Build Wealth for Owners While Preserving the Community Interest
Every program should attempt to maximize the impact of public funding by balancing the interests of individual homeowners and the broader community.
- Balancing Individual and Community Interests: Each program should identify a locally appropriate balance between the goal of helping individual homeowners to build financial assets and the community interest in maintaining long-term affordability so as to maximize the number of families assisted. Many programs serve both interests very well, but the balance between these goals can vary substantially based on local program design decisions.
- Scenario Testing: Prior to designing or updating an affordable homeownership program, program planners should test proposed (and a limited number of alternative) approaches under multiple hypothetical market scenarios to see how they perform in both rising and falling markets and during periods of both high and low inflation in achieving the individual goal of financial asset-building and the community goal of preserving affordability over time.
- Maximize Impact: Every program should be designed to extend the impact of limited public resources to the greatest number of households over time given other community goals. One approach to achieving this goal is to require that homes made affordable through large public investments stay affordable over time. Not every program will be able to preserve affordability perfectly while also achieving community stability, economic development or social equity goals; but long-term affordability should not be sacrificed without a clear compensating public benefit and should only be reduced by the extent necessary to achieve those other goals.
- Asset Building: Every program should offer homeowners a real opportunity to build wealth. Homeowner equity gain should not be limited more than necessary to sufficiently protect ongoing affordability. One aspect of achieving this goal is that — without guaranteeing a minimum sales price – programs should avoid imposing price restrictions or equity sharing requirements that limit owners’ outgoing equity to less than their initial investment in the home.
- Economic Value to Buyers: Affordability requirements (resale restrictions or recapture obligations) should be imposed only in exchange for a clear economic benefit that the buyer receives at the time of purchase (ie. A below market purchase price or deferred payment loan, etc.) Any restrictions should be proportional to the level of this benefit to the buyer.
- Right to Sell: Each program should have a contingency plan that allows owners to eventually sell their homes even when an appropriate income eligible buyer cannot be located.
- Purchase Option: Every program should maintain an option that allows program managers to purchase assisted homes from residents who are selling to preserve affordability when desirable and feasible.
- Tracking Results: Each program should track the average seller’s net asset gain and each unit’s ongoing affordability to verify that the program is achieving the intended balance between asset building and affordability over time and under changing market conditions.