Controlling Residential Stakes

Local communities often suffer when residents have too small a stake in their homes—a point underscored by recent rashes of foreclosures and abandonments, and implicated by longstanding questions about the effects on communities of renters and owner-occupants, respectively. However, homeowners with too great a financial stake in their homes can also cause difficulties for local governance by acting as risk-averse NIMBYs. Local governments should have a strong interest in helping members of their communities move away from problematic forms of stakeholding and toward more desirable intermediate positions. This Article examines how and why governmental entities at the state and local levels might regulate or shape the financial stakes that residents have in their homes.

We give particular attention to the role local governments may play in facilitating homeowner and tenant access to index-based financial instruments that adjust residential risk-bearing. More radically, we suggest that local governments, assisted by state law, could formulate shared equity arrangements in which local residents hold stakes, either directly or through their municipalities, in the housing markets of surrounding localities as well as in their own jurisdictions.