H4H 2010 Shelter Report

8/8/2019 H4H 2010 Shelter Report

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Shelter Report 2010:

Te Case or Low-Income Homeowners


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3shelter report 2010

Habitat for Humanity International

CEO

Jonathan Reckord

Senior Vice President o Advocacy, Government Aairs and General Counsel

Liz Blake

Congressional Relations Associate

Dan Petrie

Communications Associate Director

Arlene Corbin Lewis

Contributing Writer

Jennier Duncan

Layout and Design

onya D. Wright

Habitat or Humanity International is a nonprot, ecumenical Christian housing ministry. HFHI seek s to eliminate poverty

housing and homelessness rom the world, and to make decent shelter a matter o conscience and action.

Habitat or Humanity International Government Relations and Advocacy Oce

121 Habitat St. 1000 Vermont Ave. NW, Suite 1100

Americus, GA 31709 Washington, DC 20005

(229) 924-6935, (202) 628-9171, ax (202) 628-9169

(800) HABIA, ax (229) 928-8811 E-mail: [email protected]

[email protected] www.habitat.org www.habitat.org


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Shelter report 20104

Acknowledgements

Many thanks to the Habitat or Humanity sta who helped make this report possible, especially:

Barb Daugherty, Susan Dunn-Lisuzzo, Lori Harris, Sue Henderson, Jane Katz, Beth Marcus, Stacey Millet,

Ramya Punnoose, Christopher Ptomey, Steven Seidel, John Snook, Susan Stevenson, Teresa Waldrop and eresa

Weaver.

For sharing homeowner stories: Pat Bacon, Rev. Pam Doty-Nation, Gib Edson, Diane Estrin, Ariane Kjellquist,

Lew Kraus, Amy Lemmer, Harold essendor, onya Tayer, Sharlene Weed and Betsy Whitney.

For their wonderul photographs we would like to thank Stean Hacker, Chenqa Maxwell, Ezra Millstein and

Greg Pachkowski.

We are also extremely grateul or the time and energy Susan Corts-Hill spent preparing and editing this years

report.


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able o contents

Foreword: Meet Andrea LaGrone, homeowner ................................................................................................................................7

Executive Summary: Te acts o success...........................................................................................................................................9

Chapter 1: Introduction .......................................................................................................................................................................13

Chapter 2: Making homeownership possible: then and now ..........................................................................................................17

Chapter 3: Benets o homeownership or low-income amilies ...................................................................................................23

Chapter 4: ools or success or low-income amilies .....................................................................................................................37

Chapter 5: Conclusions and policy recommendations ....................................................................................................................49

Acronyms and Glossary .........................................................................................................................................................................55

Endnotes ..................................................................................................................................................................................................59


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Habitat or Humanity believeshomeownership or low-income

amilies is worth deending.

6


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Foreword: Meet Andrea LaGrone, homeowner

All her lie, Andrea LaGrone o Grand Rapids,

Michigan, thought about home as a place that

belonged to somebody else. Having lived in

a number o neighborhoods as a child, she changed

schools several times and oen dreamed o having a

home o her own.

Despite desires that lie as an adult would be dierent,

it appeared that Andrea was poised to replicate the

circumstances in which she grew up. As a single mother

o our children, she moved a number o times, and some

o the places where the amily lived were overcrowded andwere not sae or the children.

During a period when Andrea and the amily lived in

transitional housing, however, she made some important

changes and took on some challenges. She worked hard to

pay her bills, save money and improve her credit score. All

that diligence paid o when she received a telephone call

inorming her that she had been selected to be a Habitat

or Humanity homeowner. She was going to have a place

where she could watch dreams come true.

Andrea LaGrones story is not atypical. Te world

has witnessed what has happened when greed andirresponsible decisions govern the housing market. But

that dismal picture has not been the case or Habitat or

Humanity. Because we set out to help amilies succeed, the

majority o Habitat amilies are thriving and oreclosure

rates remain low. In act, because we have been partnering

with amilies or more than 30 years, we are seeing more

and more amilies pay o the mortgages on their homes

and celebrate becoming debt-ree homeowners.

Habitat or Humanity believes that homeownership

or low-income amilies is worth deending. Habitat

homeowners like Andrea make nancial investments

in their homes, which they also help build. Tis pride in

homeownership makes people walk a little taller, as some

have said, and provides a sense o personal empowerment.

Oen improvements in one or two homes lead to positive

changes or an entire area.

Over the years, countless homeowners have returned

to school or begun new training to improve their earning

capacity, and statistics show that children o homeowners

do better in school. We also nd that children who live in

a stable home are healthier, and that homeowners are morelikely to volunteer in civic and political activities. Trough

paying taxes and making purchases, homeowners also

contribute nancially to their communities.

Habitat or Humanitys hand up model o investing

in homeowners has proved successul all over the world

as we approach two million people who have a new or

improved home through working with Habitat. Tat

success is dependent upon supporting homeowners with

education and requiring accountability. It is also dependent

upon obtaining additional resources to be able to partner

with more amilies.Te purpose o this report is to make the case or how

a decent place to live is a oundation or a better lie to

help readers come to know the importance o supporting

the thousands o amilies like Andreas. Discussions can be

extremely complex, or they can be as simple as imagining

Andrea and her children continuing to live in a cycle o

poverty or having the opportunity to break ree, make

changes and discover a world o hope and promise.

By Jonathan Reckord, CEO, Habitat or Humanity International

Andrea LaGrone stands in ront o the home she built or

her amily with Habitat or Humanity Kent County in Grand

Rapids, Mich.

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Larry Vaughn, 53, is a retired machinist who makes his living as a landscaper and handyman. Since losing his house and all his possessions in Hurricane Katrina in 2005, he spent time

living in his truck, then a FEMA trailer and then a Mississippi Emergency Management Agency cottage beore qualiying or a home built in partnership with Habitat or Humanity o theMississippi Gul Coast, which will be completed in 2009.

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Executive Summary: Te acts o success

Discussions about low-income homeownership can be extremely complex, or

they can be as simple as imagining a amily either continuing to live in a cycle

o poverty or having the opportunity to break ree, make changes and discover a

world o hope and promise.

Jonathan Reckord, CEO,

Habitat or Humanity International

he success o low-income homeowners is

certainly inspiring, but it is more than eel-

good news. It is key evidence that should

unlock smart government policy.

Owning a house is a power move or low-income

amilies, an Asheville, N.C. homeowner likes to say. It

powered the creation o his own small business and

helped him aord to send his children to college.

A 28-year-old college graduate was only 10 when

his amily built a house with a low-income housing

nonprot. Now as a Sonoma County supervisor, he

sees the big picture. Investing in a home or a low-

income amily doesnt just help the amily but the

whole community, he says. And the investment comes

back.

Another child o low-income homeowners in

Oregon says empowerment is a clich, but its the

spirit o the experience my amily went through,

the spirit that got him to Harvard Medical School

committed to a lie o service.

A single mom says at rst owning her own

house was a dream come true, now its a push to do

something more.

High-cost loans, poor underwriting standards

and raud in the subprime mortgage market spurred

the worst economic slide in decades, heightening the

anxiety o many Americans. oo many consumers o

subprime, and even prime, mortgages are in deault or

oreclosure. Recent studies debunk the myth that sub-

prime loan deault was highest among low-income


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homeowners; delinquency or subprime loans was high

in neighborhoods o all income levels.

Trough this economic crisis, Habitat and other

low-income homeowners continue to thrive.

Te case or homeownership or low-incomepeople remains as compelling as the lives o Habitat

amilies.

Homeownership has unique potential to break the

cycle o poverty or low-income amilies, especially

or the next generation. Low-income amilies that

become homeowners oen accumulate wealth and

become more sel-sucient, depending less on state

and ederally supported assistance programs. Tey

have improved mental and physical health and become

more active in their communities. Tese amilies

are also able to oer their children a greater sense o

stability, meaning children oen make better grades

and stay in school longer.

Beore, during and aer this economic crisis,

nancially inormed, low-income amilies with

mortgages o appropriate size and with reasonableterms prove to be successul homeowners, beneting

themselves, their children, their neighborhoods and

larger communities in which they live.

