When Renters Can Earn Equity

[M II A II R II K]

When Renters Can Earn Equity


August 18, 2020

By Emily Nonko

Read More: https://nextcity.org/daily/entry/whe...an-earn-equity

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Residents fulfill commitments in their lease agreement, like paying rent on time and helping to maintain the property, and in doing so, earn financial credits they can exchange for cash after five years. But the model, known as rental equity or dividend housing, has been slow to get off the ground and scale, despite interest from other cities. In spite of challenges, it continues to forge ahead in Cincinnati.

- “Owning doesn’t work for everybody and renting doesn’t work for everybody,” says Margery Spinney, who pioneered the dividend housing model with Carol Smith under the organization Renting Partnerships. “This is a third way. But we’re sort of running a business with the control [of the buildings] upside down. Not everyone sees the value.” — The prototype for dividend housing was renter equity, which Spinney created in 2000 as executive director of the Cornerstone-Homesource Community Loan Fund, now called Cornerstone Renter Equity. There she partnered with Smith, a property manager, to recruit residents for a participatory management system with equity credits in affordable housing, then prove that financial credits for households could be sustained without subsidies.

- Between 2002 and 2012, 24 participating households accumulated over $140,000 in equity credits even though their income averaged about $20,000 per year. There was clear community benefit. A 2013 report from the Ohio Housing Finance Agency examining the impact of renter equity in Cincinnati found tenants rated “community atmosphere” as the program’s highest appeal. The evaluation also confirmed “costs were comparable to those of similar properties that did not offer renter equity credits.” ​— But Spinney faced disagreements within Cornerstone Renter Equity on how to expand the program. “The issue was really about how much control residents had,” she says. So she and Smith split off and started Renting Partnerships in 2013.

- They re-launched the program under the name dividend housing by leasing a duplex in Avondale and subleasing it to two residents, Williamston and Rosetta Ferrell. After five years, both are now vested with financial credits worth about $4,000 each. — While dividend housing borrows from cooperative housing, co-housing and land trusts, it’s none of those. “None of those models address the possibility of a third way,” she says. “In a land trust, there’s still ownership in a traditional sense for the residents … a co-op, again, you have to buy in and you can sell your unit on the market.” — Dividend housing creates pathways for residents to build equity without buying and selling property. It also flips the traditional property management model by prioritizing resident input.

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[kingkirbythe....]

Sounds like a good thing for renters and society at-large. I hope it is taken up in more places and at mass scale.

[Buckeye Native 001]

That's an old photo of Cincinnati...

[M II A II R II K]

It would be too bad for those who don’t end up living up to their obligations for points.

[Pedestrian]

If you want equity, borrow the money and buy. This scheme is seeking the upside of equity without the downside. Property values don't just go up as many people learned in 2008. In this scheme, where's the downside risk that should attach to equity? The co-op model seems much more reasonable to me.