Posted on 06/11/2015 1:05:36 PM PDT by Cincinatus' Wife
In the new June/July/August issue of the Washington Monthly, freelance journalist Jordan Fraade has a piece on something you may not be familiar with yet. Driven by below normal home ownership in the Millennial generation, some communities are coming up with an interesting incentive called “Shared Equity Housing.”
Because Millennials began entering the economy right around the time the economy cratered in 2008, they don’t have the savings typical of people their age. This makes finding a down payment on a house one of the most significant barriers to home ownership.
All across the country, particularly in its most expensive regions, housing developers are becoming increasingly convinced that shared-equity housing can help solve this problem. Designed as a “third way” between owning and renting, shared-equity programs promote the idea that the primary benefit of homeownership isn’t necessarily wealth building, it’s stability.
In shared-equity housing, a third party provides a one-time subsidy to prospective homebuyers, allowing them to purchase a home they wouldn’t be able to afford otherwise. The third party tends to be a governmental housing agency or an affordable-housing nonprofit, but either way, according to a 2010 report by the think tank New America, the effect is to make buying a home easier, “either by lowering the price of the home which a lower-income family is attempting to buy or by reducing the down payment which a lower-income family must bring to the deal.” However, along with that subsidy comes a critical caveat: when the time comes to resell the home, a cap is placed on how much the owners can get for it.
The article uses the family of Seattle-based Estavan Muñoz-Howard as an example of a family for whom shared-equity housing made sense.
The trade off is what you might expect. Take the casino gambling out of home ownership and you aren’t going to get any big winners. For Estavan Muñoz-Howard, however, this downside is worth it.
The biggest drawback of shared-equity housing is baked into its very premise: low-income families need to accept limits on the appreciation of their home value. “Obviously that was something that was in line with our values,” Estevan said, but it was still a hard decision for a family that lives on a nonprofit salary. The system relies on the continued generosity of nonprofits and city governments, which have limited resources. And it won’t provide any first-time, low-income homebuyers with obscene amounts of wealth. But for most Millennials, any amount of wealth building, no matter how slow, still sounds like a good deal.
It’s hard to decide how I feel about this new phenomenon. It definitely will work for some people. I know I have Millennial stepchildren who had difficulty just making enough money to move out of the house and get an affordable apartment. And I know that their experience is the norm for their generation. Home ownership seems a long way off, although I’m not that much older and I had a home by the time I was twenty-seven.
Does Shared Equity Housing provide a helping hand to the American Dream, or it is just the latest adaptation to the fact that for Millennials the American Dream is dead?
I know this much. There’s something a little different about this kind of thinking:
In particular, he and his wife gravitated toward shared equity as a way to mitigate gentrification. Brighton and nearby Columbia City have a long history as African American neighborhoods that later became home to Vietnamese and African immigrants, and they remain relatively racially integrated. The point of living there, Estevan says, should not be to get rich: “This is a social-justice issue for me. If I’m able to extract as much equity as I possibly can out of this home, that is actually to the detriment of the community that’s already here.”
I guess that he’s got a point there, but getting as much equity as you can has traditionally been a big part of the American Dream. Some would say that without it, the American Dream is not possible. Yet, the Muñoz-Howard family obviously disagrees, and maybe they’re right. Maybe they’re the wave of the future.
In any case, you should read the whole thing.
In 10 years, this becomes the new “racist redlining”.
What starts out as a creative solution to get low income people into housing becomes “locking people of color out of real estate wealth creation”, particularly if the 3rd parties who end up buying equity positions in people’s homes wind up being banks or hedge funds. I can see the hysterical headlines now.
Taxpayer subsidized down payments for home buyers.
You got it.
And it doesn’t matter if it’s not a good investment - it’s not their money, it’s our money.
As the guy says, “It’s a social justice issue.”
Who in their right mind would buy equity in a home that is going to be lived in by section 8 type home owners? That’s crazy.....
They can accomplish this because the language of Prop 13 makes it difficult to determine exactly when a property trades hands if more than one person/entity has an interest in the property before and after the transfer.
Shared equity housing may be a way for homeowners to avoid reassessment when houses are transferred just like large corporations.
This could be a game changer for California and Prop 13.
“Who in their right mind would buy equity in a home that is going to be lived in by section 8 type home owners?”
The taxpayer with a gun to their heads.
Yeah.... This whole deal stinks from every perspective. Because even though the tax payer funds the government program that funds the bank or mortgage company.... 15 years from now when all of these deals go south because the houses have depreciated so that there is NO equity.... it will be time for another bailout.
Wasn’t it just a week or so ago we were told millenials don’t want to own homes and stuff?
“racist redlining” is a possibility. More likely the homes will be dilapidated from not being taken care of, and be worth about 50% of what the people paid for them. And, there will be little or no equity in them for anybody.
When it does, maybe the younger set will be able to buy in. Until then, the gimmicks are just redistributing the wealth the rest think they have.
This has nothing to do with getting Millennials into homes (without families they don’t need them - and most will never have families), and everything to do with getting foreigners into them (as the people trafficked here to replace Americans in those same homes). Immigrants can be a frugal bunch, and I’m sure many see the writing on the wall - They are being steered towards homeownership as a means of funding masses of gibsmedats that have chased the American taxpayers away from them.
I don’t think anyone wants people of color as homeowners anymore (since that would make them taxpayers with responsibilities); rather, the homeowners are to be their piggy banks. We have reached a point similar to the Quartering Act that preceded the American Revolution (by which colonists had to provide room & board for British troops); homeowners (of any color) are going to be assigned an allotment of gibsmedats (also of any color) for which they will be required to provide housing, free public education, and food (free breakfast & lunch, plus food stamps).
Head to colder climates; when funds dry up gibsmedats flee those areas.
They don’t; they have no need for them, and don’t want to lose the ability to follow jobs to other states/countries that often results from being tied to mortgages. They have no families anyway; they often don’t even have cars.
Just as they learned from their parents’ generation’s divorce nightmares (causing many now to forego marriage/children) they have also learned from their parents’ generation’s foreclosure nightmares.
This is to put ANYONE in unneeded stand-alone single-family homes that are quaint reminders of this country’s former prosperity.
And buying Democrat votes with it.
There’s actually something to be said for this approach, but only if you accept the idea that a home should not be seen as an “investment.” A home is a home, and that’s it. It’s nice if you can sell it for a lot more money than you paid for it, but this country’s housing bubble was largely driven by investment-driven considerations that never should have been part of the conversation.
This comes right when the usurper is bringing in 10 million from Syria which is on top of those he’s been caught bussing in and those he’s completely ignored who came here on their own.
....Or preparing for a conservative sweep to take place come 2016 when there will be a need to rebuild this nation.
I would hope the wave of the future is reasonably priced houses.
A thousand square feet of plywood is about 30 sheets at maybe $20/sheet - $600.
A house might have $5,000 worth of wood in it. It might cost $4,000 for labor to frame that wood.
A mason should be able to lay 200 big concrete blocks in an 8-hour day. So maybe that’s $2/block laid. A 30x30 house has 120 linear feet with maybe 90 blocks, or $180 every 8 inches of foundation. With maybe 12 layers of 8-inch blocks that’s 12x$180 or about $2,300.
So we have $11,300 for foundation blocks and rough frame carpentry.
Houses in many areas in the country are severely overpriced.
Maybe mortgage companies should have their lending people learn to estimate the construction cost of a house (and insist potential mortgagees learn to estimate the construction cost of a house by taking an online course.
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