The Potential for Shared Equity and Other Forms of Down Payment Assistance to Expand Access to Homeownership

Kristin Perkins, Shannon Rieger, Jonathan Spader, Chris Herbert

Previous studies of the financial constraints for homeownership attainment have found that cash grants to cover down payment and closing costs can fairly substantially increase the share of renters who can afford to buy a home. Shared equity homeownership is an alternative to traditional homeownership and renting that provides a substantial upfront reduction in the purchase price of the home, which reduces the cost of homeownership and can expand access for households that do not have the savings for a down payment or have incomes too low to qualify for market rate mortgages. Despite the interest in shared equity, there has been relatively modest growth in the number of these housing units, with fewer than 250,000 of them nationally. If the financial, administrative, and political barriers to shared equity programs could be overcome, how many households could potentially benefit from this alternative to renting and owning?

We use household-level income, assets, and debt data from the Survey of Income and Program Participation (SIPP) to expand on previous literature by assessing how a broader range of upfront financial assistance would affect the ability of potential homeowners to buy modestly-priced homes, providing estimates of the potential scale of programs providing modest down payments as well as more substantial amounts of assistance consistent with the levels typically provided by shared equity programs. We find that 6.6 million potential homeowners could purchase a home in their metro area with assistance of $25,000 to $100,000, a level consistent with what shared equity programs typically provide. An additional 8.6 million would be able to purchase with assistance of $100,000 or more. Still an equal number (15.2 million) of potential homeowners would be able to buy with relatively modest assistance of $10,500 or less, amounts typically provided by traditional down payment assistance programs. We disaggregate our results by racial/ethnic group, income, and geography and show that there may be much greater demand for shared equity than can be met by current programs.

This paper was originally presented at a national Symposium on Housing Tenure and Financial Security, hosted by the Harvard Joint Center for Housing Studies and Fannie Mae in March 2019. A decade after the start of the foreclosure crisis, the symposium examined the state of homeownership in America, focusing on the evolving relationship between tenure choice, financial security, and residential stability.