Live at the Forum Webinar on Balancing Affordability and Asset Building in Homeownership Programs

Replies to This Discussion

Permalink Reply by Tracy Parent on February 1, 2011 at 12:26pm

I enjoyed the webinar, and have a question about the affordability of Limited Equity Housing Coops. If resident-owners of a LEHC decide that asset building is more desirable than future affordability, what would prevent the Co-op Board/Residents from changing the affordable re-sale restrictions to market-rate in the future?

Permalink Reply by Rick Jacobus on February 1, 2011 at 2:53pm

For any of these affordable homeownership programs the ideal is to set a formula at the outset before any homes are sold that appropriately balances asset building and affordability and then stick with it.  However things change and no one seems to have found the perfect formula yet so there really should be a way to make adjustments in the future. But whenever you make changes there is a risk that the new formula will either be unfair to current owners or unfair to society at large (unfair to future buyers?)  In a co-op the current owners generally make up the board but future buyers have no voice. For co-ops, I think it makes sense for there to be a third party with the right to approve any change in the limited equity formula to ensure that affordability os protected.  For example if a city has provided subsidy to create affordability they might require the right to veto any change to the formula.  Ideally this third party would be able to distinguish between changes in the formula that make the co-op work better and changes where owners are trying to eliminate the public purpose. In some places jurisdictions have assigned this kind of oversight role to nonprofits (generally along with a training and support program for co-ops)  In California, state law also sets a cap on how generous the formula can be in an LEHC which provides some limited protection for ongoing affordability.

Permalink Reply by Doug Kleine on February 2, 2011 at 3:51pm

The affordability control should rest with the entity that is providing subsidy or making the investment. While a covenant can also be used, there should be a time limit (for HUD assisted co-ops it is the length of the mortgage), after which changes can be made. Changes will have other affects--taxes may go up and that means higher monthly costs for those who stay, so you often see pressure to lift restrictions from those who want to leave and cash out, and resistence from those who want to stay and benefit from low mothly costs. Those debates are happening now with 40 year old co-ops around the country and especially with the zero equity co-ops done under NYCs Mitchell-Lama program, where original residents have aged in place and are ready to sell and move to FL. 

Permalink Reply by Center for Housing Policy staff on February 1, 2011 at 3:55pm

(posted on behalf of a webinar participant)

Is it possible to get the locations of the units that were studied - perhaps the census block locations?

Permalink Reply by Ken Temkin on February 4, 2011 at 1:38pm

Unfortunately, we did not collect address information for homes included in the seven shared equity programs.  One of our suggested areas for further research is to collect address information for buyers' locations before purchasing their shared equity homes, the address of the shared equity home and the address of the home/apartment a shared equity owner moves to after selling his/her unit.  This would allow for analyses of changes to shared equity homebuyers' neighborhood conditions, which is another potential favorable impact of such programs.

Permalink Reply by Center for Housing Policy staff on February 1, 2011 at 3:56pm

(posted on behalf of a webinar participant)

 

Jeff or others may answer this question later on, but is there research that compares the asset-building benefits of affordable / shared equity homeownership to rental strategies with wraparound services designed to help families build wealth?

Permalink Reply by Center for Housing Policy staff on February 1, 2011 at 3:59pm

(posted on behalf of a webinar participant)

 

The lowest income household that participated was 39% of AMI in Atlanta.  In your experience, is that the minimum income level that you have seen to be able to access shared equity ownership?

Permalink Reply by Rick Jacobus on February 11, 2011 at 7:28pm

There is really no standard.  Different shared equity programs use very different financing and subsidy sources which translates into very different affordability levels.  Obviously serving lower income buyers requires deeper levels of public investment and generally also higher levels of ongoing support.  Some of the buyers in the Atlanta Co-op earned as little at 25% of AMI.  There are other shared equity programs serving buyers earning as much at 160% of AMI.  It is probably more common for programs to target buyers earning between 50% and 80% of AMI.

Permalink Reply by Center for Housing Policy staff on February 1, 2011 at 4:01pm

(posted on behalf of a webinar participant)

 

Regarding recouping capital improvement investments -- that sounds complicated. Who pays for the staff time to make these calculations? Also, how might that effect affordability in future resales?

Permalink Reply by Doug Kleine on February 2, 2011 at 3:42pm

It is pretty simple in most co-ops (and land trusts). The member applies to the board and furnishes cost information. The board decides how much to credit the improvement. Common improvements might be built in bookcases, in-unit washer/dryer, ceiling fans.

 

Doug Kleine

Permalink Reply by Center for Housing Policy staff on February 1, 2011 at 4:12pm

(posted on behalf of a webinar participant)

 

How do most sponsors cover the administrative costs associated with these programs?