Every child may not go to Harvard or Berkeley, but

children o homeowners look to a better uture because

so much o a good lie starts at home.

Homeownership at any income level ought to

require:

Amortgagewithfairandreasonableterms,

ully understood by the borrower,

Sucientfamilyincometocovermonthly

mortgage payments and other associated costs

(utilities, maintenance, taxes, etc.) as well as other

living expenses.

In addition, success or low-income homeowners

improves with: Pre-andpost-purchasenancialand

homeowner education and counseling aer

careul screening o homeowner amilies.

Lowbuildingandborrowingcoststhrough:

- Down payment assistance.

- No- or low-interest mortgages.

- Donated or discounted land, building

materials and labor.

Loanservicingthatemphasizesperson-to-

person relationships between borrower and

lender.

Homeowner OLinda Pritchard has lived in her Habitat house or a little less than one year. She and her amily were among the rst to move into a new Habitat neighborhood in St. Louis, Mo.

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Sweatequityandself-help.

Socializationwithvolunteers,manyofwhom

are successul in their work and amily lie.

Policy recommendationsHabitat or Humanity International encourages the

U.S. Congress to highlight and support low-income

homeownership by:

Holdinghearingstohighlightbestpractices

or low-income homeownership, including

pre-purchase nancial education programs

and requirements, underwriting standards and

applicant screening, mortgage-servicing

strategies and the use o volunteers or sweat

equity. estimony should include successul

low-income homeowners.

Creatingfederalincentivesforrenters

beneting rom government housing subsidies

to achieve sel-suciency through savings

programs, nancial literacy training and

opportunities or uture homeownership. Commissioningacongressionallysponsored

study on the costs and benets o ederal rental

and homeownership programs including

the costs and benets to the ederal, state,

and local governments and taxpayers, and the

costs and benets to individual and amily

recipients o the ederal programs.

Increasingfederalresourcesforalready

eective homeownership programs such as the

Sel-Help Homeownership Opportunity

Program (SHOP), the HOME program,

and programs that build the capacity o

organizations providing low-income

homeownership, including a national housing

trust und that can be used or low-incomehomeownership.

Passingaresolutionarmingthebenetsof

homeownership or low-income persons.

Ensuringthatgovernment-sponsored

enterprises (Fannie Mae, Freddie Mac, and the

Federal Home Loan Banks) ulll their low-

income housing mission.

Habitat house o Lora Romero in the Santa Fe, N.M., Habitat development Casas del Corazon II.

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12

Homeowner Sonja Robinson and her daughter Jada are pictured in ront o their house, which was built and sponsored by ACS, Associated Contracting Services Inc. Habitat or Human-

ity o South Hampton Roads partnered with local builders, the city o Suolk, Va., donors and volunteers to help build 16 new Habitat houses in the Huntersville neighborhood.

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For most o the 20th century, homeownershipin the United States was available only to

those with moderate to high incomes. Few

low-income amilies were able to aord the rigid

nancing requirements necessary or homeownership,

such as down payments upward o 50 percent or

mortgage terms o ve years or less in the 1920s. Even

those amilies that could meet these requirements

sometimes aced additional challenges including

discriminatory practices like redlining.

As early as the 1970s, nonprot groups like Habitator Humanity began helping low-income amilies

move into homeownership. In the ollowing years,

low-income and minority amilies made tremendous

gains in homeownership. A strong economy, low

interest rates, and easier access to home loans all

contributed to this trend. Low-income amilies

that became homeowners experienced wealth

accumulation and became more sel-sucient,

depending less on state and ederally supported

Chapter 1: Introduction

As early as the 1970s, nonprot groups like Habitat

or Humanity began helping low-income amilies move

into homeownership. In the ollowing years, low-income

and minority amilies made tremendous gains in

homeownership.

A portrait o homeowners-to-be Gudy and Maribel Palacios

with son, Sebastian, and daughter, Daniela, was taken just

beore work started on their own home in Las Vegas Nev., in

August 2009.

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Alvin Pearsons lie story includes quite a ew rsts:

He is the rst in his amily to own a business and the

rst to send his children to college. Pearson attributesthose accomplishments to another rst: No one in

his amily had been a homeowner beore the Pearsons

built a house with Habitat or Humanity in Asheville,

North Carolina.

Tanks to Habitat, I had aordable housing. Tat

gave me a chance to save money, Pearson said. From

that I was able to open my own business and get my

kids through college. Applying or a Habitat house

was a power move, Pearson said.

Pearson, his wie, Cynthia, and their our children

lived in an apartment complex in Asheville beore

building their house with Habitat in 1994. When

it rained, water backed up in the building, Pearson

recalled.

Back then, Pearson worked in the maintenance

department o a local bank. Not long aer moving

into his house, he elt condent enough to start up his

own cleaning and maintenance service. Pearson now

employs eight people, and among his clients are the

bank where he used to be employed and the oces o

the Habitat aliate that he built his home with.

Pearson, who likes to cal l himsel a Habitat poster

child because he speaks up oen and gladly or the

organization, is quick to point out to anyone who asks

that his amily did not qualiy or a Habitat house the

rst time they applied. We had to work on our credit,but the second time, we were approved.

Fortunately, Pearson cant lay claim to being the

last in his amily to own a home and run a business.

His daughter and three sons, now grown, are al l

homeowners, and his daughter owns a beauty shop in

Charlotte.

I thank God or Habitat, Pearson said. Because

o aordable housing, I was able to help my amily

live better. Tats all I want out o lie, anyway.

A house leads to business, college or children

I thank God or Habitat. I was able

to help my amily live better. Tats all I

want out o lie, anyway.

Alvin Pearson and amily Asheville, N.C.

communities and society. Policy and private nonprot

intervention or homeownership is necessary; without

it, the housing marketplace does not adequately

deliver homeownership to all households that couldbenet rom it. Housing markets, which aect many

aspects o a community including race, income levels,

access to public services and jobs, have a powerul

eect on shaping neighborhood characteristics and the

opportunities available to amilies.1

As Habitat or Humanity partner amilies and

many other low-income homeowners continue to

demonstrate, homeownership or low-income amilies

is valuable and successul when properly implemented.

Several key actors in determining success include:

low supply and labor costs, down payment assistance,

no- or low-percent mortgage interest, and donations

or reduced prices on land. In addition, pre- and post-

purchase education and counseling services are crucial

as well as loan-servicing practices that emphasize

person-to-person relationships between borrower and

lender.

Te Habitat model also requires sel-help or

homeowners by requiring sweat equity, socialization

with volunteers many o whom are successul

in their work and amily lie and an essentialcommitment to acknowledge and honor the dignity

o human beings no matter their income. Habitat

homeowners-to-be also have strong role models

in successul Habitat homeowners in their own

community.

With tools like these in place, low-income

homeownership benets amilies, neighborhoods,

local economies and the nation as a whole.


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16

Amber Brand and her daughter Kali in their new Habitat home at the 32nd and Spenard Townhome Community. Construction began on this 12-townhome community in the Spenard

area o Anchorage, Alaska, in May, 2006.

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Given that homeownership in the United States

has oen been out o reach to low-income andminority households, policy interventions are

necessary to correct market ailures. Despite important

gains in the 1990s and early years o the new millennium,

homeownership remains much more accessible to those

with higher incomes. Tis is true because o several

actors, including an inadequate supply o aordable

housing in many areas o the United States, restricted

access to credit and a variety o social and discriminitory

actors. A brie look at American history oers some

context or current housing issues.

Between World War I and the mid-1970s, restricted

access to nancing and social actors such as racismprohibited most low-income (and many middle-income)

households rom owning their homes. In the 1920s, banks

oered mortgages with a maximum ve-year term and

required a minimum down payment o 50 percent. While

some middle-income households with high savings levels

could aord mortgages on these terms, most low-income

households could not.

Homeownership jumped dramatically in the 1940s

largely due to changes in housing nance systems and

the creation o entities such as the Federal Home Loan

In the 1920s, banks oered mortgages with

a maximum ve-year term and required aminimum down payment o 50 percent.

