…A Path to Affordable Homeownership?
Let us know your thoughts
With a housing crisis gripping the nation and little being done yet on the federal and local government levels to seriously address it, a financing approach known as "shared equity," where the homebuyer agrees to sell a percentage — as well as future gains — of their property to a lender in exchange for a smaller mortgage loan, is beginning to gain more interest by investors and potential homebuyers. It is an old idea, going back centuries in fact, but technology has facilitated some innovations leading to new approaches entering the market.
Mirabilis, for example, a Houston startup, charges their clients a monthly "fee" (market-rate rent) to reside in the house they wish to purchase, plus an additional percentage of the client's choosing representing the client's share of the equity which goes towards the purchase of the home. So, let's say a client starts out purchasing 5 percent of the home. If the monthly fee charged is $1,300 and the monthly costs, including taxes and homeowner association fees, are $300, the client would own 5 percent of the resulting $1,000 in cash flow: $50. That money goes toward increasing the share of the home the client owns.
Another equity-sharing model, Society 23, enables everyday people to invest in development, especially in historically Black neighborhoods, an increasingly popular movement called "Buy the Block." The idea is that, through crowdsourcing, a community will invest in its own people, building wealth and affordable housing opportunities, and keeping outside investors from extracting wealth from the community.
Despite these innovations and expanded opportunities, it cannot be denied that they come at the expense of equity, and could be considered a “kinder, gentler” form of exploitation where those who have resources benefit at the expense of those who don’t.