Webinar: Equitable homeownership: Reducing the wealth gap through shared ownership models

Guest writer: Elias Crim, Ownership Matters

It’s the foundation of the American dream: homeownership. 

Especially in the last few decades, however, homeownership has become a mirage for many, especially people of color, and especially in the aftermath of the 2008 financial crisis. As we now know from new research, this historic path to middle-class wealth creation has also been damaged by the dark legacies of racial and class discrimination.

How can we reinvent our home real estate financing models? Is that even possible? Could new models also contribute to building wealth for a whole community?

A growing number of innovative financial organizations are emerging to offer models of ownership and financing designed to protect affordability and build ownership—both for residents and for small business owners.

On February 23, Purpose hosted several aligned organizations and Emerging Fund Fellows for a webinar to showcase work and prototypes in response to this deepening crisis.

Derek Razo and Camille Canon, in addition to speakers from Trust Neighborhoods, Folks Capital, The Guild, Mission Driven Finance, and Schmidt Futures offered a master class in using various combinations of market power and community control to build up shared ownership and community wealth. 

The solutions offered by the speakers aim to accelerate this transition by incubating leaders, building infrastructure, and improving access to capital. Interestingly, the solutions also revealed some philosophical differences in approach.

Camille Canon asked the group some opening questions: what does shared ownership really mean? Where are the intervention points? Where is financial participation happening?

Some key takeaways from the conversation:

Speaking for Trust Neighborhoods, Kavya Shankar and David Kemper described their MINT (mixed-income neighborhood trust) model, now operating in Kansas City and Tulsa. This is a strategy to preserve naturally occurring housing and to protect renters (and retail owners) in place, ahead of gentrification pressure, via a trust model.

Once developed, a MINT is controlled by a perpetual purpose trust and governed by community stakeholders. A mix of debt and equity, it draws on external financing to create a portfolio that harnesses the growth of some market-rate rents in order to subsidize affordable units for the benefit of existing residents. Local governments can support MINTs, Kavya Shankar noted, from direct investment into a MINT to tax abatements or land banks.

Folks Capital’s Evan Absher explained that their fund is solving for a realignment of forces through a model based on individual entrepreneurship. He explained that his group views ownership—of a home, a business, or even a public utility—as the easiest entry point into local financial ecosystems, with a goal of thriving communities which own their assets. This model also allows some owners the option of cashing out.

The model features an emphasis on family level wealth-building and agency, without aiming to use additional levels of governance. “We’re open to being wrong about this model,” Absher noted, seeing it as a question for each community to decide. Derek Razo commented that the structural tensions between the approaches of community wealth building vs. personal wealth building was something Purpose has seen emerge in their own fellowship program.

Absher added that Folks Capital is making a bigger bet than just the local homeowner or local business. They emphasize the social value of these properties. 

On the topic of government partners and a vision of permanent affordability, he cautioned about possible unintended consequences of creating structures that have a tendency to “warehouse” poverty and defeat wealth creation via entrepreneurship.

Avery D. Ebron described The Guild’s Atlanta-based fund and its model which focuses on “providing the glue” between local real estate developers and grassroots organizations. Based on Nwamaka Agbo’s restorative economics, The Guild aims to open up ownership to the people who have created a local culture, using participation at all levels. Ebron acknowledged that building up resilient networks and political power while also building wealth is a difficult balance.

Ebron spoke of their vision in terms of the impact of offering someone an affordable rental rate or manageable mortgage: “You’re enabling them to buy a seat in the neighborhood, with access to the amenities, the relationships, the ability to engage with their community.” He also described The Guild as partly a kind of knowledge transfer effort—i.e., demystifying real estate. (For more about the Guild and other related Black ownership initiatives nationally, see the Inclusive Capital Collective and check out their new series of Black Papers.)

Laura Kohn presented Mission Driven Finance’s remarkable Care Access Real Estate (CARE) Investment Trust, another example of what could be described as reinventing a model by turning it upside down. Instead of funneling profits to a small number of affluent investors, this REIT shares its appreciation with a particular sector: mostly female, BIPOC, and lower-income providers of childcare services.

The latter is an underserved occupation whose workforce is often renting in poor locations with bad leases and little ability to finance their growth aspirations. By contrast, participants in the CARE Investment Trust will have a 50/50 share in the appreciation of the properties. The goal is to assist them in acquiring their properties via a down payment or a price reduction—which will also work to recycle capital for the REIT. Since most childcare providers work out of their own homes, this strategy also works to build up homeownership.

Kohn emphasized that more childcare available means more (and less stressful) workforce participation—certainly a form of community investment.

A funder and Purpose Fellow in this emerging field, Zoe Schlag of Schmidt Futures, pointed out the challenges facing innovators on shared ownership, given the models, our conventional funds operate with. For example, working in these new ways requires legal expertise and planning time.

But Schlag noted that philanthropy can support early-stage fund managers with a goal of de-risking in order to lay the groundwork for private capital to come in. Moreover, she described her own realization over the last year that the original design decision to tie ownership to governance—which often happens from great distances—needed to change. If we are going to address wealth inequality successfully, she argues, we must take co-governance as a vital piece, incorporating the voices of stakeholders.

A final (and hopeful) prediction from Schlag: in five to ten years, funds that aim to remain competitive in this space will have to include some aspect of shared ownership in their models.