Building Assets for the Rural Future

Take a Shared Equity Approach to Affordable Housing

Take a Shared Equity Approach to Affordable Housing

The Opportunity

In many public subsidy programs for affordable homeownership, such as down payment assistance programs or interest rate subsidies, the public loses its subsidy when the assisted homeowner eventually sells the home. In shared equity programs, however, the assisted homeowner and the public split the equity that has been earned on the home. By retaining the public subsidy (or more) for further public use, the public can offer the subsidy to the next homeowner.

In some shared equity homeownership programs, the public recaptures its entire subsidy at the time of resale, and the assisted homeowner keeps any remaining equity. In other programs, the public may demand to receive more than its original subsidy. That is, the public may demand a return of its original subsidy plus some share of any additional equity earned at the time of resale.[1] In each case, policy-makers must strike a balance between building the community’s financial asset—that is,earning a return on the public subsidy—and building financial assets for the assisted homeowner through equity accumulation. Variations appear in the design of the equity sharing mechanisms, such as loan agreements, mortgage instruments, or ground leases.

How the Tactic Is Applied

Establish Community Land Trusts

Champlain Housing Trust (Vermont)

In the community land trust (CLT) model, a government or nonprofit organization (called a CLT) purchases land and builds a dwelling on it. The CLT then sells the dwelling—but not the land—to a qualified buyer. The dwelling price is affordable because the cost of the land is not included in the price. The CLT subjects the dwelling to a ground lease at some nominal lease rate, with the terms of the lease requiring any resale of the dwelling to be made at a price that will be affordable to the next low- or moderate-income buyer. The CLT therefore retains control over the terms of resale through the ground lease, so the dwelling will remain affordable over the course of many resale events.[2]

The ground lease ensures the housing will remain affordable at each resale by placing the following limitations on resale of the dwelling: (1) the resale price, (2) restrictions on who qualifies as an eligible buyer at resale (often through an income means test), and (3) the amount of equity retained by the seller upon resale (typically the amount the seller originally invested in the property plus a moderate return on that investment). The CLT model has been successful in urban and rural areas, but rural areas must overcome challenges related to their lower population density.  

The Champlain Housing Trust in Vermont, as one of the oldest CLTs in the nation, has developed a model for operating in rural communities that are experiencing steep increases in home prices. To counter scale problems associated with lower population densities in the rural areas it serves, Champlain serves a regional rather than local area.  According to the executive director, it would be too expensive to operate a separate CLT in each small town in the region.[3]

Champlain credits its success in part to its relationship-building efforts in each small town in which it works. Champlain only develops CLT housing in towns in which it already has experience with non-CLT projects, and it maintains a constant presence in each CLT community through a satellite office.[4]

The model has demonstrated success. A study of Champlain Housing Trust found that it had expanded homeownership opportunities for low- and moderate-income residents and created wealth for its homeowners on resale. Champlain’s CLT model preserved and enhanced the affordability of its homes, and by sharing equity with owners, it retained its affordable housing subsidies for future low-income buyers.[5]

In North Carolina, no rural CLTs have been established. However, the state is home to three urban CLTs: Community Home Trust in Orange County, Durham Community Land Trustees, Inc. in Durham County, and Cape Fear Housing Land Trust in Wilmington.

Learn More

Brenda Torpy
Chief Executive Officer
Champlain Housing Trust
Burlington, VT

On the Internet

Community Home Trust

Durham Community Land Trustees, Inc.

Cape Fear Housing Land Trust

Lands in Trust - Homes than Last


[1] Rick Jacobus, Shared Equity, Transformative Wealth 12 (2007), available at http://www.nhc.org/pdf/chp_se_transwealth_0407.pdf (describing shared equity housing programs).

[2] Julie F. Curtin & Lance Bocarsly, CLTs: A Growing Trend in Affordable Home Ownership, 17 J. Affordable Housing & Comm. Dev. L. 367, 378 (2008).

[3] Interview with Brenda Torpy, Chief Executive Officer, Champlain Housing Trust (Mar. 9, 2010).

[4] Ibid.

[5] John Emmeus Davis & Alice Stokes, Lands in Trust Homes that Last: A Performance Evaluation of the Champlain Housing Trust 1-2 (2009), (finding that the average household served by Champlain earned less than 70% of the area median income; the net equity gain to a homeowner on resale was $12,000; the average home was affordable to a household earning less than 54% of the area median income; and the initial subsidies of more than $2.1 million invested in the homes were retained upon resale).

Topics - Local and State Government