The Home Purchase Assistance Program (HPAP) is a 30 year old loan assistance program that exists in the District of Colombia. The program provides interest-free second mortgages to first-time low-to moderate income homebuyers. This interest free loan, which the homebuyer repays, serves as a down payment on a house and also covers most of the closing costs. HPAP recipients receive intensive financial and home buyer education, preparing them for the responsibilities and challenges of homeownership. This program has helped over 13,000 DC residents become homeowners, building assets for their families and anchoring them in their neighborhoods.
As an organization that helps people purchase affordable homes in the District, we often work with people that use HPAP loans, and we advocate for the funding and efficiency of HPAP because we recognize the importance of the availability of this resource. We are glad that HPAP exists in the District, especially now, during this time of rising housing prices; with many residents facing the reality that they may be priced out soon.
The program has done a great amount of good in the District; however, it suffers from a number of inefficiencies that have hampered the success of the program at a time when it is needed most. While home prices (green columns) and HPAP applications (purple line) are rising , the number of DC residents that are able to find and purchase a home using HPAP (blue line) is decreasing.
At the request of the DC Department of Housing and Community Development, CNHED’s Ownership Housing Working Group came up with recommendations to address some of the issues that have impacted HPAP’s success. These recommendations include the need to increase staffing and administrative capacity, as well as providing a way to allow borrowers to pay HPAP loans using direct debit or online payment services. Yet, one of the most pressing concerns is that the HPAP loan amount is too low. Prior to the Great Recession, the maximum HPAP loan amount was $70,000, but that amount was cut to $40,000 once the recession hit. Although the maximum loan amount was increased to $50,000 last year, that amount still is not enough considering the sharp increases of home prices in the District. With CNHED, our partners, and many low-to-moderate income DC residents, we are advocating to increase that amount to $80,000. The aforementioned issues are just a few of the problems that need to be addressed in order to improve the efficiency, and enhance the impact of HPAP.
However, one giant step has been taken towards improving the program. The Greater Washington Urban League (GWUL), who administers HPAP, recently announced a change to one of the biggest impediments to using the program. Up until last month, two home inspections were required for those purchasing a home with an HPAP loan. The first inspection was paid for by the buyer; the second paid for by the HPAP program. Originally, this inspection was added to fulfill the requirements of a federal subsidy often used in the HPAP budget; however, this funding source has not been a sizable portion of the HPAP budget, if at all, for several years.
This second inspection discouraged many sellers from accepting offers from HPAP buyers. Requiring a second inspection was time consuming and costly. The first inspection is standard for all homebuyers, and during that process inspectors identify issues with the home that the sellers need to address. However, in the event that the second inspector identified additional issues with the home, the seller would have to put out more money to get the second set of repairs completed, sometimes a lot more. This discouraged many people from selling to HPAP buyers. Bill Jackson, a DC realtor that works with at least 25 HPAP buyers each year, recently testified at City Council about sellers choosing a lower non-HPAP offer over a higher HPAP offer – sellers were choosing to take less money due to the hassle and expense of the second HPAP inspection. However, thanks to our advocacy work over the past few years, the second HPAP inspection is no longer a requirement and home buyers and sellers alike are rejoicing.
Two days after the second inspection was eliminated, Jackson submitted an offer on a home from one of his HPAP buyers. The seller’s realtor said he refused to put his seller through the difficulties of working with HPAP. Bill informed the realtor that the second inspection was no longer required, and the realtor immediately agreed to accept the HPAP offer. We are confident that these stories will keep happening as word gets out about this important change.
We are truly thankful for the elimination of this second inspection, and hope the Department of Housing and Community Development will be able to address all of the other kinks in the program in order to make HPAP the best program it can be – District residents need a nimble and well-funded HPAP program! It’s one of the essential pieces to making homeownership and asset building possible for low-to-moderate income residents. We know this will take ongoing collaboration, and continued support from local government and our allies. However, we are celebrating now and can’t wait to see the full impact of this and future changes!