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The Practice of Theory

A commenter on a popular local blog about affordable housing pointed out that sometimes reality isn’t always convenient for theories, even sound ones. Policymakers have long touted the various benefits that can be gained from innovative policies. Inclusionary Zoning and public land agreements provide for a set-aside of affordable units in developments across the District. However, these arrangements are not always as beneficial as conjectured. For example, in the past decade, during the boom years of real estate, the District implemented partnerships with private developers that included a certain percentage of affordable for-sale units in luxury condominium developments. While this might have seemed to be a great way to integrate low and moderate income individuals and families, the reality has been less than spectacular. ADU buyers at these developments have experienced escalating condo fees -many of them at 100% more than what they were initially paying at the time of purchase.

Further compounding this problem is the resale process. Because of the restrictive covenants, ADU owners must abide by a resale formula. The formula limits appreciation and requires the ADU owner to resell these units to a buyer within the same income category and at a price that is affordable to this purchaser. The problem with this is that because of the escalating condo fees, the formula will not allow any appreciation to the original ADU owner. So, this ADU owner, who purchased a home and assumed all of the typical risks of homeownership, gets none of the reward. The end result is that this ADU owner is now in worse financial shape upon resale than before they purchased a unit, and from factors that have nothing to do with the market. How does this move people up the socio-economic ladder? How does this solve the District’s problem of the ever-widening wealth disparity?

A post today in the City Paper’s Housing Complex contemplates why the only two condo units produced through the District’s Inclusionary Zoning policy have not yet sold. Blame is attributed to difficult lending guidelines, another unforeseen issue that further pokes holes in sound theories Blogger W Jordan ends a comment by stating “in theory [the author] is not wrong, but we don’t live in theoretical neighborhoods”. A very apt observation and something that City officials and policymakers should take notice of.

The Fallacy of the Fallout

During a recent lunch with a friend and the inevitable discussion about affordable housing in the District, he mentioned that the District has done too much already for affordable housing and that it was poor policies that resulted in the mortgage meltdown and the financial crisis that ensued. My policy wonk hat turned, I countered by citing hard data about the history of restrictive covenants, redlining, and the inner-workings of the subprime industry. He seemed genuinely surprised by this and it registered to me that many people, even very smart people like my friend, simply did not know the truth. A few sensational headlines that trade ill-researched positions seem to be all you need to convince the masses.

A very informative video of the history of restrictive practices in housing can be found here: http://hatdc.org/?p=599.

As for the subprime meltdown, while fishing through dozens of articles has illuminated much for me, the most impactful piece I’ve found is a demographic study done by Maurice Jourdain-Earl, the founder of a company called ComplianceTech. The full report can be found here: http://www.mortgagebankers.org/files/Conferences/2008/RegulatoryComplianceConference08/RC08SEPT24HMDAMauriceJordain.pdf

What’s interesting is for starters the majority of Subprime borrowers were not low income household, but rather middle and upper income white households. Many of these borrowers were not first-time buyers either. The overwhelming majority of subprime borrowing occurred when existing homeowners pulled out home equity through refinancing. Equity stripping became the practice that fueled the subprime boom and is directly attributable as the reason why so many families are “under water” on their mortgages today.

Even though the majority of borrowers were middle and upper-income White households, the most unfortunate part was that Black and other minority households were disproportionately targeted for these toxic products, even in instances where they would qualify for “good” loans.

This study is really important because it not only proves that low and moderate-income Minority households were not to blame for the crisis, but also in figuring out a realistic solution for the existing problem.

According to Maurice Jourdain-Earl:

The problem with portraying the foreclosure crisis as a minority and low-income problem is that it affects how solutions will be approached. If, on one hand, it is believed that subprime rate loans were predominately made to marginal segments of society (Black, Hispanic or low-income) housing policymakers may approach solutions with bias assumptions about minorities and minority qualifications (low education, bad credit, and low-paying jobs, etc.). Thus, there may a tendency to write-off the subprime lending debacle as a type of affirmative action gone bad. On the other hand, if it is believed that the foreclosure crisis affects broader and more demographically diverse segments of society then a more politically responsible approach is likely, thereby changing the tone, climate and context of how solutions are crafted.

