Yale/Neighborhood Reinvestment Home Equity Guarantee Project

Barry Nalebuff & William N. Goetzmann
Home equity is the single largest component of household wealth for the majority of American households. Yet, there is virtually no way for the average family to insure itself against drops in home value and the ensuing destructive financial loss. Until now, no program exists to help protect homebuyers against the market risks of home ownership. In response to falling home values in Syracuse, NY, Yale University and Neighborhood Reinvestment (NR), a non-profit organization devoted to neighborhood revitalization, have collaborated to provide home equity assurance to homebuyers in the City of Syracuse. The cost is 1.5% of a home's value at the time of purchase. If housing prices have fallen in the local area (as defined by zip code) at the time homeowner chooses to sell, the protection reimburses the homeowner against this market decline.

This program is bringing financial and economic stability to the residents of Syracuse. As it spreads out to other communities, we believe it will profoundly impact public policy.