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Shelter Report 2010:
Te Case or Low-Income Homeowners
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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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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.
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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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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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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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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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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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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
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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.
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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
lnd, b & s f us $112,500
t juny css
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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.
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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.
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