DCʼs Home Purchase Assistance Program (HPAP)

What is it?

HPAP, the Districtʼs homegrown downpayment assistance program, provides up to
$44,000 for first-time, low and moderate income home buyers. Downpayment
assistance is critical for low and moderate income DC residents as saving enough for a
downpayment, especially in DCʼs expensive housing market, is one of the largest
impediments becoming a homeowner.
In addition to the financial assistance, HPAP recipients also receive intensive financial
and home buyers education, preparing them for the responsibilities and challenges of
homeownership.
HPAP acts as a second mortgage. Recipients begin paying it down starting in year six
of owning their home and make monthly payments over a 40 year period, thus making
the payments affordable. Some recipients pay back their HPAP loan much quicker.

What it provides

HPAP has helped 13,000 DC residents move out of systems of dependency and
ongoing subsidy, and currently generates $2 million in repayment every year. Even
through the housing crisis, HPAP recipients have only a 2% foreclosure rate.
Homeownership offers a way for prepared families to build wealth through the equity in
their home, helps reduce crime in neighborhoods, and improves childrenʼs educational
performance.
At a time when it is cheaper to own than rent in the DC and with historically low interest
rates, the DC government should be increasing HPAP rather than letting it dwindle (see
the chart below). Providing homeownership opportunities to low and moderate income
people also allows room for other DC residents to benefit from other essential affordable
housing programs – creating a dynamic continuum of housing that moves people out of
poverty.

See a recent article about the program and budget cuts at http://greatergreaterwashington.org/post/14648/cuts-threaten-successful-homeownership-program/

Testifying at City Council!

Future affordable homeowners and HPAP recipients give testimony at City Council.

Yesterday, the DC City Council Committee on Housing & Workforce Development held its annual budget hearing for fiscal year 2013. As affordable housing for District residents remains distant from Mayor Gray’s vision for the city, cuts were made to two essential city housing programs: the Home Purchase Assistance Program (HPAP) totaling $5 million and the Housing Production Trust Fund (HPTF) totaling $20 million (for more information, see http://housingforallblog.org/2012/03/so-what-happened-in-the-mayors-budget/).

Along with numerous housing advocates and non-profits, 19 past and future recipients of HPAP loans, along with Manna, Inc. staff, submitted testimony before the Committee Chairman and At-Large City Councilman Michael Brown to the positive effect that homeownership purchased through HPAP has had on their lives.

Bernice Joseph, a mother of 4 and homeowner in Ward 2 since 2002 said, “Without this program I do not know where I would be. But I do know I would not be in my neighborhood, the one that is so dear to my heart, the one where I put down roots, the one where I have lived for the past 21 years… Without the stable price of my mortgage, I would not be able to afford to go back to school; I definitely could not afford my classes if I had to pay market-rate rent.”

Robert Cooke, a recent homeowner in Ward 5 said, “My story, and the story of some of the members on this very Council, is only possible with the HPAP. HPAP is one of the best investments that the City makes. It just doesn’t make sense that the Mayor is cutting back on this program, while there is an ongoing housing crisis in this city. I will pay back my HPAP assistance so others can become homeowners, too, and I will contribute to the City through property taxes. Where else would this be possible for a person on disability?”

Finally, Willamena Samuels, homeowner in Ward 2 and Director of Manna’s Homebuyers Club said, “HPAP has helped to break the cycle of poverty and allowed families to build wealth and live the American dream of homeownership. Although I own a home in DC and have no thoughts of moving, it pains me to think that the future of the District of Columbia would be one that doesn’t give people opportunities to stay in the city they grew up in and love. If you cut HPAP funds, you limit homeownership to only the very rich.”

After the council hearing many testifiers, concerned residents and housing advocates held a rally in support of full restoration to the housing budget. Ralliers heard from affordable practitioners, advocates and recipients alike, including Jubilee Housing affordable renter Brian Adams, Coalition for Non-Profit Housing and Economic Development organizer Elizabeth Falcon, and Manna affordable homeowner Robert Cooke. Together their words testified to the fact that DC residents need a diverse continuum of affordable housing to move low-income residents up and out of poverty and full funding from the city government to make that possible.

