Helping Make Housing Affordable with “Non-Intrusive Joint Ownership”

Published by Anonymous (not verified) on Wed, 25/12/2019 - 4:02am in

We have been trying Foundation Housing with an apartment building in San Francisco, and while we like that structure for many reasons, we are now trying something else, this time more personal that others might want to try: joint ownership of a house. The couple times we have tried it with friends and family, they have credited this with allowing them to stay in the expensive Bay Area, so deemed a success. It has also not changed our relationship with these friends and family (as would being their landlord or bank) which has been what we wanted.

We are trying “non-intrusive joint ownership” of houses by owning a stake in a house that others live in. It is non-intrusive since it is a “silent” ownership share. This is distinct from co-signing on a mortgage and reverse mortgages in ways I will touch on later.

Let me explain our current approach, and please, if you have further ideas please comment below.

It could be any % of the house, but we have tried 50%, so I will describe it that way. A lawyer has written the documents to make this work.

It is structured as a “tenancy in common,” where each owns half the house, let’s call one the “Resident Owners,” and the other the “Equity Owner.” The Equity Owner pays the owner (could be the Resident Owner or the seller) one half of the value of the house based on current appraisal, purchase price, or something agreed upon. Then each owns half of the house and this is registered with the deed with the county. We have not tried this, but the Resident Owners could mortgage their half if they wanted to, but the bank would not have a claim on the Equity Owner’s share. We have discouraged mortgages because of how they have gone wrong, but we believe it is possible in this structure.

The Resident Owners uses the whole house and pays all the taxes and upkeep (and is required to keep it up). If there are any additions or improvements, it does not change the half-half share. 

This whole arrangement is unwound when the house is sold and the proceeds are split half-half, or the house can be appraised and the Resident Owner can buy out the Equity Owner’s share. The sale happens when the Resident Owners decide to sell the property, the Resident Owner dies, or, if owned by a couple, when the later of the original Resident Owners dies. Therefore the Equity Owner can not force the Resident Owners to sell, unless, I guess, if the Resident Owners default on their obligations.

To grant it stability to both parties, the Residential Ownership share is not inheritable and is non-transferable and has to be their primary residence. This makes sense to us, as the Equity Owner, since we wanted to help these particular people stay in the Bay Area. In another step towards stability, the Equity Owner’s interest is not transferable either, when the later of my spouse and I die, then the share goes to our family foundation. This non-transferability of the Equity Owner stake is based on my bad experience, decades ago, of my student loan being sold by my town’s savings and loan bank to an aggressive lender.

This has turned out to be non-intrusive, and in fact, pretty invisible: after it is set it up there have not been discussions about it. This is how we have wanted it: to help our friends and family but not change the nature of our relationship.

This differs from co-signing someone’s mortgage as that approach does not decrease payments for the Residential Owner except, perhaps, to make it so they could get an favorable mortgage in the first place. It also differs in that the co-signer takes on the risk of default bringing in an entanglement we wished to avoid.

This differs from reverse mortgages in that it is a share of the house, where a reverse mortgage is a loan that is secured by the house. Loans have interest, and fees, and if you fail to pay, you lose your house. There are many stories of these going wrong. Where this joint ownership structure will surely have ways it goes wrong, we have not found them yet.

If you have experiences with this, or have any questions, please write in a comment below.