Ellie Adelman and Jaser Alsharhan are prepared to complete their home purchase while seated around a huge conference table at the South Denver Elevated Title office. Both are eager to begin signing documents because this is the first time either has purchased property.
Since 2018, the two have shared a space, initially in a large house with six other people and most recently in a three-bedroom apartment that they have been renting out for the past two years. They both work for charitable organizations and their monthly rent was $2,500 (plus $75 for parking for each of them). They are jointly purchasing a 2,800 square foot home with five and a half bedrooms, four full bathrooms, and a mortgage that is only little more expensive than their prior rent. Their living expenses will be lower than renting as long as they are able to rent out at least one, if not both, of the rooms.
Adelman and Alsharhan are a part of the expanding co-buying trend, in which two or more unrelated, single individuals buy real estate more frequently. According to the Wall Street Journal, co-buying expanded nationwide by an estimated 771 percent between 2014 and 2021, roughly measured by co-owners with distinct last names. Co-buying has been made easier in recent years by businesses like Pairadime, „Live Work Denver“, CoBuy in Seattle, and GoCo in Toronto.
Adelman and Alsharhan were successful in acquiring a single-family house in an area known for being out of their price range by working with realtor Bri Erger, one of the three agents at „Live Work Denver“, along with company founder Laura Cowperthwaite and Sarah Wells. According to a study by the mortgage and home equity research company HSH, Denver is the ninth most expensive metro area in the US. If they put 20% down, a person has to earn at least $148,000 per year to qualify for a conventional mortgage. If they only have 10%, the required wage increases to around $173,000 instead.
According to Jonathan Cappelli, executive director of Neighborhood Development Coalition (NDC), a coalition of affordable housing nonprofits in the Denver metro area, "the single-family home dominate landscape of today's cities represents an outdated and implicitly racist housing model that caters pretty exclusively to a nuclear heteronormative family." According to him, the model does not reflect the various ways that individuals choose to coexist.
Co-buying as a tactic exemplifies the decommodification of housing by vastly enhancing access to homes and promoting communal ways of life. It raises an alternative interpretation of homeownership that is based on collectivism and group wealth creation.
The co-buying strategy advocated by „Live Work“ Denver and others isn't "house hacking," which is a method of generating passive income by renting out a portion of a home to pay off the mortgage and turn a profit. Instead, co-buying gives certain people a chance to leave the rental market and gain access to the wealth-building potential of real estate assets. According to Erger, most co-buyers are initially attracted to it because of how affordable it is but quickly come to appreciate the advantages of living in a community.
"Traditionally, people have believed that I need my own room, belongings, and things. However, I believe this to be a really wonderful alternative if you're looking to challenge the capitalistic standards surrounding ownership, according to Alsharhan. “Personally, I am aware that I thrive in social environments. It feels fantastic to be supported and that I'm a part of something bigger than myself.
Both Alsharhan and Adelman assert independently that they might have been able to purchase their own condos in Denver if they had desired to. But because we had seen so many excellent examples of co-buyer power, Adelman explains, "we recognized that if we combined our resources, we could purchase something bigger."
Buying together
Cobuying enables users to purchase "more house with less money," according to the „Live Work Denver“ team in its quarterly Cobuy Curious Class. Consider two homes that are on the same street. One is 1,050 square feet, with two bedrooms, one bathroom, and is listed for $615,000. The other is priced for $749,000 and has double the square footage, four bedrooms, and two bathrooms. When there are two purchasers for the larger house, the down payment and monthly mortgage payments are nearly a third less expensive for each buyer than if they had chosen the smaller property. In essence, buying jointly saves each buyer $1,186 per month and $24,000 in down payment.
Five years ago, Wells' initial three clients were three unrelated individuals. One was a single artist who had enough money from an inheritance for the down purchase. The other two, both single mothers, had a steady source of income to cover the mortgage payment each month.
Together, they were able to buy a single-family home in the Denver suburb of Lakewood even though none of them could have done it on their own.
The three brokers at „Live Work Denver“ have assisted more than 100 individuals in acquiring equity in more than 30 houses since 2019. They closed on 16 properties in 2021 alone. There is a particular market for polyamorous groups, while other co-buyers include intergenerational families, couples, and groups of friends.