Though the testimony heard before the council and at the rally has been stirringly emotional and persuasive, the fight to restore HPAP and HPTF funding is far from finished. And though those at the rally also heard support for affordable housing needs from Councilmembers Michael Brown, Yvette Alexander, Jim Graham, and Marion Barry, full budget restoration can only happen with majority support from the council.

The hearing and rally are over. It is now up to all housing advocates to continue the fight and steadfastly plead to their Councilmembers for full restoration and funding to these vital housing programs. There is only a short time remaining for action before the Committee of the Whole will cast its final vote on the Mayor’s budget. Go forth and act on this issue today.

For more about the rally and excerpts from speeches given visit the Coalition for Non-Profit Housing and Economic Development website at:
http://housingforallblog.org/2012/04/residents-rally-stop-making-affordable-housing-programs-disappear/

Almost every American receives a subsidy in some form or owes some benefit from one.

Housing subsidies were especially instrumental in creating the white middle class after the Second World War. American soldiers returning from war were welcomed home with generous aid from the GI Bill of Rights, guaranteeing access to education and housing.

But these guarantees were meant almost exclusively for the benefit of whites. Preexisting federally sanctioned racist FHA and bank lending practices excluded almost all minorities from benefiting from these housing subsidies. By favoring whites, they created artificial and racially sterile white suburban communities. For an upwardly mobile minority homebuyer trying to integrate into these neighborhoods, it was a common experience to be greeted with racist housing practices including redlining and blockbusting or discrimination by neighborhood NIMBY organizations. Together these practices preserved or worsened residential segregation and impeded minority resident homeownership. As owning a home means the ability to accumulate equity and build a financially sound future for oneself, not having this ability to accumulate wealth hinders one’s socioeconomic wellbeing. It also detrimentally affects minority communities by concentrating poverty in segregated neighborhoods, resulting in a resounding cycle of urban decay, structural dilapidation and lack of interest in community wellbeing and development.

Even though today these racist lending practices have been outlawed by the Fair Housing Act of 1968, this law alone could not and has not corrected the legacy of decades of neglect and the segregated concentration of poverty. Direct corrective measures are needed, particularly subsidies for first-time minority homebuyers. If this seems unfair or the favoring of some over others, one needs to remember the dual history of the housing market: subsidizing whites and divesting minorities. One half of the story created the middle class and the other minority segregation and exclusion. Taking action today by subsidizing minority homebuyers is not an unfair handout; it is the reification of an equality of opportunity long withheld to some while being long enjoyed by most.

Don’t treat America’s homeless as criminals

Braving America without a home has always been hard. Now it’s becoming a crime. A recent survey of 234 cities by the National Law Center on Homelessness and Poverty found that on nearly every front, municipalities are cracking down on the homeless: 24% prohibit begging, 22% prohibit loitering and 16% say it’s illegal to sleep in public places.

Full Article here: http://www.usatoday.com/news/opinion/forum/story/2012-02-14/homelessness-poverty-criminalize/53094736/1

Peculiar Problem in the District as well, where homelessness is up 20%:  http://www.washingtoncitypaper.com/blogs/citydesk/2012/02/22/homeless-families-up-20-percent/

Official Affordable Condo Legislation!

Wonderful news Advocates!  We have a draft of the proposed legislation to assist distressed ADU owners.  The key components of the bill are:

 (a) DHCD may grant a hardship waiver to resale restrictions for homeowners residing in Affordable Housing Units financed in whole or in part by DHCD.  If granted, the homeowner may rent the unit at market rate or sell the unit subject to the restrictions.   In order to qualify, the Owner must meet one or more of the criteria below:

                                (1) The Owner’s employer is temporarily sending the Owner to a work place a great distance from the Owner’s home;

                                (2) The Owner is called to military service;

                                (3) The Owner can prove an excessive annual condominium fee increase of 25% or more; or

                                (4) Any other compelling reason warranting a hardship waiver under the Director’s discretion.

