8%
delinquent 7%
% Currently seriously
delinquent in county 6% 5% 4% 3% 2% 1% 0%
King County
Burlington
Davis
Duluth
Boulder
Atlanta
Source: Temkin, Theodos, Price 2013

21. Mobility 45% % moved % expected move 35% 30% 25% 20% 15% 10% 5% 0%
King County
Burlington
Davis
Duluth
Boulder
Atlanta
Source: Temkin, Theodos, Price 2013

22. 2017 study with comparison group
Shared equity buyers had average incomes at baseline of 51% of the AMI, lower than many homeownership supports
•Shared equity purchasers had lower mortgages and monthly payments than comparable buyers
Shared equity purchasers performed largely the same as comparable buyers in terms of their other financial and neighborhood outcomes

23. Concluding thoughts
Shared Equity homes largely retain affordability and create
wealth, without limiting mobility or creating instability
…But these programs must balance competing objectives of affordability preservation and wealth creation while taking into account local dynamics
…And creating homeownership in an expensive market is
expensive—big commitments are needed
…But preserving affordability is cheaper than recreating it
…Can work with rental, ownership, and commercial units

24. Resources
Case studies and outcome assessments here: and-communities-policy-center/projects/shared-equity- research