Unlocking the Power of Shared Equity

As I step into the shoes of an affordable housing advocate, I can’t help but feel a palpable sense of urgency. The challenge we face is daunting – a severe shortage of nearly four million affordable housing units across the country, exacerbated by a decade-long surge in home prices.

But amidst this crisis, a glimmer of hope shines through – the community land trust (CLT) model. This innovative approach to homeownership has the power to not only create new affordable housing, but also preserve it for generations to come. And as I delve into the details, I’m convinced that harnessing the potential of CLTs could be a game-changer in our mission to make housing accessible for all.

Shared Equity: A Sustainable Solution

The essence of shared equity programs, including CLTs, lies in their ability to decouple the value of the land from the value of the home. By separating these two components, they can ensure that homes remain affordable, even as the surrounding property values rise.

Here’s how it works: A nonprofit or government entity acquires land and homes, often in disinvested neighborhoods. They then sell the homes to income-eligible buyers at below-market rates. In exchange, the homeowners agree to certain resale restrictions, such as limits on the amount of equity they can retain when they sell.

This model creates a win-win scenario. Homeowners are able to build wealth and financial security through homeownership, while the shared equity program ensures that the home remains affordable for the next buyer. It’s a self-sustaining cycle of opportunity, where the gift of affordability keeps on giving.

Unlocking Opportunity Zones

One particularly promising application of the CLT model is in the context of Opportunity Zones – economically distressed communities designated by the Tax Cuts and Jobs Act of 2017 to receive tax incentives for investment and development.

While these Opportunity Zones hold the promise of economic revitalization, there’s a risk that low- and moderate-income residents could be priced out of their own neighborhoods. That’s where CLTs come into play.

Freddie Mac has been at the forefront of leveraging CLTs in Opportunity Zones, working with community partners in cities like Milwaukee, Minneapolis, and Omaha to transform vacant, abandoned, and deteriorated properties into permanently affordable housing units. By connecting land banks and shared equity program providers, they’re creating pathways to sustainable homeownership for underserved populations.

Empowering Communities Through Collaboration

The true power of CLTs lies in their ability to empower communities and foster long-term, inclusive development. It’s not just about building affordable homes – it’s about building vibrant, resilient neighborhoods where people can put down roots and thrive.

Research has shown that CLTs can help mitigate displacement and promote community stability, as homeowners are able to remain in their homes long-term. Moreover, CLTs often work closely with local residents, ensuring that the community’s needs and aspirations are at the forefront of the development process.

But realizing this vision requires a collaborative approach. As Freddie Mac’s work in Milwaukee, Minneapolis, and Omaha has demonstrated, it’s crucial to bring together diverse stakeholders – from government agencies and nonprofit organizations to community members and industry experts. By aligning their efforts and pooling their resources, they can create a powerful synergy that amplifies the impact of CLTs.

Bridging the Homeownership Gap

One of the most compelling aspects of CLTs is their ability to address persistent inequities in homeownership. Across the country, we see stark racial disparities in homeownership rates, with communities of color often facing significant barriers to accessing the wealth-building opportunities that come with owning a home.

CLTs have the potential to be a powerful tool in bridging this gap. By making homeownership more accessible and sustainable for low- and moderate-income families, they can help level the playing field and create pathways to financial stability and intergenerational wealth.

Imagine a young, first-time homebuyer in an Opportunity Zone, who would otherwise be priced out of the market. With the support of a CLT, they can secure an affordable home, build equity, and lay the foundation for a more secure financial future. And as they pass that home on to the next generation, they’re not just preserving a roof over their family’s head – they’re preserving a legacy of opportunity.

A Catalyst for Change

As I reflect on the potential of CLTs, I can’t help but feel a sense of optimism and excitement. These innovative models aren’t just about bricks and mortar; they’re about transforming lives, strengthening communities, and creating a more equitable future.

At HACC Housing, we’re committed to leveraging the power of CLTs to drive meaningful change. By forging strategic partnerships, tapping into innovative financing mechanisms, and amplifying the voices of the communities we serve, we’re confident that we can make significant strides in preserving and expanding affordable housing.

It’s a tall order, to be sure, but the stakes are too high to back down. With CLTs as our guiding star, we’re ready to roll up our sleeves and get to work, one home at a time. Because when it comes to ensuring that everyone has access to a safe, affordable place to call home, we simply can’t afford to fail.