Chapter 2: Making homeownership possible:then and now

Homeowners Hector and Viridiana Solis and daughter Evelyn

in ront o their house in Casas del Corazon in Santa Fe, N.M.

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Banks, the Home Owners Loan Corporation and the

Federal Housing Administration in the previous decade.

Aer World War II, the Veterans Administrations

mortgage insurance program helped millions oamilies into homeownership. Due to ederal subsidies

lowering risks to banks during the New Deal, a typical

mortgage by the 1950s required only a 20 percent down

payment and oered a xed-rate 20-year term. While

these terms allowed more middle-income households

to purchase their own homes, the 20 percent down

payment requirement, as well as discriminatory practices

and policies, eectively excluded most low-income

households.

In the 1970s though, the ederal government

intervened to encourage mortgage lending to low-

income households. Following the adoption o the Home

Mortgage Disclosure Act (HMDA) in 1975 and the

Community Reinvestment Act (CRA) in 1977, banks

and thris began to expand their reach to low-income

borrowers and to households in low-income communities.

In some cases they relaxed underwriting standards in

order to do so.

Still, in the early 1990s low-income households still

encountered steep barriers to home purchase including

lenders that rejected low-income applicants with a marred

or poorly documented credit history and lenders thatrequired loan payments equal no more than 28 percent o

a borrowers income.3

Beginning in the 1990s, homeownership increased

markedly among low-income households and minorities.

Increased household income, decreased barriers to

nancing, and supportive ederal policies and institutions

including the CRA, Department o Housing and Urban

Development (HUD) programs, and government-

sponsored enterprises such as Fannie Mae and Freddie

Mac, helped push the trend in homeownership up. As a

result, homeownership rates increased to a record high o

69 percent in 2004.4

Increase in homeownership among

minorities and women

Between 1994 and 2000, mortgages to Arican-American

households rose by 89 percent and mortgages to

Hispanic households rose by 138 percent, while loans

to white households increased 25 percent.5 Although a

homeownership gap or minorities persisted, the gap was

signicantly reduced. Homeownership rates or emale-headed households also improved during this time period,

approaching 50 percent in 2001.6

Debunking the myth: Are low-income borrowers

at the heart o the mortgage crisis?

Recent studies show that the common perception that

subprime loans went primarily to low-income households

may not be true. A 2008 report by the Federal Reserve

ound 60 percent o higher-priced loan originations went

to middle-or higher-income borrowers or neighborhoods.7

Other reports have shown that sub-prime loans went

mainly to middle- and upper-income borrowers, and

that the vast majority were or home renancing, not the

purchase o a new home.8 Delinquency rates on subprimeloans are high in all neighborhoods, regardless o income

level.

Foreclosure rates or CRA-related loans, which

targeted low-income homebuyers, have been relatively low.

When oered with help rom NeighborWorks America,

a national nonprot organization created by Congress to

provide nancial support, technical assistance and training

or community-based revitalization eorts, these loans

had a oreclosure rate o 0.21 percent in the second quarter

o 2008, compared to a 4.26 percent rate or subprime

loans and a 0.61 percent rate or conventional conorming

mortgages.9 Te high success rate o CRA loans made

to low-income households is oen attributed in part to

high quality screening o loan applicants, ace-to-ace loan

servicing relationships and homebuyer education and

counseling services.

What is the real risk posed by low-income

borrowers?

While some argue that low-income borrowers, on average,

carry a greater risk o deaulting on their loans than otherborrowers,10 due to lower income and wealth levels, a

greater chance o losing employment, and the necessity o

multiple incomes to make mortgage payments,11 sound

applicant screening coupled with nancial counseling

and education, and responsible loan servicing strategies,

signicantly decrease risk to lenders. In act, because

low-income borrowers are less likely to prepay their loan

than higher income borrowers, lending to low-income

borrowers may result in cost savings to lenders, who

prot when borrowers make payments over the entire

Homeownership rates in the US: 1920-20002

Year Percentage homeownership

1920 46

1930 48

1940 44

1950 55

1960 62

1970 63

1980 64

1990 64

2000 66


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length o their loan term.12 In addition, as technology

improves, loan origination costs are reduced, increasing

the protability o low-income mortgages and potentially

making low-income mortgages as protable as or more

protable than other loans.13

Housing supply and aordability

Access to aordable credit is not the only actor

determining the rate o homeownership or low-income

households; access to aordable housing is also critical.14

While expanded access to aordable credit helped many

low-income households beore the economic crisis, it also

ueled housing price infation, which limited the supply

o aordable housing.15 In the late 1990s, housing prices

increased at double the rate o general infation.16

Te likelihood o living in unaordable housing

increased or homeowners o all income levels between

2001 and 2005. Tis was true despite the strong economy

during these years, moderate rent growth and low interest

rates.

Infation in housing prices hurts low-income renters

as well as potential homeowners, who ace rising rates

and a shortage o aordable rental options. Rising home

prices oen trap renter households in a negative spiral: as

rents rise, so does the price o purchasing a home, creating

entry barriers to the housing market that prove dicult to

overcome or many low-income households.

Housing values in many parts o the country began

to all in 2006, dropping more than 25 percent between

July 2006 and December 2008.17 Tis decline has aected

dierent groups o low-income households in dierent

ways. Falling housing prices mean house prices are lower

or potential homebuyers, but they also mean the current

homeowners experience a loss in equity. Falling house

prices also have a ripple eect. Tey increase demand

or rental housing as current homeowners are orced to

oreclose; meanwhile the homebuilding industry reels

rom economic and job loss.18

Sam and Esther Ansah are raising quadruplets (baby Nora is not pictured) in a three-bedroom home in the Bronx, N.Y.

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20

Housing cost burden at a glance:

12percentofallhomeownersintheUnitedStates

in 2004 were nancially overextended due to

homeownership costs, meaning more than 40

percent o household income went to mortgagepayments.19

Costburdenswerehighestandmostrapidly

growing or low-income households. In 2005,

60 percent o all extremely low-income

homeowners paid more than hal o their income

or housing costs.20

epercentageofverylow-incomehouseholds

with a severe housing cost burden rose by 6

percent between 2004 and 2005.21

In recent years, more and more low-income

homeowners are orced out o the ownership market and

return to rentals due to alling housing values, decreasing

income and mortgage packages that require a jump in

payment aer a preliminary period o time.22

Faced withdicult circumstances, many low-income households have

sold or rented out their houses and returned to renting

themselves in order to avoid delinquency and oreclosure.

Others have lost their home through oreclosure and have

little other option than a return to renting.

Between 2005 and 2007, mortgage deaults in the

United States rose by 29 percent, aecting one out o every

100 mortgages.23 Te rate o oreclosure also increased

by 55 percent, reaching a 28-year high.24 Subprime loans

have accounted or two-thirds o the mortgages in deault

and oreclosure, and adjustable-rate mortgages have

experienced higher deault and oreclosure rates than have

xed-rate mortgages.25

As the housing nance industry has responded

to the mortgage crisis, it has raised ees and tightenedrequirements or borrowers, excluding many low-income

borrowers rom the market.26 Few low-income and

low-wealth households have been able to take advantage

o recent reductions in mortgage interest rates. Potential

new homeowners have been less able to obtain nancing,

and current homeowners have been less able to obtain

re-nancing, either to transer out o adjustable-rate

mortgages or to withdraw equity in their house to use

during economically dicult times.27

Tracey Davison, 41, has the distinction o living in a Habitat house built by a crew that included President and Mrs. Jimmy Carter, and country music superstars Garth Brooks and Trisha Yearwood.

Davison, an assistant schoolteacher, and her our daughters (rom let), Ashunti, Karly, Majsa and Nylah are among 20 amilies in Pascagoula, Miss., who got houses during the 2008 Jimmy & Rosalynn

Carter Work Project. Davison was so moved by the experience that she intends to volunteer at a uture project.

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A ew o the words Harvard Medical School student

Judah Slavkovsky chooses to explain what decent,

aordable housing has meant to him are enabling,

transormative, empowering.

Slavkovskys parents were ull-time volunteers or

a mission in New Mexico that grew and provided ood

or people in need in Mexico. He was 7 when his amily,

which included two younger sisters, moved to Oregon.