Shira Weiner, who along with Erger and her then-partner Niko Kirby bought a property in Denver's Park Hill neighborhood in 2021, claims that she should make more than enough money to support living there. She was in danger of losing her reasonable renting, nevertheless, in late 2020 after her landlords sold the structure. When she first started looking for a home on her own, she rapidly changed her mind because of the lengthy procedure, the added responsibility, and the limited selection of one-bedroom condos.
The house they bought gave her a foothold in the housing market, a chance to accumulate equity, and perhaps most crucially, the ability to reside in a location she's enthusiastic about.
According to Weiner, "It just makes so many more things feasible that wouldn't be otherwise."
However, their investments are not equal. The other two co-owners are not able to use the en suite bathroom that Weiner paid for. But if the property is sold, it also raises her equity in it. Additionally, sharing maintenance costs is advantageous in case something goes wrong. Soon after they moved there, the plumbing broke, but splitting the $9,000 repair bill made it considerably easier on each person than it would have been for a single owner or couple.
As tenants in common, all three are included on the mortgage and home title: Each person has varied degrees of ownership and responsibility for the property, and their part may be transferred to whoever they specify in the event of their death. Unlike when partners or married couples purchase under joint tenancy, this is different. According to Matt Hanson, a mortgage planner who works with „Live Work Denver“ and presents at their workshops as well as provides financing to their co-buying clients, which include Weiner and friends, "it's our role and responsibility to help people understand that there is a way to homeownership in this wildly expensive market." Currently, lending to co-buyers accounts for around 25% of his business.
Working with a married couple is slightly different than working with single people, according to Hanson. Using a separate loan application from each buyer, Hanson determines what they may jointly buy when co-buying. He adds up the total income and total debts, takes into account the credit score with the lowest limit, and then determines what the group can comfortably afford.
The discussion of escape strategies is where there is the most disparity, according to Hanson. He doesn't normally talk about this with married people or couples. I have nothing against people co-buying, even if one has money and the other doesn't, so long as they have an exit strategy in place.
The significance of contracts
A poll of 1,000 millennials was conducted earlier this year by the online platform Pairadime, which aims to make the co-buying process accessible and scalable. Only 4% of people say they want to wait to be married before buying a house, and 36% say they would buy with a partner if it meant they could get a higher mortgage. 51 percent of the respondents stated they would prefer to see assistance from their parents in the form of a co-investment in a property over an outright gift. But according to Joe Hoppis, co-founder of Pairadime, the conventional real estate procedure frequently does not favor unmarried co-buyers.
Then, he continues, "it's devastating for everybody — for the agents, for the lenders, for the market," when one of them decides to leave or when there is an exit. "Everyone suffers because we didn't assist them in doing it from the start." Currently, Pairadime employs over 100 agents in locations all across the US and Canada, including Texas, California, Oregon, and Washington, as well as Boston, Miami, Calgary, and Toronto. According to Hoppis, co-ownership acquisitions have also taken place in less expensive markets like Tennessee and Kansas.
Since April, the business has assisted with about 80 transactions, matching co-buyers through its online survey, determining what they can afford, putting them in touch with local agents and lenders, and assisting them in drafting a 26-page legal agreement that safeguards each party's investment and establishes clear boundaries, including how expenses and equity are divided and what happens if someone decides to move.
The last component, the agreement builder, is the only expense in the procedure and costs about $95, according to Hoppis. The corporation advises a legal review even though the contract is valid in all 50 states and Canada.
According to Hoppis, "We think that the healthiest and most loving thing you can do to protect relationships is agreements and transparency surrounding agreements.
When Caitlin Alexander and Kayla Hoggatt first met in a yoga teacher training program in 2017, they bought a Denver home together in July of the same year.
We were both aware that neither of us could accomplish that on our own, but combining our financial resources might make it possible, according to Hoggatt. The two were able to be approved for a Federal Housing Administration (FHA) loan in addition to a grant that assisted with the down payment thanks to the assistance of a willing real estate agent and lender. Additionally, they hired a lawyer to analyze their co-buying agreements.
Due to a variety of life situations, the couple sold the house in 2020. During this process, they referred back to their agreement to determine how to divide the equity. Despite the brief co-buying experience, Alexander and Hoggatt are delighted they engaged in it. Over the course of ownership, they were able to gain around $60,000 in equity and, in the process, solidified their friendship. Even Hoggatt's maid of honor in her wedding was Alexander.
In the instance of Weiner, Erger, and Kirby, the agreements safeguarded all parties when Erger and Kirby divorced, maintaining the shared objective of fostering community and promoting equity.
