The Encyclopedia of Housing

Tenure Sectors

Contributors: John Emmeus Davis

Edited by: Andrew T. Carswell
Book Title: The Encyclopedia of Housing
Chapter Title: "Tenure Sectors"
Pub. Date: 2012
Access Date: April 6, 2019
Publishing Company: SAGE Publications, Inc.
City: Thousand Oaks
Print ISBN: 9781412989572
Online ISBN: 9781452218380
DOI: http://dx.doi.org/10.4135/9781452218380.n254
Print pages: 742-744
© 2012 SAGE Publications, Inc. All Rights Reserved.
This PDF has been generated from SAGE Knowledge. Please note that the pagination of the online
version will vary from the pagination of the print book.
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Residential property can be divided into three sectors: housing that is privately owned and conveyed through
market means, housing that is publicly owned and conveyed through nonmarket means, and housing that is
privately owned and conveyed through nonmarket means. Different forms of tenure are to be found within
each of these three housing sectors. Different public policies have been developed to support each sector.
Some forms of housing straddle the line dividing one tenure sector from another. There is sometimes a blur-
ring of the boundaries, therefore, between “public” and “private” housing, as well as between “market” and
“nonmarket” housing.

Housing Tenure
Housing tenure (from the Latin tenere to hold) refers to any number of legal arrangements for securing, either
permanently or temporarily, a possessory interest in land and buildings that are used for human shelter. Resi-
dential real estate may be held in many different ways. There exist, therefore, many different forms of tenure.

These multiple forms of tenure can be classified and clustered by sector according to who holds the posses-
sory interest and how that interest is priced and conveyed from one owner to another. Thus, housing may be
owned by an individual, by a group of individuals, or by a for-profit or nonprofit corporation within the private
sector; or it may be owned by a governmental or quasi-governmental entity within the public sector. Hous-
ing may be priced and conveyed through the market, where access and occupancy are determined solely by
ability to pay, or housing may be priced and conveyed through nonmarket means, with prospective owners or
renters gaining access to housing only if they meet certain social criteria for eligibility. Three tenure sectors
are differentiated when housing is classified by ownership and conveyance (see Table 1): (1) privately owned
market housing, (2) publicly owned nonmarket housing, and (3) privately owned non-market housing. A fourth
sector of publicly owned market-priced housing is too rare to warrant more than a passing mention.

Table 1 Classification of Tenure Sectors

Each tenure sector exhibits a distinctive approach to owning and conveying residential real estate, but there
are also multiple variations contained within each sector. To employ a traditional metaphor, each sector con-
tains a variety of ways in which a property's “bundle of rights” may be possessed, utilized, and transferred.
Many “sticks” are to be found in this bundle, including the following:

• The right to occupy the property

• The right to exclude others
• The right to convey (i.e., alienate) the property by selling it, subletting it, or bequeathing it to one's
heirs
• The right to profit from the property's sale, pocketing all of the equity as one's own
• The right to improve or remove existing buildings
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• The right to mine the minerals underneath

• The right to enjoy the air, light, and “view corridors” overhead

All of these rights may be permanently held by a single owner or temporarily held by a single renter. The pop-
ular perception of tenure tends to divide residential property into precisely this dichotomy of owning versus
renting. The legal reality is much more complex. Any property's bundle of rights may be held in total by more
than one owner—or by more than one renter. Alternatively, the bundle of rights may be untied and split apart,
with individual sticks separately apportioned among different owners or renters. The rights that are held by
the owner-occupant of residential real estate, moreover, along with many of the responsibilities, risks, and
rewards that come with homeownership, may be shared with an outside party that continues to exercise a
degree of control over what the present owner (and future owners) can and cannot do with the property.

Private, Market Housing

The largest tenure sector in the United States, containing more than 90% of the nation's residential units, is
made up of market-oriented housing, either owner occupied or renter occupied, having the following charac-
teristics:

It is privately owned. Title to residential real estate is held by a person, a family, or a private corpo-
ration, not by an instrumentality of the state.

It is market priced. Prices are set by the market for the sale or rent of residential real estate. Housing
is conveyed, except in cases of gift, inheritance, or foreclosure, through a market transaction be-
tween a willing seller (or lessor) and a willing buyer (or renter). Access to housing is available only
to those who can pay the going market rate.

It is profit oriented. The function of residential real estate is not only to meet the residential needs
of the property's occupants, but also it is to accumulate wealth for the property's owners. When the
property is resold, whatever equity that remains after any mortgages, liens, or other encumbrances
have been paid off rightfully and fully belongs to the owner alone.

