Balancing the benefits of affordable housing
Shared equity homeownership models like those used by a growing number of private and public housing organizations on the Vineyard are effectively locking in subsidies (money and land) into each home sold and building a growing stock of permanently affordable housing for generations of Islanders. As long as housing prices are rising faster than incomes, housing programs that do not effectively retain their initial subsidies or those which completely forgive their subsidies after a certain number of years, will not only have to reinvest more money or land into creating the same affordable housing opportunity but will likely have to spend more for the same investment to keep up with the rising cost of housing prices in the future.
Examples are all around us of friends and family members who once could afford to purchase a modest house five or ten years ago but no longer have a chance for homeownership or the benefits accrued from it.
Many Island housing programs are using subsidy retention models in order to preserve housing created through limited funding sources and/or discounted land costs resulting from new affordable housing zoning by-laws and land use regulations that provide density bonuses. These models include long-term ground leases in the case of the non-profit Island Housing Trust and permanent deed riders in the case of some town programs.
These subsidy retention programs work by investing the necessary subsidies (money and/or land) into making the cost of housing affordable to working families in exchange for the buyer agreeing to limit the price at which they sell their house later. The sale price is based on the increase in the area median income rather than the housing market, which assures that the house will remain affordable for the next generation of homebuyers without any need for further subsidies.
At the same time, each homeowner can earn substantial equity, just not as much as they would from an unrestricted house. Beyond the benefits of decent, stable and secure housing, homeowners benefit from the equity earned from the appreciation (typically between three and five percent annually is allowed) on the restricted value of their house, from the portion of their mortgage that they pay off, and from state and federal homeowner tax deductions.
Benefits to the community are also significant and include a pool of permanently affordable housing for Island families and individuals who are priced out of the housing market now and in the future, stabilizing the local work force, maximizing the public's "return on investment," and using scarce dollars and land to help more Island residents.
Philippe Jordi is executive director of the Island Housing Trust.