Because of the structures, "[the split] was probably the most easiest," claims Kirby. Because we had the contingencies, not much had to be renegotiated or was unclear.
There is no legal requirement for co-buyers to use an agreement, despite the realtors at „Live Work Denver“and lenders like Hanson and Pairadime encouraging it. And in the end, not every client signs one.
At the end of November, Alsharhan and Adelman moved into their new home but have not yet signed theirs. However, they are debating its content and intend to have a legal review soon. It includes everything from allocating their equity interests in the home according to the amount of space they occupy to making monthly payments into a joint bank account for unexpected repairs and pledging to co-own for at least five years.
Breaking up the game
Many of the problems that co-buying can bring about can be mitigated through agreements, including how finances are handled, who is responsible for what around the house, and how departure routes are laid out. Additionally, it might aid in bringing up concerns like disconnect over preferences for privacy and noise, children, or pets. Civil Society finds sustainable housing where like-minded people can find each other through a platform and rent together housing that would be unaffordable for them alone. Unfortunately, many people find themselves in this situation. Rising rents, falling standards, less space - civil society relies on alternative ideas that also address the Sustainable Development Goals.
But while they support clients interested in co-buying, the „Live Work Denver“ team has also encountered additional difficulties.
Co-buying and the notion of making financial investments with friends and even family still face cultural skepticism, and the understanding that independent homeownership may not be feasible for everyone causes considerable embarrassment and pain.
The system does not actually prepare people for that, according to Wells. We must mourn the loss of this interpretation of the American ideal while determining what is reachable and available. One method for doing such is co-purchasing.
It can also be difficult to get everyone on the same schedule when the process can take longer than conventional real estate transactions. Finding the ideal property that is appropriate for co-ownership can be difficult, and so can navigating local zoning and occupancy regulations. The „Live Work Denver“ team routinely finds properties that would be ideal for co-buying, but these properties frequently sell before a group is prepared to make an offer.
With a $400,000 investment from Colorado's Gary Community Ventures, „Live Work Denver“ is in the midst of establishing a revolving loan fund to aid in mitigating these difficulties.
The House First program will enable „Live Work Denver“ to buy and repair homes that are well-suited to co-ownership first, and then sell them to co-buyers at cost, with the goal of assisting families in lowering expenses and building equity. Any earnings will be reinvested in the fund to buy more real estate.
According to Wells, it will be a chance for people to discuss co-buying loans and agreements without the added strain of the deadline for the competitive real estate market. The idea is to make real estate investment, which creates income, more accessible to traditionally underrepresented populations.
So far, the majority of „Live Work Denver's“ clients have been white women who identify as LGBTQ, as well as the brokers' networks and social circles. However, in response to „Live Work Denver's“ co-buying classes, the team has been asked to speak before other community organizations in Denver like Globeville, Elyria-Swansia Coalition, and East Colfax Community Collective. These local anti-gentrification organizations work to prevent the eviction of community members who are primarily low-income and people of color. In order to offer Spanish programs in early 2023, they are also collaborating with The Center for Community Wealth Building.
Hoppis is also optimistic that Pairadime and co-buying will contribute to greater equity in the real estate market. But because Pairadime is still in its infancy, it is still too soon to quantify demographic information about co-buyers in order to fully comprehend who is taking advantage of the model. "We've succeeded if we can give excluded groups more reason to believe they can succeed and give them the tools they need to do so. We took action to interrupt this game, he claims.
Co-buying is by no means a solution to the affordability crisis that most American communities are experiencing. Since the price of single-family homes has risen to an all-time high, the housing market in many ways does not accurately reflect the genuine price that the majority of people can afford. Policies and programs that significantly expand affordable housing are required due to opposition to density, a lack of supply, and employment that pays below-living wages. However, co-buying does give some people the chance to make their first real estate acquisition.
According to Cappelli, who is in charge of the Neighborhood Development Collaborative in Denver, "local, state, and federal governments fundamentally need to coordinate policy to ensure that a sufficient number of homes are built, sold, and subsidized at affordability levels that open up the American dream of homeownership to a wider array of buyers."
The co-buying model offers a practical alternative and should be supported as a substitute for many people and households. This method is one of many that are required to make homeownership more accessible to more people and reduces the global financial inequality.
If civil society does not have to give up more than half of its income to rent, money is either saved, the living conditions of families can improve, or it is consumed, for example the economy is boosted. Such alternative programs should be heard globally and should be increasingly applied, especially in cities with high rent prices.