Tere they had a basic human need o their own: decent

shelter.Te two-bedroom house the amily rented was

sometimes moldy and oen cold, with only one heater,

Slavkovsky recalled. I remember when it was really cold,

we all moved into that room.

Te Slavkovskys were the rst to build a home, in

1991, with Habitat or Humanity in Sisters, Oregon.

Te house has been an anchor or the amily as the

Slavkovskys continue to help less-ortunate people, and a

stable base or Judah and his sisters, Mary and Rose.

Tat stability reed and enabled him and his sisters to

get a better education, Slavkovsky said. Mary is a Seattle

University graduate. Rose, now an intern with UNICEF

in Geneva, Switzerland, is also working on a university

degree.

Education has been a gateway not only to success

in the standard way o dening it, but in the sense o

being more aware o the world around you, to engage in

international issues, oen in issues o justice, Slavkovsky

said.

From a volunteer stint at a tuberculosis clinic in

Ethiopia to a hospital rotation in an obstetrics clinic in

South Arica, where doctors ocus on preventing the

transmission o HIV rom mother to child, Slavkovsky

has acted on that awareness. Now he is leaning toward aresidency that will enable him to improve medical care to

underserved, rural areas o the United States.

Habitat or Humanity is equipping people who

have a very grounded sense o poverty and injustice

with the ability to do something about it, Slavkovsky

said. Empowerment seems such a clich. But its the

spirit o the experience my amily went through.

Homeownership by Income Level(Pew Research Poll, April 9, 2008)

Household income level Percent o

homeowners

lss n $10,000 28

$10,000 - $19,999 40

$20,000 - $29,999 57

$30,000 - $39,999 54

$40,000 - $49,999 70

$50,000 - $74,999 79

$75,000 - $99,999 86$100,000 - $149,999 83

$150,000 nd bv 90

Te rising incidence o deault and oreclosure makes

even more important measures aimed at supporting

current low-income homeowners, such as post-purchase

counseling.28 Tese trends mean that ewer low-incomehouseholds will be able to realize the nancial benets

rom homeownership. While rising delinquency and

oreclosure rates have ueled public skepticism about

low-income homeownership, homeownership among

households earning 30 percent to 60 percent o area

median income can still be highly successul. (See

urther explanation in Chapter 4 o this report.)

Habitat house to Harvard: Empowered to help others

Te Slavkovskys Sisters, Oregon

Habitat or Humanity is equippingpeople who have a very grounded sense o

poverty and injustice with the ability to do

something about it.


22/65

22

Habitat homeowners Norma and Reyes Ornelas, and their sons Agustin, 18, and Adrian,11, in ront o their house in the Santa Fe, N.M., Habitat development Casas del Corazon II.

SteFFaN

haCKer


23/65


Research studies show that homeowner benets

include wealth accumulation, improved saety

and security or homeowner amilies and their

neighborhoods, improved health or homeowners and

their children, improved perormance in education

among homeowners children, better behavior and

increased work productivity, as well as enhanced civic

and political participation among homeowners. In

addition, these research ndings have been reinorced

by the success o organizations like Habitat or

Humanity. Homeownership success or low-income

amilies depends on targeting amilies that have a

level o household income, wealth and job stability

that makes a amily able to meet mortgage payments

and pay or repairs and maintenance to their homes

over the medium and long term.

Habitat or Humanitys homeownership model targets

households that make 30 percent to 60 percent o area

median income (AMI) or its subsidized homeownership

programs. While amilies with incomes below 30 percent

o AMI may not be suited or homeownership, most

experts believe that households making above this

Te stability o homeowners can also stabilize

the surrounding neighborhood, providing positive

benets to more than just one homeowner.

Chapter 3: Benets o homeownership orlow-income amilies

Mike and Gladys Murphy have made a home or their daugh-

ters Mikayla, Analiese and Kristiana in the borough o

Queens, N.Y.

hFhNeWYorKCitY


24/65


level can succeed, given well-designed support like pre- and post-purchase nancial

counseling. For households in these income groups, the benets o homeownership

are likely to include, at a minimum, greater levels o residential satisaction, higher

levels o civic and political participation, and increased stability.29

A. Financial stability/wealth accumulation

Te question o whether and to what extent homeownership generates wealth

or low-income households is critical given the central role that investment in

homeownership plays in the nancial portolio o many low-income households.

Several existing studies suggest that homeownership can be an important means

o wealth accumulation or low-income households. A study by the Department o

Housing and Urban Development (HUD) based on data rom 1990 and 2000 ound

non-housingwealth accumulation or lower-income amilies is at best minor and,

or minority amilies, is oen negative. In act, housing wealth may be the only way

some low-income households are accumulating wealth.30

Although homeownership does not guarantee wealth accumulation, household

wealth appears to be positively aected by homeownership. According to a HUD

study, low-income and minority households experience signicant increases in

wealth through homeownership.31 Most low-income homeowners do build wealth

through homeownership;32 low-income homeowners actually ared better than

higher income groups rom house price appreciation in the l ate 1990s and the rst

ew years o the new millennium.33 Whether these gains have held true in recent

years, as more borrowers have shied to higher-cost, variable mortgages and as housing

and labor markets ell, is not yet clear.

Equity provides homeowners with nancial stability in the event o a amily

emergency, with leverage or other nancial goals and protects a amily rom economic

hardship.34 Households that do not have reserve assets, like home equity, are more

vulnerable to high-cost debt and more likely to need to rely on public support.35 Over the

long term, the lack o nancial assets, like equity, can undermine a amilys opportunities

or economic and social mobility, education and retirement.36

Multi-amily complexes are oten built in cities and suburbs; this project will be home to 41 amilies in Brooklyn, N.Y.s Ocean Hill-Brownsville neighborhood. Its one o the largest,

and greenest, complexes ever built by a U.S. Habitat aliate.

hFhNeWY

orKCitY


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I came to the United States in the summer o

1983 rom a very small town in Mexico. I was unable

at the time to read, speak or understand English, yet

I longed to come to a country like the United States,

where everyone has an equal chance to make a good

lie or themselves and their amilies. I moved to

Rockord, Illinois, with my mother and two young

sons. I ound a small, one-bedroom apartment. While

I worked two jobs, my mother kept an eye on the boys,

and I kept an eye on the uture o my amily. We went

rom one apartment to another, always making some

improvement with each move.

I met a very nice lady who told me about

Rockord Area Habitat or Humanity. I was skeptical,

but I submitted the application anyway. In November

o that year (1989), I received word that my application

was accepted, and I would be the proud new owner

o a Rockord Habitat home. I cannot even now, aerall these years, put into words or describe the eelings

I experienced with that news. Te generosity o

Rockord Habitat allowed me the reedom to expand

my lie in directions that would probably never have

been presented to me any other way.

With a house that had plenty o space, a yard

or my boys to play in and a sae neighborhood, I was

able to work during the day and go to school at night.

I have since graduated college as a paralegal. My oldest

son, Jose, works two jobs and has taken some college

courses. Francisco, my younger son, is in the U.S. Navyand hopes to enter the Naval Academy and become an

ocer.

I believe because o Rockord Habitat or

Humanity, my total outlook, everything changed.

It had always been my dream to someday be a

homeowner, but I knew I couldnt aord it. It was

always my dream to send my sons to a Catholic school.

Because o Habitat, I was able to do it. I work hard,

but Habitat gave me more push to become something

more.

I received word that my application was

accepted, and I would be the proud new

owner o a Rockord Habitat home. I cannot

even now, afer all these years, put intowords or describe the eelings I experienced

with that news.

A dream come true, a push to be something more

Maria Degollado Rockord, Ill.

