Shared Equity Programs Link Low- and Moderate-Income Homebuyers to Affordable Homes

Shared equity programs connected low- and moderate-income potential homebuyers to affordable owner-occupied housing, according to Brett Theodos and his colleagues at the Urban Institute. These programs allow households who meet certain income requirements to purchase homes at subsidized prices, but the program restricts the gains the homeowner can receive when reselling the house, preserving the unit’s affordability over time. In this study, the authors evaluated nine shared equity programs across the country to examine the characteristics of households who purchased homes through these programs and their financial and neighborhood outcomes. The researchers used application, administrative, credit bureau, and demographic data on 683 people who applied to the nine programs studied between 2012 and 2014, comparing applicants who purchased a home through the shared equity program with applicants who did not, applicants who purchased a home outside the program, and similar homebuyers who did not apply to the program. These comparisons reveal the results of shared equity programs on homebuyers, which the authors consider with their policy implications.

Key findings

• Homebuyers in the shared equity program received subsidies equal to 39 percent of their house’s market value, on average.
• Applicants who purchased homes in the shared equity program had smaller mortgages and lower monthly payments on all credit accounts than applicants who purchased homes outside the program.
• No differences in neighborhood and other financial outcomes were observed between those who purchased a home through a shared equity program and other homebuyers.