Homeownership rates are near historic lows. Some try to spin this as liberation from the shackles of geography and home maintenance. But others see it as the road to a new form of feudalism. In this fiefdom, the landed rental conglomerates consolidate their wealth. Meanwhile, the renting peasants see their fortunes diminish having been stripped of the one appreciating investment still accessible to commoners. Their chances of breaking free of this cycle become slimmer as the 20% downpayment and securitization of a loan become out of reach due to endemic student loan debt and stagnant wages.
A few new ventures are offering novel ways for would-be homeowners to break this cycle. Companies like Unison, Landed, and Patch Homes are offering homeowners “shared-equity” in home purchases. Consumers get cash toward down payments in exchange for skin in a home’s appreciation (or depreciation). The added funds are being touted as leading to smaller, easier-to-secure mortgages to boot.
The companies allow existing homeowners a way to sell equity in their homes as well, getting cash without taking on the debt of a refi or a home equity line of credit (HELOC). In both cases, the companies get paid out when the house is sold (within 30 years). Customers can pay back early against the current value of the home.
The mass market march toward renting is, for many, a forced march. People want to own their homes. The shared equity model—and other, more offbeat models—are offering novel approaches for people to buy a home that could one day threaten banks and the rental giants that emerged in the wake of the housing bubble.