While homeownership is not or every amily at

every stage in lie, homeownership can oer substantial

nancial benets over renting. Homeownership insulates

a households risk against infation in the rental market.Tis advantage was very relevant during the housing

market boom o the last two decades, when renters in

most parts o the country aced a tight supply o rental

properties and increasing rent. Housing costs or low-

income renters, as a percentage o household income, are

oen equal to, or higher than, those paid by homeowners,

and do not have the nancial benet o creating home

equity.37 While alternative investments could potentially

oer low-income households a better return on

investment than homeownership,38 many, i not most,

low-income renter households lack the income aerpaying housing costs to make any investments.39

Wealth accumulation through homeownership may

occur through several ways,40 including saving or the

initial down payment, the appreciation o home value

and the repayment o the mortgage, which allows the

homeowner to accumulate equity in the house over

time and establish a strong credit history.

However, the most important nancial impact o

homeownership may be the accumulation o wealth

across generations.41 Research shows that children o

homeowners are more likely to become homeowners

themselves, and at a younger age, than are children

o parents who did not own homes.42 Buying a home

at a younger age increases the probability that an

investment will result in wealth accumulation over

time.43


26/65


Jeremie Whiting, 14, relaxes in the living room o his amily s new Habitat house in Las Vegas, Nev. His mother, Jennier, is a case worker at Shade Tree, a shelter or homeless and abused women and

children.

ezramillSteiN

Forced savings

Forced savings are a signicant potential benet o

homeownership and help to oset other nancial

losses and risks associated with homeownership.

Unlike renters, homeowners may accumulate orced

savings through mortgage payments and incrementalinvestments in their house.44 Instead o making rental

payments to a landlord, most homeowners make

monthly payments on their mortgage over a course

o 15 to 30 years. Over time, some percentage o

this monthly payment goes to principal on the loan

resulting in a gradual accumulation o wealth that is

not accessible to renters. For low-income homeowners

working with programs like Habitat or Humanity that

charge no or very low interest, the entire payment or

nearly the entire monthly payment, aer taxes and

house insurance, is put toward the principal. A 2008

study by the University o Southern Indiana reported

that Habitat partner amilies elt increased condence

in their own nancial security aer owning a Habitat

home. Overall, amilies in the study reported that

aer owning a Habitat house they could now covera large, unexpected bill or assist a relative who was

having nancial problems. Tese homeowners also

recognized the importance o saving or the uture.45

By taking equity out o their houses to und

consumer and other expenses, e.g. through home

equity loans and renancing, many households

in recent years may have undermined the wealth

accumulation benet o homeownership.46 While the

option o easy and inexpensive renancing over the

past decade may have beneted some households, by

allowing them to withdraw equity rom their home to

pay or emergency health costs, childrens education

costs or similar expenses, it also meant less orced

savings through homeownership. Post-purchase

homeownership counseling can be an important

component o low-income homeownership. Tiscounseling allows amilies that have access to new

nancial assets through homeownership to manage

those assets in a benecial way.

Leveraging equity through homeownership

One o the primary attractions o homeownership as

an investment is the possibility o leveraging equity.47

When a amily buys a house using traditional mortgage

nancing, it contributes a relatively small amount o

the total sale price o the house into an actual equity


27/65


A homeless person probably couldnt wish or a

better housing counselor than Antoinette Brown.

When people come in the door, I know just how

they eel, Brown said. She also knows exactly how tohelp them get help.

Tats because just a ew years ago, Brown was

unemployed and homeless hersel. I was in trouble,

she said, living with riends, dierent places, going

back and orth. Her son, then 8, lived with his

grandmother.

With steely determination, Brown pulled her lie

together. She went to a local nonprot community

agency, otal Action Against Poverty (AP) or job

training. She worked or two years on repairing her

credit status in order to qualiy or a house with

Habitat or Humanity o Roanoke, Va.

oday Brown is a certied housing counselor at

AP. She owns a our-bedroom house she built with

Habitat, and is on her way to getting a degree in social

work. She provides a stable home not only or her son,

but also or three nieces who had been in oster care.

Brown is proud to be the rst in her amily to

own a home. Its still a big thing or me, she said. Its

given her stability, she said, and helps me to be more

responsible.

And its made a world o dierence or her nieces,

who had lived apart in dierent oster homes and wereso troubled when they rst went to live with Brown.

Im trying to set the standard or them, she said.

I want them to see that i you work hard, you can

have anything you want.

Im trying to set the standard or them,she said. I want them to see that i you work

hard, you can have anything you want.

Helping others, helping her amily, helping hersel

Antoinette Brown Roanoke, Va.

investment, the down payment. Over time, equity

accrues in small increments through whatever portion

o the mortgage payment is attributed to principal.

Te attraction o leveraging is, assuming that the valueo the house continues to rise, the homeowner will

realize exponential gains in wealth relative to the small

amount o equity invested in the house.

Te corresponding risk o the leveraging eect is that

even a very small loss in housing values can damage a

amilys equity investment. I the amily considers the

house its homestead and plans to hold on to it or 10,

20 or 30 years, this short-term loss may not be o great

consequence. However, i the amily needs to sell its house

in order to move, withdraw some o the equity in its house

or an emergency, or i a homeowner becomes unable tomake monthly mortgage payments because o a drop in

household income or wealth levels, the amily may not be

able to leverage the equity investment. Understanding the

equity investment and how equity can change over time

is an important part o pre- and post-purchase nancial

counseling or any income.

Increased wealth through repairs and

maintenance

Higher levels o maintenance and repair among

homeowners bring several benets, including nancial

gain through increased equity and psychological gain

through a sense o accomplishment and control over a

amilys living space. In addition, this higher level o home

maintenance can enhance living environments48 and have

a positive impact on the neighborhood and community

through higher home values, aesthetic appearances, and

even reduced crime.49


28/65


New homeowner Luis Saenz in his amilys nearly-completed Habitat home in Don Pedro Padillo in New Mexico.

ezramillSteiN

Homeowners have a nancial incentive to improve

the equity value o their home over time. As a result,

homeowners tend to invest more in maintenance andrepairs on their homes than do renters. Because o the

leveraging eect discussed above, even a small increase in

the house value can result in a large return on investment

or the homeowner at the time o sale, while a small

decrease in house value can result in a negative return

on investment at sale. Furthermore, homeowners can

bequeath their ownership rights to heirs, which may prove

an incentive to maintain and improve the physical statuso the house over time. Homeowners also benet directly

rom repairs and improvements made to their homes.

Homeownership counseling can make the responsibility

o maintaining and repairing their homes less onerous

to low-income amilies. First-time home buyers do not

always know the wisdom o investing in an adequate level

o repairs and maintenance. Tis can cause expenses to

snowball in the uture and detract rom the homeownersability to benet rom appreciation in house value over

the medium to long term.50 Pre- and post-purchase

counseling and inormation can help prepare rst-time

homeowners or the responsibility o homeownership.


29/65


Te Macon Area Habitat

or Humanity knew building

a reborn Lynmore Estateswouldnt be easy. Nearly a third

o the 435 houses in the South

Macon neighborhood were

abandoned and almost hal o

the rest rentals in deplorable

shape. But aer more than our

years with 14 new Habitat Houses built and two under

construction, Habitat executive director Harold essendor

said he eels theyre making progress. Tey would be a

host o partners and volunteers joining the work in the

neighborhood, including the city o Macon, the localpolice, ederal government unds and a long list o other

Macon institutions, nonprots and local builders. Such

a coalition, said essendor, a South Arican immigrant

with a community development background, is needed or

the hard, long, practical work o turning a neighborhood

around.

Rev. William Rand, a dynamic Arican American who

was called to pastor a small, mostly white church, explains:

Its just like the hand o God is on this neighborhood.

We need something and God brings the right person,

the partner. In the July heat, he hopes an air-conditioner

might be next to arrive.

Rand and his congregation, the Southside Community

Church, are really the vital neighborhood anchor or the

revitalization. Te church will stay in the neighborhood.

Teyre here everyday. Teyll be here long aer were

building someplace else, essendor said.

Te church opens its amily lie center to oer

GED classes, computer training and a place or Habitat

volunteers, such as college students, to stay during

construction as well as space or other community

meetings.

Macon Area Habitat hopes to build 20 houses inLynmore Estates by the end o 2010, and then 26 more,

through acquiring abandoned or condemned lots,

demolishing the structures on those lots, and raising new

ones in their place.

Encouraged by work to improve the neighborhood,several homeowners are xing up or rebuilding themselves

and deciding to stay. A better relationship between the

community amd police has decreased crime.