The housing in this sector is variously known as market housing, for-profit housing, or commodity housing. It
comes in many different forms. It can be found in single-family houses and in multi-unit apartment buildings. It
can be found in buildings where a single owner-occupant possesses all of the sticks in the property's bundle
of rights and in common interest communities, such as condominiums and cooperatives, where some rights
are individually held, and others are collectively owned by everyone who resides there. Private, market hous-
ing can also be found in property that is leased out by absentee owners, buildings in which the occupants
possess only the right to remain in residence for a specified period of time.

Housing policy in the United States has been heavily biased toward this single sector. On the rental side,
governmental support for market housing has focused on providing tenant-based rental assistance for low-
income households, enabling them to pay market-priced rents to private landlords. On the homeowner side,
support for this sector has focused on subsidizing (i.e., lowering) either the initial down payment or the month-
ly mortgage payments of home buyers of modest means who are purchasing market-priced homes they would
otherwise be unable to afford. The most successful public policy promoting private homeownership was the
creation of the long-term, fixed-rate, high loan-to-value mortgage, made possible by federal insurance and the
federal backing of secondary mortgage markets. The largest federal subsidy for owner-occupied housing has
been the deductibility of mortgage interest when homeowners calculate their federal income taxes. By 2012,
this single subsidy will cost the U.S. Treasury an estimated $131 billion a year, an amount far exceeding the
total annual outlay for all of the programs administered by the Department of Housing and Urban Develop-
ment.
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Public, Nonmarket Housing

The housing contained within this governmental sector, usually known as public housing in the United States
and Canada, shares these defining characteristics:

It is publicly owned. Title to residential real estate is held by an instrumentality of the state, typically
a municipal corporation.

It is price restricted. A limit is placed on the current and future price for which the property's units
may be rented, preserving their affordability for a targeted class of residents. Rents are established
by public policy, not by the market.

It is means tested. Access to housing is available only to prospective occupants whose incomes
(and, perhaps, other characteristics such as age or disability) make them eligible for admission.

Aside from the special case of military housing, the only form of publicly owned, nonmarket housing that has
received regular—although somewhat grudging—governmental support in the United States has been that
which is owned and managed by locally chartered, municipal corporations known as public housing authori-
ties (PHAs). There are just over 3,000 of these local authorities. Together, they own 1.1 million units of hous-
ing. All of this housing is occupied by households earning less than 80% of Area Median Income and, in any
given year, at least 40% of new admissions must earn less than 30% of the area median. Many PHAs also
establish local preferences for populations such as the elderly, people with disabilities, veterans, people who
are homeless, and so on.

The ownership of housing by other governmental or quasi-governmental bodies has been rare, although not
unknown. In the 1930s, at the height of the New Deal, for instance, several innovative experiments in public,
nonmarket housing were launched by the Resettlement Administration, the Farm Security Administration, and
the Public Works Administration. With the passage of the Wagner-Steagall Housing Act of 1937, however,
most of the responsibility for owning and operating public housing shifted from the federal government to local
authorities.

Except for the interruption of World War II, when the federal government became briefly involved in planning
settlements and providing housing for defense workers, this trend toward a decentralized system of public
housing has continued. Federal funding for publicly owned housing ebbed and flowed in the years that fol-
lowed, federal regulations came and went, but the ownership and management of public, nonmarket housing
remained almost the exclusive purview of local authorities appointed by municipal governments.

Private, Nonmarket Housing

There are numerous models of housing contained within what is sometimes called the third sector, for they
represent a clear alternative to the more familiar tenures of both the market and the state. Numbering approx-
imately 800,000 units in the United States, such housing has these defining characteristics:

It is privately owned. Title to residential real estate is held by an individual, a family, or a private cor-
poration, not by an instrumentality of the state.

It is price restricted. A contractual limit is placed on the price for which the property's units may be
rented or resold. Prices are established through a predetermined formula, not by the market. These
price restrictions neither lapse when the housing changes hands, nor do they expire after a short
duration to allow owners to cash in on the housing's appreciated value. By design and intent, the
housing is to remain affordable for many years, perhaps in perpetuity.
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It is means tested. Access is available only to prospective occupants whose incomes (and, perhaps,
other characteristics such as age or disability) make them eligible for admission.

It is socially oriented. The property's primary function is to meet the social needs of current and future
occupants, not to accumulate wealth for the property's owners. Although the need for safe, decent,
and affordable housing is paramount here, the property's social orientation often includes a collabo-
rative component as well, whereby individual households are linked together in a residential network
of pooled risk, mutual aid, and operational support.

