Affordable Homeownership: An Evaluation of the Near-Term Effects of Shared Equity Programs

ABSTRACT

We estimate the effect of nine shared equity programs on the short-term financial health and loan performance outcomes of participating households. Using both difference-in-difference and propensity score matching approaches, we compare the outcomes of shared equity home purchasers with the outcomes of other similar first-time home buyers in their metropolitan regions. We find that shared equity purchasers have, on average, significantly less mortgage debt and pay less on their credit accounts each month than other similar purchasers, and they are appreciably less likely to have a home equity line of credit. They also perform just as well on their mortgages as nonshared equity purchasers do, as defined by having any 90- to 180-day mortgage delinquencies. Finally, shared equity purchasers do not show appreciable differences in nonmortgage financial health measures compared with similar borrowers.

KEYWORDS:

• affordable homeownership
• financial health
• shared equity

Acknowledgment

Thanks to Grounded Solutions Network staff and consultants who contributed to the development of this study by providing feedback, expertise, and support: Tiffany Eng, Elizabeth Haney, Jenee Kresge Gaynor, Rick Jacobus, Hong Ly, Thane Maxwell, Rachel Silver, and Emily Thaden.

Disclosure Statement

No potential conflict of interest was reported by the authors.

Notes

1. The nine shared equity programs are in Austin, Texas; the Bay Area in California; Burlington, Vermont; Long Island, New York; Nashville, Tennessee; Park City, Utah; Seattle, Washington; South Florida (Broward and Palm Beach Counties); and Washington, DC.

2. Limited equity cooperatives were not a model implemented in any of the sites of our evaluation.

3. We define a purchaser in the credit reporting firm data as having an increase in mortgage amount of greater than $10,000, the value for months since open mortgage is less than 49 months from the follow-up pull, or the change in the number of mortgages between baseline and follow-up is greater than zero. We identify 52 individuals who were shared equity purchasers whom we did not identify as home purchasers in the credit reporting firm data.

4. We choose not to compare shared equity purchasers with other shared equity applicants (either outside purchasers or nonpurchasers), since the selection bias of purchasing a home through the program is largest for those who know about and apply to the program. Also, it is hard to compare credit outcomes for purchasers with those of nonpurchasers, since the purchase alone affects short-term credit outcomes even if they do not affect the true financial health of the individual. Therefore, we choose to compare shared equity purchasers with other first-time home purchasers in the regions who did not apply to, and likely are not aware of, the shared equity programs.

5. The comparison group is restricted to first-time home buyers in the same metropolitan area as the shared equity purchasers, who also have a credit score between the highest and lowest score of the program participants at baseline.

6. We also estimated this model separately by sites that provide deed restrictions or are CLTs (not shown but available upon request). We do not find systematic differences in the results by program type.

7. Because of the matching procedure with repetition, individuals of the matched comparison group are weighted by the number of matches for statistical calculation purposes. For example, an individual in the comparison group matched to three shared equity home purchasers receives a weight of 3 in the statistical calculations.

8. We also estimate the distribution of propensity scores in the treatment and comparison groups. Our visual analysis shows significant overlap between those distributions, and therefore the common support assumption is likely to hold.

Additional information

Funding

The background research for this article was funded by Capital Impact Partners, with support from the Social Innovation Fund, the Ford Foundation, and the Annie E. Casey Foundation.

Notes on contributors

Brett Theodos

Brett Theodos is a senior fellow at the Urban Institute.

Christina Plerhoples Stacy

Christina Plerhoples Stacy is a senior research associate at the Urban Institute.

Breno Braga

Breno Braga is a senior research associate at the Urban Institute.

Rebecca Daniels

Rebecca Daniels is a research associate at the Urban Institute.