Georgia Ann Sanders moved into her new Habitat

house on Valentines Day 2009. She looks orward to

spending more time in

her kitchen, her avorite

room. Since their move

to their own home,

Sanders daughter Misty,

24, has started school

to become a medical

associate, building a

better uture or her

daughter ristan, 2.

Its just like the hand o God is on thisneighborhood. We need something andGod brings the right person, the partner.

Revitalizing Lynmore Estates takes homeowners,partnerships

Macon, Ga.

B. Saety and neighborhood stability

Homeownership can have a positive eect on

personal and neighborhood stability, saety and security.

Homeowners are much more stable geographically thanrenters,51 in part because o the higher level o transaction

costs required or homeowners to move. Tese costs

include realtor ees, nancing ees and potential losses

in equity. Homeowner stability can have positive social

eects, including greater civic participation, increased

social networks and gains in education and child welare.

Te stability o homeowners can also stabilize the

surrounding neighborhood, providing positive benets to

more than just one homeowner. Neighborhoods where

homeowners have a shared interest in improving their

environment show reduced levels o crime over time. 52

Neighborhood home values

Several studies have documented that well-implemented

aordable housing developments tend to improve

the value o nearby homes.53 While homeownership

alone may not reverse a neighborhoods decline, it can

be an important component, even a cornerstone o

revitalization.54 A positive link between homeownership

and neighborhood property values exists.55 Tis increase

in home value is related in part to the greater care

that homeowners generally take o their houses and

property. Owners take better care o their properties. As

a result, communities with high homeownership rates

are oen more attractive than neighborhoods with ew

homeowners. In addition, the value o nearby properties

oen increases as homes in a neighborhood switch

rom rental units to owner-occupied housing.56 When

investments in inrastructure and services accompany low-

income homeownership programs, the benets or the

neighborhood are even more likely to accrue.57


30/65


Broader economic benet

Fostering access to homeownership among low-income

households may provide broader economic benets

as well. Increased home building and homeownership

can result in more spending on home-related products.

Homeowners also have the opportunity to leverage

their housing assets or credit. Increased homebuilding

and homeownership can also expand the base or localproperty tax revenues, which can then be invested in

improvements to local inrastructure and services.

As the authors o a 2006 report by the Joint Center

or Housing Studies (Harvard University) noted,

owner-occupied housing also has a benecial eect on

the local economy by increasing consumer spending,

providing tax revenues and ees, and growing businesses

and jobs. Building and rehabilitating homes requires

additional employees, goods, and services rom the

general economy.58

C. Health

An additional benet o homeownership is improved

physical and mental health. When a amilys housing

is improved through homeownership, improved

physical health oen ollows.59 Well-constructed and

well-maintained aordable housing can reduce health

problems by reducing exposure to lead paint, asbestos and

allergens which can lead to asthma and other respiratoryillnesses.60

In addition, the psychological benets o

homeownership, such as improved sel-esteem, may

lead to physiological benets as well. Many researchers

have pointed to a correlation between homeownership

and increased psychological health, improved

sel-esteem and general sense o well-being.61

Improvements in parents sel-esteem, ostered by

homeownership, may provide important benets to

children as well.62 While the scientic research is still

in early stages, homeownership is associated with

lower levels o problem behavior among children,

which could indicate a greater level o mental and

emotional stability among both parents and childrenand in improved health outcomes.

Home equity can also provide emergency unds in the

event o a health crisis. While money paid into a house is

oen dicult to withdraw without considerable time and

expense, by paying down principal over time, homeowners

have an asset upon which to draw in hard times. A amily

may be able to aord to pay emergency or ongoing medical

bills by taking out a loan using home equity as collateral.

Tere is also a relationship between homeownership

and increased levels o lie satisaction and being happy

with where one lives.63 For example, a 2005 study in eightEuropean countries tested the housing satisaction levels o

renters versus homeowners and ound that, independent

o other variables, satisaction levels were higher or

homeowners.64 Homeowners may realize higher

satisaction levels or at least our reasons.65

First,buyingahomemaybeanimportantlifegoal,

or even a rite o passage, or many people in the

United States.

Second,homeownersmayfeelpersonal

empowerment in maintaining and/or improving

their homes.

ird,homeownersarebetterabletocustomize

their housing environment to their own needs,

resulting in greater satisaction with their homes.

Fourth,homeownersmayfeelsatisfactionfromtheir

homes as investments because o equity cumulation

and home value appreciation.

Volunteers Alex Zimmerman (let) and Hal Arner rom Albuquerque, N.M., install a door in a new Habitat home.

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31/65


Berkeley grad, county supervisor got his startin Habitat house

Eren Carrillo Jr. Sonoma County, Cali.

When you invest in a amily, youre not helping

just that amily, but the whole community, and that

investment comes back. Tats Eren Carrillo Jr.ssummary o the Habitat or Humanity message.

In the case o the Carrillo amily, the investment

payo is clearly even more ar-reaching. Te eloquent

28-year-old University o Caliornia, Berkeley graduate

grew up a house built with Habitat or Humanity o

Sonoma County, Caliornia. oday he is a Sonoma

County supervisor, a board member o the local

Habitat or Humanity aliate and an active member

o a handul o other nonprot organizations. I

like to think Im still putting in my sweat equity, he

joked. Carrillo was 10 when his amily built its three-

bedroom house in Roseland. Buying a house under

normal market conditions was beyond the means o

the amily o ve, which had shared a one-bedroom

apartment.

I and my sister slept in the living room. I

remember vividly the living conditions, and how

excited I was to be able to be in a new home, Carrillo

said. I was able to do my schoolwork. I had a home to

go to. I had never really had that beore.

In 2001, Carrillo Sr. lost his manuacturing job

while his oldest son was at UC Berkeley. I myamily hadnt been in a Habitat house, I dont know

i I could have stayed in college, Carrillo said. But

because the house payments were low enough or

the amily to manage, he went on to get his degree in

Environmental Economics and Policy. Carrillo Jr. was

the rst in his amily to graduate rom high school and

to get a university degree. I think it was a gi rom

Habitat, he said o his education.

Carrillos parents also make sure the investment

in the community is paying back. Emigrants rom

Mexico, Eren Carrillo Sr., a high school janitor,

and his wie, Margarita, are well-known in the

neighborhood or their civic-mindedness and their

volunteer work.

Owning your own home, its truly the American

dream, said Carrillo Jr., who now owns his own

house. I can eel their pride, he said o his parents.

Tey are great citizens, not just o the community, but

o this country.

I and my sister slept in the living room. Iremember vividly the living conditions, andhow excited I was to be able to be in a newhome... I was able to do my schoolwork. Ihad a home to go to. I had never really hadthat beore.

D. Improved education outcomes, behavioral

changes and increased work productivity

Homeownership can lead to improvements in

childrens education, behavior and uture workproductivity. One reason that homeownership is good

or children is because it oen leads to a better physical

home environment, which in turn leads to improvement

in physical and mental health as well as saety and stability.

Homeowners invest more in improvements, maintenance

and repairs than renters and may create a better

psychological home environment or children because

homeowners gain esteem and satisaction in their homes.66

Better physical and mental health means children are able

to attend school more regularly and have more energy or

school work. A saer and more stable living environmentmeans that children have more avorable conditions or

school and work achievement.

Increased residential stability that comes with

homeownership means that amilies that stay in one place

or longer are able to develop important social capital that

benets their children. For example, increased stability

means less requent school changes or children, possibly

more investment in local schools by homeowner amilies

and longer-term relationships with neighbors and others

who may be able to help support and watch out or

children.67

Another reason is that children o homeowner amilies

gain skills rom observing, and sometimes helping,

their parents take care o the physical and nancial

responsibilities associated with homeownership, such as

repairs, maintenance and nancing transactions.

While some researchers note that actors like

neighborhood social conditions and amily asset levels

or security, mobility or neighborhood choice, have not

been adequately distinguished rom homeownership itsel


32/65


Homeowner recruitment and training

Te journey begins or a potential homeowner

with the recruitment, application and qualication

process. Out o every 10 applications received, Greater

Greensboro Habitat ultimately qualies just one

homeowner. Te number one reason homeowners

ail to qualiy is overwhelming debt and credit issues.

