Homeownership holds a coveted place in the American tradition. For over a century, federal and local governments promoted policies that sought to build wealth through homeownership, and in so doing shaped the modern landscape of housing equity in fundamental ways. Yet while this was a history of monetary equity, it was not one of monetary equality. These policies created institutionalized paths to homeownership for generations of white Americans, while simultaneously erecting structural barriers to housing wealth for people of color (Ehlenz, 2014; Gallaher, 2016; Lawton, 2015; Saegert and Benítez, 2005; Rothstein, 2017). And that legacy has real material effect today: the yawning racial wealth gap of our modern era is pronounced, growing, and inextricably linked to property.

One response to this has been the emergence of an alternative model of shared equity homeownership—the limited equity cooperative (LEC). My master’s dissertation explores the impact of municipal support for limited equity cooperative (LEC) homeownership on existing racial wealth gaps in cities. Looking specifically at the case study of Washington, DC, it raises questions about the structural implications of state action promoting resale-restricted homeownership for majority-black communities, and ultimately underscores the need to explicate the nuanced and often invidious ways in which racial inequality continues to haunt the rollout of affordable housing policy today.

What is a Limited Equity Cooperative?

The LEC is a shared equity homeownership model that endeavors to provide stable homeownership to low-income populations while remaining permanently affordable through resale restrictions (Ehlenz, 2018). In the LEC model, residents own a share of a cooperatively run, multi-family residential building (i.e. rather than owning real property, residents own a share of the co-op corporation and have exclusive occupancy rights to individual units). LECs place income restrictions on membership and allow initial members to buy shares at affordable rates by using blanket mortgages and governmental subsidies to bridge gaps in financing (Huron, 2015).

Affordability of units is then maintained, theoretically in perpetuity, through resale restrictions on co-op shares: when an individual sells their share in the co-op, they receive only the amount they paid for their initial co-op share and limited interest (subject to the individual cooperative). The majority of equity appreciation on the unit is recycled back into the cooperative, allowing the next resident to buy in at the same affordable price (Ehlenz, 2014).

The Missing Role of Race in LEC Scholarship

Almost the entirety of existing research on LECs focuses on the structure of the model (e.g. financing and governance), their social functionality (e.g. community control and the use-value of homeownership), and the economic justifications for the model (e.g. its anti-speculative nature). Most authors recognize that LEC resale restrictions remove the capacity of homeownership to act as a wealth-building instrument, but frame this as either a necessity in the quest for affordable homeownership or even a desired outcome of communal ownership. The few critical bodies of work on LEC resale restrictions argue they create a “second class form of homeownership” (Kenn, 1995: 70) where “the membership fee in effect becomes a refundable security deposit” (Miceli, Sazama, and Sirmans, 1998: 654), rather than a tool for equity generation.

Yet in both praise and critique of the LEC model, the vast majority of scholars continuously frame LECs through the language of class. Conspicuously absent from the literature is any substantial treatment of the impact of LEC resale restrictions on the racial wealth gap and racialized disparities in housing wealth, despite its widespread use as a homeownership alternative for communities of color. Indeed, the term ‘race’ rarely appears in academic work on LECs. Nor is there significant attention given to the ways in which LEC models and pro-LEC policies interact with a history of structural, governmental biases in housing equity that consistently conferred greater opportunities for inter-generational wealth accumulation on white families.

My dissertation attempts to fill this disciplinary void by using critical race theory to examine the racialized impacts of the LEC model. Using Washington, D.C., as a case study, and drawing on in-depth interviews with members of the recently assembled D.C. LEC Task Force, the paper assesses the racialized impacts of legislative efforts to preserve the city’s LEC housing stock. It is a piece that asks not whether this is a ‘good’ model, nor whether it is the logical response of a systemically constrained populace, but rather: what does it mean for local government to put time, effort, and financial resources behind this model? To promote it across the city and the country as a governmental tool for affordable housing creation and preservation?

The Equity/Equality Tradeoff for Communities of Color

In the face of limited resources, policymakers will always be forced to confront competing goals in the provision of affordable housing (Byrne and Diamond, 2007). LECs offer myriad benefits to individuals, communities, and governments, from their capacity as an anti-displacement instrument to their ability to recycle municipal subsidies in a cost-effective manner. Yet the results of my research indicate that LECs can create new forms of racial stratification in property markets, removing the capacity of homeownership to act as a financial investment for communities of color. My research highlights the real costs of prioritizing long-term affordability over equity creation for communities of color, and demonstrates the ways in which racial inequalities are reproduced in institutions, even when well-intentioned policymakers sit at their helm.

The DC case study ultimately serves as an example of how anti-displacement affordable housing strategies can unwittingly intensify asset-based racial wealth gaps in cities. It highlights the need to proactively assess the impact of facially neutral, class-based affordable housing policies on racial disparities in wealth, particularly in the arena of shared equity homeownership. For affordable homeownership policy is not only a foundational determinant of the distribution of fiscal equity across communities, it is also one of the single most impactful drivers of racial equality in the U.S. today. And, thus, if we hope to begin closing the racial wealth gap in the U.S. and working towards a more just and compensatory framework for homeownership, the question of how new models of limited equity homeownership affect or even perpetuate racial disparities in wealth must be raised, first, and then again and again.

Further Readings

Byrne, J. and Diamond, M. (2007) Affordable Housing, Land Tenure, and Urban Policy: The Matrix Revealed. Fordham Urban Law Journal, 34(2), pp. 527-612.

Ehlenz, M. (2014) Community Land Trusts And Limited Equity Cooperatives: A Marriage Of Affordable Homeownership Models. Cambridge: Lincoln Institute of Land Policy.

Ehlenz, M. (2018) Making Home More Affordable: Community Land Trusts Adopting Cooperative Ownership Models to Expand Affordable Housing. Journal of Community Practice, 26(3), pp. 283-307.

Gallaher, C. (2016) The Politics of Staying Put: Condo Conversion and Tenant Right-to-Buy in Washington, DC, 1^st ed. (Philadelphia: Temple University Press).

Huron, A. (2015) Working with Strangers in Saturated Space: Reclaiming and Maintaining the Urban Commons. Antipode, 47(4), pp. 963-979.

Kenn, D. (1995) Paradise Unfound: The American Dream of Housing Justice for All. Boston University Public Interest Law Journal, 5(1), pp. 69-98.

Lawton, J. (2015) Limited Equity Cooperatives: The Non-Economic Value of Homeownership. Journal of Affordable Housing and Community Development Law, 23(3/4), pp. 393-425.

Miceli, T., Sazama, G. and Sirmans, C. (1998) Managing Externalities in Multi-Unit Housing: Limited Equity Cooperatives as Alternatives to Public Housing. Journal of Policy Modeling, 20(5), pp. 649-668.

Saegert, S. and Benítez, L. (2005) Limited Equity Housing Cooperatives: Defining a Niche in the Low-Income Housing Market. Journal of Planning Literature, 19(4), pp. 427-439.

Rothstein, R. (2017) The Color of Law: A Forgotten History of How Our Government Segregated America. (New York: Liveright Publishing Corporations).