With millions of potential home buyers priced out of the market and rents at an all-time high, the U.S. housing affordability crisis has finally grown so painful that it’s at the top of both political and philanthropic agendas. Shared equity homeownership — a proven path to housing stability, community health and generational wealth creation — should be at the top of the solutions list. Long perceived as a niche strategy, it’s now poised to scale.
Shared equity homeownership — in which a low- or moderate-income (LMI) buyer pays a below-market price for a home in return for accepting a modestly higher price from another LMI buyer when they sell — has been turning renters into homeowners for decades. The results are compelling: One study found that over 90% of shared equity purchasers remained homeowners after five years, while roughly half of all other low-income home buyers fell out of ownership in that time span. And the shared equity model creates lasting affordability, providing opportunities for successive generations.
The only problem is that there aren’t enough shared equity homeownership opportunities to meet demand from the millions of people trying to climb out of generational poverty, plus the growing ranks of people with solidly middle-class incomes who are shut out of conventional homeownership in thriving metro areas. To address this gap, housing-focused funders have incubated an investment approach that gives foundations, institutional impact investors, family offices and donor-advised fund (DAF) holders an easy way to fund a ramp-up of shared equity housing.
A new path to scaling shared equity homeownership
Recognizing that standard approaches to promoting the shared equity model — advocacy, federal and state policy changes, supporting individual nonprofits — were not creating enough affordable starter homes, Grounded Solutions Network set out to find a way to scale this proven solution. GSN conducted a feasibility study to explore market-based tools that could eliminate the need for public subsidies. The result was the Homes for the Future model, which leverages institutional investor disruption in the single-family rental market to sell homes affordably while returning impact investment capital. Following early support from the Kresge Foundation, Homes for the Future is now putting the model into action.
Homes for the Future uses integrated capital — senior debt, program- and mission-related investments, impact and traditional equity investments, and grants — to acquire, rehabilitate, rent and sell single-family homes at affordable prices. These homes will initially be leased to tenants, who will benefit from stable rents and supportive property management. With mortgage debt amortizing and home values and potential homebuyer incomes increasing throughout the rental period (an estimated 10 years), Homes for the Future will be able to sell the homes at a below-market price to shared equity homeowners while still repaying debt and meeting investor return targets.
Grounded Solutions Network is now piloting this new model with a fund targeting acquisition of 400 homes in three years. This will require $44 million in low-cost (but fully repayable) subordinate capital to leverage $62 million in market rate senior debt — an investment that will pave a replicable path for others to follow. Under current market conditions, the Homes for the Future model could create up to 1 million permanently affordable single-family homes in 30 target markets across the U.S., including Atlanta, Charlotte, Dallas, Orlando and Columbus. This would require $1.2 billion in concessionary capital to leverage roughly $1.5 billion in market-rate debt — well beyond current philanthropic impact investment efforts, but a tiny fraction of the $1.56 trillion in private foundation endowments.
Jacqueline Waggoner, president of Solutions at Enterprise Community Partners, said Homes for the Future stood out among thousands of proposals submitted for the Housing Affordability Breakthrough Challenge, a national housing innovation competition led by Enterprise and the Wells Fargo Foundation.
“The Homes for the Future Fund offers an ingenious twist on a proven model,” said Waggoner. “It blends the established success of shared equity frameworks with the power of impact investing. This unique approach increases opportunities to stabilize housing in key markets, expand access to homeownership, and create generational wealth. We believe the Homes for the Future Fund has the capacity to deliver transformative, scalable change in communities across the United States.”
Fannie Mae and Freddie Mac have approved the purchase of loans originated under shared equity programs. All that’s required now is investment at the scale of the need.
An investment with generational impact
This is not a solution that philanthropic funders can support solely through oversubscribed program-related investment (PRI) funds — it’s going to take significant investments from endowment funds, DAFs and other sources of impact capital.
Financial returns from Homes for the Future investments are modest, but the impact returns will be generational: Initial shared equity homeowners begin to build family wealth, and because the homes can only be sold at below-market prices, each succeeding owner has the same opportunity. A $44 million impact investment deployed into the Homes for the Future model could preserve 400 homes and create 940 new LMI homeowners within a generation, providing families an average of $120,000 in additional wealth.
That opportunity would be life changing. LMI renters who are struggling to keep up with ever-escalating costs (rents have been rising faster than incomes for decades) can’t build wealth or achieve stability by buying a home. To afford monthly mortgage payments under common purchase scenarios for a median-priced home, a borrower would need an annual income of at least $119,800—a threshold just 1 in 7 (6.6 million) of the nation’s 45 million renter households can meet, according to the Harvard Joint Center for Housing Studies report “The State of the Nation’s Housing 2024.” The shortfall is particularly acute for Black and Hispanic households, which are disproportionately cost burdened, the report notes.
But many of these renters could afford a shared equity home: At initial purchase, 95% of shared equity homes were priced affordably to low-income households (defined by the federal Department of Housing and Urban Development as households earning up to 80% of area median income) and nearly half were affordable to very low-income households (those earning up to 50% of AMI), according to a 2019 study.
While shared equity buyers don’t build as much equity as market-rate buyers do, it’s more than you might think: A 2021 study found that shared equity homeowners accumulated about 80% of the median annual net home equity gains realized by similar conventional owners. That is a huge advantage over renting: The same study found that similar renters had almost no real wealth gain during the research period. By the time of sale, nearly 60% of shared equity homeowners who sell their homes buy a new home on the conventional market.
An opportunity to save the starter home — now and for the future
Despite its history of success at giving renters a path to homeownership and giving communities a way to ensure an affordable housing supply, shared equity housing has remained a niche concept. GSN created Homes for the Future to provide a long-term solution to that problem. It’s also an immediate intervention to save the starter home, which is disappearing from the market as private equity investors buy up the last remaining affordable homes and turn them into rentals.
Homes for the Future made an initial investment in fall 2024 in the acquisition of a single-family rental portfolio consisting of more than 200 units. As the fund grows, Homes for the Future aims to maintain a sustained acquisition rate of at least 200 homes annually.
Shared equity housing organizations, which support homeowner success and ensure ongoing affordability, play an essential role and will continue to need grant funding. And government subsidies will continue to be needed to build new shared equity homes. But the Homes for the Future model provides a way for concessionary capital alone to dramatically increase the supply of affordable homes, starting now.
As Asset Funders Network’s brief on shared equity homeownership explains, “Shared equity homeownership is a small but mighty movement, and far more work remains to create more pathways to economic opportunities, belonging and shared prosperity. Philanthropy can join the movement to support community-led models and recreate enduring systems, holding in mind that the choices we make today will either help, hinder or facilitate racial equity and shared wellbeing.”
Devin Culbertson is Vice President of Innovative Finance at Grounded Solutions Network.
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