Shared Equity Explained for the Bentonville Schools Housing Project

Since we first started talking about the workforce housing development for Bentonville Schools employees, there has been a lot of interest in the “shared equity” portion of the project.

The simple truth is that the cost of buying a house is rising faster than workers’ income. In 1980, the average age of a first-time homebuyer in Arkansas was 27; in 2021, that figure leaped to 36. As costs continue to rise at historic rates, that number will only go higher, in effect shutting out future generations from aspiring to this core aspect of the American Dream. We must help put people on the “equity escalator” as early as possible, or they may never be able to catch up.

That is the goal of our shared equity program.

Any Bentonville Schools employee who moves into one of the 40 two-bedroom, 900 sq. ft. single family cottages in the development can choose to live there under one of two models: affordable rentals or the shared equity program.

With affordable rentals, tenants will pay approximately $500 less than the going market rate for such a unit (currently, two bedroom units go for around $1,500 a month in Bentonville, so the starting rent will be $1,000 for a single family home!). 

The shared equity program, however, emulates the benefits of home ownership, such as participating in the equity appreciation of the home, while eliminating as many of the downsides as possible. This puts participants on the equity escalator and the path to being able to actually buy a permanent home elsewhere.

For example, take a Bentonville Schools teacher who has a household income of roughly $65,000 a year. They would pay $1,500 a month to participate in the shared equity program. They then get to move into their home with no down payment, no PMI, no closing costs, no property tax, and no insurance except for their belongings within the house. Excellerate Housing will pay for and perform all maintenance and will even mow the lawn.

The teacher and their family could then live in the cottage for up to five years. During that time, we will provide the support they might need to take the next step of their journey: training in financial management, budgeting, preparation for home ownership, and more. When they leave, not only will they go with the knowledge we have helped provide, but also they will have their full principal and the lion’s share of the equity appreciation that has accrued during their time in the cottage. We currently estimate that a participant in the shared equity program who has stayed for the full five years will have $50,000 to use towards the purchase of a permanent home. All without the labor and expense of having to sell their current home.

And, best of all, the cottage will remain affordable for the next Bentonville Schools employee who moves in. Combined with the occupancy maximum of five years, this means we could put many more such families on the equity escalator in the years to come.

The shared equity program is the most exciting part of this development, taking a proven model that has been used with great success all across the country and putting a unique spin on it for our community. Our goal is to see this model replicated elsewhere in the region in order to serve more of our vital workforce—medical support personnel, law enforcement, food service professionals and others—and ensure that the people who make our cities and towns run smoothly are able to live in them in a way that they can afford.