Once qualied, a amily works with the Family

Services training and education team or six to 18

months. Habitat spends $20,000 a year alone in

specialized training courses or homeowners including

classes in nancial management and budgeting,

home and yard maintenance, legal issues around

home ownership, community building and confict

resolution.

Additionally, Habitats certied housing counselor,

program sta and volunteers walk alongside the

homeowners every step o the way ensuring that on

that great day when the walls go up on their own

house, the homeowners are ready or those exciting

steps in their journey.

Construction

While the homeowner in process is logging sweat-equity

hours in training and building other peoples homes, the

Construction and Land Development department is

working to prepare a lot or their home.

Purchasing, clearing, grading and preparing a single

lot or building can take three months. Developing a

subdivision can take up to two years.

Once construction on the house begins, the amily and

volunteers together will log 2,000 more hours working

alongside the construction sta in the intensive hands-on

construction phase. It typically takes 15 to 20 weeks to go

rom oundation to dedication including raising walls,

trusses, laying shingles, siding, putting in drywall, painting,

trim work, cabinetry and all the details until at last its

time to hand over the keys. Habitat dedication days are

jubilant events amily, riends, volunteers, clergy, sta

all who have had a hand in the journey come out to give

thanks or the blessing o the journey together and to bless

the house and the amilys lie there. For many, this seems

like the journeys end, but, like vows at the altar, this is just

the beginning o the transormation. In Greensboro, it

costs $112,500 to build the house and travel with the amily

to this milestone.

Lie o the loan

Once the house is completed, the longest leg o the

journey begins a 20-30 year marathon with GreaterGreensboro Habitats 0 percent nancing program.

How one Habitat or Humanity aliatepartners with amilies

From Te Journey Home, a publication o the Greater Greensboro (N.C.) Habitat or Humanity, Summer 2009.

32


33/65


SOURCES OF FUNDING

SPONSOR CONTRIBUTION: $60,000

CITY & FEDERAL FUNDING: $18,000

IN-KIND MATERIAL DONATIONS: $9,500

UNRESTRICTED DONATIONS: $25,000

Habitat is a bank like no other. Our interest-ree

mortgage program includes Lie o the Loan services

or a amily. We take that responsibility and all it

entails seriously. Habitat processes and tracks monthly

payments, manages tax and insurance escrows, as wellas maintenance escrow accounts, to help homeowners

save and prepare or major home maintenance. We

provide additional budget counseling and nancial

training, and intensive case management with

negotiated payment plans and loan modications

when job loss, illness or other crises threaten to steer

a amily o track. Habitat provides Lie o the Loan

services to a lmost 300 current homeowners at a total

cost o over $150,000 per year.

Neighborhood outreach and advocacy

Working in neighborhoods has always been a bi-

product o our ministry. We work in neighborhoods

beore we buy land, while were building and aerhomeowners move in. Greater Greensboro Habitat has

helped build a community center in Eastside Park, a

playground in Stonegate Crossing and helped nurture

neighborhood associations in other communities.

With nearly 350 homes under Greater Greensboros

belt in more than a dozen neighborhoods, were

bringing more intention to this work.

Were actively working across the ministry and

with partners and homeowners to explore ways we can

continue to strengthen neighborhoods so that amilies

living in Habitat homes can build the economic andsocial ramework that can better their own lives and

help their children break through the barriers and

constraints o cyclical poverty.

HOUSE COSTlnd cqusn nd dvn $18,000

Cnsucn s nd subcncd

fssn b (ccns, ubs,

c.) $54,400

ps, fs, nsunc $2,400

Wus, s, qun $7,500

Cnsucn suvsn, fy scn

nd nng, vun cdnn $20,000

Cnsucn, gn dnsn nd

ngn $10,200

Total House Cost $112,500

PRICES FROM THE GREATERGREENSBORO HABITAT

Bx f ns $5

hdgs f ngbd ck-u $75

tnng csss f wn $350

annu svcng f n 0% n $650

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An adobe house in Taos, N.M., built with Habitat or Humanity in 2006.

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as causing positive impacts on children,68 the majority

o research shows the link between homeownership and

improvements in education and childrens behavior.

According to a study tracking the eects ohomeownership on childrens educational achievements

over time, parental homeownership caused childrens

math scores and reading scores to rise and behavioral

problems to decrease.69 Tese improvements helped to

predict uture school achievement and uture earnings.

Tis study also ound that gains in educational

achievement accumulated over time; the longer a childs

parents owned their home, the more likely the childs

educational and behavioral perormances improved.70

Another study ound a signicant correlation

between parental homeownership and the probability

that their children will graduate rom college.71 Yet

another study ound that children o homeowners weremore likely to remain in school until the age o 17 and

were less likely to become teenage mothers,72 with both

o these eects more pronounced or children o low-

income households.73

ogether this research builds a strong case or the

positive and valuable impact low-income homeownership

has on children.

E. Civic and political participation

Research also consistently supports a causal link

between homeownership and increased participation

in voluntary organizations and local political activity.74

Indeed, a 2008 study by the University o Southern

Indiana on Habitat or Humanity Evansville noted

that amilies were more involved with neighborhood

activities, attended church more regularly, and took

pride in their neighborhood now that they own a

Habitat home.75

Te results o a seminal study in 1999 suggested

that homeownership causes increased investment

in social capital.76 Te authors ound that much o

this increase derived rom higher levels o residential

stability,77 which in turn allowed homeowners to reaplong-term benets rom investments in social capital.78

Specically, homeowners were 10 percent more

likely to know the name o their U.S. congressional

representative than were renters and 15 percent more

likely to vote in local elections.79

Research indicates that homeownership provides

social benets in the orm o greater property

maintenance and neighborhood conditions, more

successul children, and better civic behavior.80 Many

o these positives probably derive rom increased

residential stability; the longer a amily stays in a

neighborhood the more likely it is to participate in civic

activities.81

Jozette Boyd moved into a three-bedroom house in 2007, with her sons Gavin 5, above, and Kaleb, 7. She built the home with

Greater Fairbanks Area Habitat or Humanity in Alaska.

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New homeowners Josena Velez-Majalca (let) and her daughter Diana inside their almost-completed Habitat home in Albuquerque, N.M., in 2008.

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H

omeownership is a realistic choice or many

low-income amilies. While homeownership

may not be the best choice or those in the

very lowest income brackets or those without a stable

source o income, it can be a very good choice or

many amilies. Given the proper tools and support,

amilies making 30 percent o the area median income

or more can not only succeed as homeowners, but can

enjoy the nancial and social benets o homeownership.

Trough experience, Habitat or Humanity has

learned that careul screening o loan applicants is

essential to success. By targeting households making 30

to 60 percent o area median income, Habitat has been

able to reach a group o households that, while low-

income, have enough resources to support the costs o

homeownership when partnered with adequate program

support. In this way, Habitat helps to ensure the economic

viability o its continued work as well as the economic

viability and success o the amilies it serves. In addition,

Habitat has seen the benets o providing pre- and post-

purchase nancial counseling and o putting a amily

support network in place to help homeowners stay in their

homes. Habitat also works hard to ensure aordable land

prices and uses sweat equity rom homeowners-to-be and

volunteer labor to lower housing costs.

Given the proper tools and support, amilies making

30 percent o the area median income or more can not only

succeed as homeowners, but can enjoy the nancial and socialbenets o homeownership.

Chapter 4: ools or success or low-incomeamilies

Nancy Hermanson and Raylene play in their new Habitat home

in Las Vegas, Nev.

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1. Lowering land and building costs

Te cost o land, especially in urban areas, is one o

the most expensive components o aordable housing

development. Reducing or eliminating the cost o land

makes homeownership more accessible to low-income

amilies. Many aordable homebuilders take advantage

o programs like inclusionary zoning or land donation

programs to make homeownership more aordable.

In addition, a reduction in regulatory barriers to home

building can have a signicant positive impact on the cost

o building homes.

