The United States is currently facing a significant housing affordability crisis that is particularly affecting hopeful, first-time homebuyers. In the past, options such as payment assistance and housing vouchers have been effective tools in combating rising prices and high interest rates. Though these options are proving to be less helpful in the current market, all hope is not lost. 

Shared equity housing has entered the chat. Community land trusts and nonprofit partners typically lead these programs, which offer potential homeowners scalable and sustainable alternatives. This way, homeownership can meet long-term affordability with a formula that works. 

Getting to Know the Shared Equity Housing Model

So, how exactly does it work? In the simplest terms, someone will buy the house, while a community land trust or nonprofit keeps land ownership. Not only does this significantly reduce costs, but it also helps potential future buyers. The property is limited in its ability to appreciate over time, which benefits both current and future homeowners.

There has been an increasing demand for recent generations to find a middle ground between renting and owning a home. Given that homeownership is largely unattainable, the equity housing model serves as a happy medium, allowing buyers to build equity and wealth while maintaining restricted resale prices that prioritize the next owner’s interests. Ultimately, this model helps keep neighborhoods affordable, rather than contending with the common issue of rapidly rising costs that push out locals and result in heavy gentrification.  

How Does the Shared Equity Housing Model Work?

First things first: someone will purchase a shared equity home at a rate below the market. While these homes may be rented out for some time, they are resold to buyers who meet the income requirements. These buyers must wait until the end of the holding period to make a purchase. 

Nonprofits are here to help educate potential homeowners about their options, manage property pipelines, and make sure that long-term affordability is enforced through structured ownership agreements. Of course, each city handles this model differently based on the area’s local housing dynamics. 

The Minneapolis/St. Paul Initiative

Minneapolis/St. Paul has made significant strides to back this model. In particular, Grounded Solutions Network (GSN)’s Homes for the Future initiative is helping local nonprofit member organizations acquire 283 single-family homes, with the goal of transitioning them into permanent, affordable options through community land trusts. Depending on the circumstances, some renters can eventually own their homes with a quicker, 3-4 year transition, while others are placed in long-term affordability portfolios. 

GSN has a deep commitment to community stability and generational access. Devin Culbertson of GSN said, “We’re really looking to help organizations build up the number of homes they’re able to keep affordable in those neighborhoods over the long term.” 

Shared Equity Housing Isn’t All Smooth Sailing

Like any initiative, shared equity housing isn’t without its challenges. Between rising interest rates, capital constraints, and the difficult task of scaling renovation and operations, it can be tricky to implement. The success also largely depends on support from stakeholders, including public agencies, private investors, and community residents. 

Despite some hurdles, shared equity housing is expanding into new cities like Atlanta, with further growth in Texas and North Carolina on the horizon. While urban areas, in particular, continue to struggle with housing affordability, shared equity housing offers a practical and equitable middle ground for potential homeowners to utilize. Ultimately, these programs contribute to wealth building by ensuring long-term community access.