 The draft will be introduced on Tuesday and a public hearing will be scheduled within the coming weeks.  We will need your support to make this bill a reality and will need your assistance to make Council visits.   However, we will need to revise the dates of the Council visits that were scheduled for the week of February 27th.  Please spread the word to other ADU owners.  We are one step closer to revising these onerously restrictive policies.  Thank you all and we’ll be in contact as soon as we know the hearing date.

HPAP- DC’s Homegrown Tool

In a recent Washington Post Article “In D.C. loan program, mortgage defaults abound”, the District’s homegrown down payment loan program, HPAP, was painted a massive failure that purposely sets low-income residents up for failure.  This couldn’t be further from the truth. The article takes the facts about high delinquency rates out of the context, comparing the rates for small down payment loans (historically and expectedly high compared to first trust delinquency rates), as its evidence that the program is a ‘wasteland’ and the District is putting families in ‘loans buyers can’t afford’.  However the true measure of the program, a1.8% foreclosure rate, gets dismissed.

Ms. Cenziper isolates a few instances where purchasers paid too much for their homes and are facing problems staying current on their mortgages.  Ms. Cenziper contacted Manna in her research and the following was shared to her, none of which appears in her article.  A typical HPAP recipient goes through an intake session, a home purchase counseling program, two levels of underwriting for credit and income worthiness, and the professionalism of the program management.  The end result is a buyer educated on the risks and responsibilities of being a homeowner.

Manna has been producing affordable homeownership housing for almost 30 years now and we know what a ‘Wasteland’ looks like.  The down payment loan program provides a responsible, successful approach for lending money that is repaid and recycled.

Sensationalizing the facts to fit the headline contributes to the misinformation about affordable homeownership housing.  With a less than 2% foreclosure rate, it’s hard to make sense of the article.   The program has successfully contributed to assisting thousands of low and moderate income people become homeowners in the District.  This should be celebrated instead of scapegoated.

Washington Post article on Affordable Condo issue

An article came out yesterday in the Washington Post about the Affordable Condo issue (rising condo fees coupled with 20 year resale/rental restrictions in market-rate condo buildings) that all of you have been involved in since Fall 2011. Please read the article at http://www.washingtonpost.com/local/affordable-housing-zones-rules-are-an-affront-to-kings-dream/2012/01/15/gIQABEsq1P_story.html. You’ll notice that there is a storm of varying opinions in the comments section, some that are quite disparaging to the situation that many Affordable Condo owners, many of you, are going through.
Please send the article around to your friends, family and Councilmember, and comment on the article yourself. It is important that your voices are heard, that affordable owners going through this situation are humanized and that solutions are lifted up.
We believe a few things are important for residents of our City to note:
1. These affordable owners are not trying to game the system; they qualified for their mortgages like any other homeowner but have fallen prey to policies that unfortunately have financially burdened them and do not account for normal life circumstances. These policies will also adversely affect market-rate owners.
2. There is a way to provide relief to those in trouble: allowing owners to sell to buyers in higher income categories, allowing owners to rent out at a price that covers their monthly unit costs, creating a fund for condo fees using an affordable owners’ restricted equity, etc.
3. There is another way to structure the Affordable Dwelling Unit program – one that doesn’t allow for windfall profits, but that allows affordable owners to gain equity like any other homeowner and recaptures funds for the District to produce more affordable housing (see http://hatdc.org/?p=428).
Lift your voice for yourselves and your neighbors! We are all in this together.

Free Housing Advocacy Training

The Coalition for Nonprofit Housing and Community Development, as part of the Housing for All campaign, is offering a free 5-week housing advocacy training. The training will be held on Wednesdays 6:30-8:30pm at Jubilee Housing (1631 Euclid Street NW). See the training schedule below:

January 18 – Advocacy Basics
January 25 – Telling your story
February 1 – Giving testimony
February 8 – Meeting with elected officials or agencies
February 15 – Talking to the media

If you are interested, please RSVP. For questions, contact Elizabeth Falcon at efalcon@cnhed.org or 202-745-0902 x205.