Various names have been attached to such private, nonmarket housing: social housing, nonspeculative hous-
ing, decommodified housing, nonprofit housing or, when applied solely to owner-occupied arrangements, lim-
ited-equity housing or shared-equity homeownership. A more precise label is third sector housing, denoting a
nongovernmental domain within which the preeminence of social needs over private accumulation is institu-
tionalized—and perpetuated.

Many different models of private, nonmarket housing have been developed, although six may serve as points
of reference for all the rest. Arrayed along a tenurial continuum between owner-occupied housing and renter-
occupied housing, they are the following:

1. The deed-restricted, owner-occupied house or townhouse

2. The community land trust
3. The limited-equity condominium
4. The limited-equity (or zero-equity) cooperative
5. The mutual housing association
6. Various forms of nonprofit rental housing—some of it resident managed, some not

Although governmental support for private, non-market housing has been common in many Western coun-
tries, especially in Sweden, Denmark, and Canada, such housing has seldom been a favored recipient of
public largess in the United States—with two exceptions. Federal support for nonprofit rental housing, target-
ed to the elderly, has been provided through the Section 202 program since 1959. Federal support for limited-
equity and zero-equity housing cooperatives was once available through the Section 213, Section 236, and
Section 221(d)(3) programs.

The proliferation of private, nonmarket housing during the 1980s and early 1990s attracted new governmental
support to this sector. At the federal level, set-asides and priority funding for the types of nonmarket housing
being developed by community-based nonprofits were built into the Financial Institutions Reform, Recovery,
and Enforcement Act of 1989 and the Cranston-Gonzales National Affordable Housing Act of 1990. At the
state level, housing trust funds were established in over two dozen states, most of which provided priority
support for private, nonmarket housing and for the nonprofit developers of such housing.

It is at the municipal level, however, that third sector housing has found the most acceptance and received
the greatest support. The wider use of local monies and local powers such as inclusionary zoning and in-
centive zoning to encourage the production of affordably priced homes led many municipalities to pay closer
attention to preserving the affordability of the housing they had helped to create. By the 1990s, public support
for nonmarket models and nonprofit organizations had become a significant ingredient in the general mix of
housing programs in a number of U.S. cities. In a few, it had become the touchstone for nearly every policy
and program promoting the construction or rehabilitation of affordable housing.

Overlapping Sectors
Every form of housing tenure and every type of housing policy does not fit neatly into three sectors. There is a
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blurring of the boundary between public and private, for example, in the case of publicly subsidized, privately
owned housing with project-based rental assistance. Developed by profit-oriented investors, using a variety
of federal programs, such as Section 236, Section 221(d)(3), and Section 8, this housing bears all of the own-
ership characteristics of private, market housing; yet the units are priced and conveyed through the same sort
of price-restricted, means-tested characteristic of public, nonmarket housing.

The boundary surrounding private, nonmarket housing has often proven, in practice, to be just as permeable.
The use of Low-Income Housing Tax Credits by nonprofit housing developers, for example, has attracted
profit-oriented investors into publicly regulated, price-restricted projects that are privately owned by a for-profit
partnership in which a nonprofit corporation has a financial and managerial stake. A similar blurring of the
boundaries between tenure sectors can occur in mobile home cooperatives. The land and infrastructure are
owned and managed by a cooperative housing corporation, which preserves the affordability of lot rents and
share prices. The individually owned manufactured homes that are sited on these lots, however, are often
free of any affordability restrictions on their resale. They change hands for whatever the market will bear.
Such arrangements muddy conventional distinctions not only between “public” and “private” but also between
“market” and “nonmarket” housing as well.

• tenure sectors
• nonprofit housing
• housing markets
• tenure
• third sector
• real estate
• homeownership

John Emmeus Davis

http://dx.doi.org/10.4135/9781452218380.n254
See also

• Community Land Trust

• Cooperative Housing
• Homeownership
• Shared-Equity Homeownership

Further Readings

Clurman, D., Jackson, F. S., & Hebard, E. (1984). Cooperatives and condominiums (2nd ed.). New York, NY:
Wiley.
Davis, J. E. (1994). The affordable city: Toward a third sector housing policy. Philadelphia, PA: Temple Uni-
versity Press.
Karp, J., & Klayman, E. (2003). Real estate law (
5th ed.
). Chicago, IL: Dearborne Financial.
Kemeny, J. (1981). The myth of home-ownership: Private versus public choices in housing tenure. London,
U.K.: Routledge & Kegan Paul.
Stone, M. E. (1993). Shelter poverty: New ideas on housing affordability. Philadelphia, PA: Temple University
Press.

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