Prime Property Institutions for Subprime Era: Towards Innovative Models of Homeownership

This Article breaks new ground toward contractual and institutional innovation in models of homeownership, equity building, and mortgage enforcement. Inspired by recent developments in the affordable housing sector and other types of public financing schemes, we suggest extending institutional and financial strategies such as timeand place-based division of property rights, conditional subsidies, and credit mediation to alleviate the systemic risks of mortgage foreclosure. Two new solutions offer a broad theoretical basis for such developments in the economic and legal institution of homeownership: a forprofit shared equity scheme led by local governments alongside a private market shared equity model, one of "bootstrapping home buying with purchase options. " t Benito Arruiada is a professor at the Department of Economics and Business, Pompeu Fabra University and Barcelona GSE. Amnon Lehavi is Chair, Real Estate Studies, Radzyner School of Law, Interdisciplinary Center (IDC) Herzliya, and a visiting professor, Faculty of Law, University of Toronto. For most helpful information and advice, we are indebted to Michael Brown, John Davis, Robert Ellickson, Lee Fennell, Allison Handler, Roz Greenstein, Fernando P. Mdndez Gonzilez, Steven Shavell, and participants of the 2010 annual meeting of the Canadian Law and Economics Association held at the University of Toronto. Arrufiada acknowledges financial support from the Spanish Ministry of Science and Innovation through grant EC02008-01116. Berkeley Business Law Journal