Reducing regulatory barriers to the development

o low-income homeownership

A supportive regulatory environment at ederal, state and

local levels decreases the costs o homeownership to low-

income households. Important areas o regulation include

zoning, land use and construction. Especially at the local

level, eliminating unnecessary bureaucratic hurdles to

construction and land use is essential to the development

o aordable housing. Some local regulations that appear

desirable on the surace, such as those limiting growth in

suburbs, must be careully construed to avoid reductions in

aordable housing in these areas.82 Experience has shown

that in areas where land-use and construction barriers are

reduced, nonprot homeowners are able to build homes

less expensively and aster, passing the benets directly on

to homeowners.

Donations o land or subsidized land costs

Donated or subsidized land is oen crucial in making

aordable housing development possible. Private land

donations to nonprots are common and can be made or

a variety o reasons to reduce liability or a desire to help

others and oen make nancial sense or the donor.

Between maintenance costs, and income and property

taxes, land can be expensive to own. Selling the land

oen leads to legal and brokerage ees or possibly estateor inheritance taxes. I the land is donated however, a tax

deduction can be made based on the current market value

o the property which can benet the donor, the nonprot

and the community in which the property lies.

Cities, municipalities and counties may also donate

or sell properties or aordable housing development.

Cities oen obtain land that is vacant or abandoned

or acquire houses or health or tax reasons; it is in the

communitys interest to ensure that this land is developed

and unctioning. Tese properties are oen sold to

nonprots or one dollar to develop in order to stabilizeneighborhoods, bolster communities and avoid loss o

taxes. Te City o Milwaukee, or example, sells Milwaukee

Habitat or Humanity about 25 properties a year or one

dollar each and subsequently almost all o Milwaukee

HFHs development is built on land that has been donated

or subsidized in some way.

Inclusionary zoning

Inclusionary zoning ordinances, which exist in many

cities and counties throughout the country, encourage

or require the development o aordable housing as

any new development takes place in a community.

Inclusionary zoning can be either voluntary or

mandatory. Mandatory inclusionary zoning requires

that a certain proportion o aordable housing units

be set aside in any housing development.83 Voluntary

inclusionary zoning means that developers are

oered incentives to include aordable homes in new

developments. Inclusionary zoning can help ensure a

more diverse community and can help spread aordable

Shing Hiu Cheng puts in some sweat-equity hours on the home in Brooklyn, N.Y., he will share with his mother and sister.

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Habitat or Humanity in the United States is made up o

more than 1,500 aliates located around the country.

Each aliate has its own approach to the homeownership

process rom selection o homeowners to pre-and post-

purchase nancial counseling. However, there are several

key actors that Habitat aliates share to help amilies help

themselves become successul low-income homeowners.

While every aliate does not employ every tool listed

below, this list is representative o the tools Habitat or

Humanity uses.

Outreach to the community: Habitat aliates

engage in community outreach to let potential

homeowners know about homeownership

opportunities and the potential benets o

becoming a homeowner. Many Habitat

homeowners acknowledge that beore they

learned about Habitats programs they never

thought they would own their own home.

Screening applicants: Habitat aliates screen

applicants in order to determine who is a good t

or the program. As amilies in need o decent

shelter apply to local Habitat aliates, the

aliates amily selection committee chooseshomeowners based on their level o need, their

willingness to become partners in the program

and their ability to repay the loan. Every

aliate ollows a nondiscriminatory policy o

amily selection.

Pre-purchase nancial counseling: A critical part

o many Habitat aliate programs is pre-purchase

homeownership counseling. Oering nancial

counseling to potential homeowners can help

prepare homeowners to be successul and to

prevent homeowners rom deaulting on theirmortgages. Some amilies also may work to

improve their nances or a year or two to

become able to partner with Habitat or a house.

Sweat equity: Each Habitat aliate creates its

own sweat-equity requirements or homeowners,

but typically requires a homeowner to put in

several hundred sweat-equity hours beore

moving into their home. Homeowners work on

their own house and other Habitat houses being

built at the same time. Homeowners who are

unable to do physical labor on the work site mightcontribute sweat-equity hours by volunteering in

other ways with the Habitat aliate. Some aliates

allow amily members or riends to contribute sweat-

equity hours on behal o homeowners. All sweat-

equity programs are designed to emphasize

sel-help, mutual help and the importance o

community.

Volunteer labor: Many Habitat aliates use

volunteer labor to help reduce home building

costs by decreasing the amount o money that

must be paid to home-building proessionals.

Both unskilled and skilled volunteers and skilled

proessionals are used.

Family support and oreclosure prevention: MostHabitat aliates incorporate a amily support

program into their homeownership model.

Generally, the amily support program provides

personal support to rst-time homeowners

to help the amilies deal with challenges

as they arise and answer ongoing questions

about homeownership. Oen homeowners are

assigned one amily support volunteer or sta

member they can go to with questions or

concerns. By providing personal support or

homeowners rom the beginning o theirhomeownership experience, the amily support

model can help prevent oreclosures.

Recycling mortgage payments to und more

homes: Habitat or Humanitys model was

created with a Fund or Humanity in mind. Te

concept is that houses are built at no prot and

homeowners receive no-prot loans. As

homeowners make house payments, that

money is put back into the Fund or Humanity

and new houses can be built with that money.

oday, Habitat aliates use a similar concept toensure that they are able to provide aordable

homeownership opportunities on an ongoing

basis. Many Habitat aliates also contribute to

the construction o decent, aordable housing or

amilies in a developing country by helping

support a Habitat aliate in another o the more

than 90 countries where Habitat is at work.

Habitat or Humanitys model: Partnering with low-income homebuyers

Victor Valdera, 39, and his mother, Herna, 66, lived in a small

two-bedroom apartment beore their Habitat home was

completed in 2009. It was specially designed to meet Victors

needs, with ramps, extra large rooms and other eatures. He

lost both arms in an electrical accident.

39

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housing throughout a community. Inclusionary

zoning can result in costs savings that are passed on

to homeowners. Because obtaining aordable land is

one o the biggest nancial challenges to low-incomehomeownership, especially in desirable areas near jobs

and transportation, inclusionary zoning helps to ensure

access to aordable land, reducing some costs to the

developer.

2. Screening the pool o potential homeowners

Trough experience, Habitat or Humanity has learned

that careul screening o loan applicants is essential to

success, both to ensure ecient use o Habitats resources

as a mortgage lender and to help ensure the success o

the homeowners. Torough screening o loan applicantsreduces the risk o households that are unable to meet

their loan requirements. For lenders, even low-income

homebuilders like Habitat or Humanity, using solid

criteria to select borrowers is critical to long-term

nancial sustainability.

raditional underwriting standards can provide

critical inormation about the probability that a amily will

be able to meet loan requirements. For many extremely

low-income households and some very low-income

households, homeownership may not be the best choice

i they do not have sucient income or a steady stream

o income. For this reason, low-income homeownership

programs typically ocus resources on those households

earning at least 30 percent o the area median income.

For example, Habitat or Humanity has typically

targeted homeowners who do not qualiy or traditional

mortgage products, either because their income is too

low, they lack the ability to make a substantial down

payment or because something in their credit history has

made them ineligible or a market-rate loan. However,

Habitat does select amilies who will be able to make their

monthly payments. Habitat is interested in setting the

homeowner amilies up or success by making sure the

amilies will be able to stay in their homes.

3. Reducing costs to homeowners

In order to reduce the cost o building homes and pass

those savings along to homeowners, low-income home-

building groups will oen seek to reduce land, regulatory

and building costs in many ways. Tese savings are passed

directly to homeowners through the reduced purchase

price o the home. In high-cost areas, reducing the costs

associated with building a home is essential to be able

to oer homeownership opportunities to low-income

amilies. Many o these plans are complex but innovative

ways nonprots use to continue to partner with low-

income amilies.

Common ways o reducing costs and increasing

support or homeowners include down paymentassistance or waiver, shared-equity models, and the use

o sweat equity and volunteers. In addition, low-income

house builders will oen oer no- or low-interest

mortgages, giving low-income homeowners additional

nancial benets.

Down payme

H4H 2010 Shelter Report

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