Boyd went from debtor to homeowner in just three years—from 2009 to 2012—thanks to an innovative homeownership plan called the shared-equity program. It works like this: Champlain Housing Trust offers a down payment for a home, paid for with government funds. Then CHT screens potential buyers, who are members of the trust, based on their assets and income. (To qualify, a family of four must earn $80,200 or less in gross annual income, they must not own another home, and they must not have significant assets outside of savings for retirement.)
The homeowner then gets a mortgage from a bank and pays the principal each month. Usually, the homeowner also pays for the closings costs and any upkeep and maintenance. When the homeowner decides to sell the property, he first must offer it back to the housing trust. Both the homeowner and housing trust share in the home's appreciation. (That's why it's called "shared equity"—25 percent of the appreciation goes to the homeowner and 75 percent to CHT). The homeowner also recoups all of the equity that he built up each month through making principal payments, as well as any money he has spent on capital improvements (a figure determined by an independent appraiser).
Housing experts like this shared-equity model, also known in housing circles as community land trusts, because "the potential is that, if it's done well, it occupies the middle rung between renting and owning," says Brett Theodos, a senior research associate at the Urban Institute, a nonpartisan think tank in Washington. "This is a market hit solution."
The shared-equity model also accomplishes two key goals for its beneficiaries and for communities. First, it helps low- and middle-income people save money by requiring mortgage payments month to month without having to worry about the down payment (often, the sticking point for first-time buyers). Second, it helps to preserve affordable housing throughout the community. Any money the housing trust earns through appreciation gets plowed back into the homes. "We use this to keep these homes permanently affordable," says Emily Higgins, director of Home Ownership for the Champlain Housing Trust.
The shared-equity model of housing came out of the civil rights movement in the South in the late 1960s, says John Emmeus Davis, a private housing consultant who works with community land trusts across the country. Activists realized that fighting for African-Americans' political and legal rights was only one step. To fully tackle racial inequality, they also needed to ensure economic independence; hence, the emphasis on homeownership among African-Americans: a policy that remains one of the best ways to encourage people to build up assets.
The first shared-equity housing program started in the rural area of Albany, Georgia, in 1967. Then, in the 1980s, activists launched the first urban iteration in Cincinnati, Ohio. Now, more than 200 nonprofits and groups work in this space.