Equity Participation in Homeownership by Institutional Investors

W98-7: Due to the financing mechanisms currently available, homeowners tend to have too much of their portfolios invested in their homes and institutional investors have too little invested in owner-occupied housing. This paper presents an approach that will permit greater portfolio diversification by both homeowners and institutional investors. It is proposed that homeowners sell an equity participation in their homes to institutional investors. These participations will involve a percentage of the value of the home with the return to be realized from the sale of the home. This approach will benefit society by encouraging and increasing homeownership. By providing a new source of equity, it will enable more households to own their home or to own a larger home. The increase in the homeownership rate that would result from such a program is estimated…