Posts Tagged ‘Purchase Rehab Resell’

The Community Regeneration, Sustainability, and Innovation Act of 2009

September 29th, 2009

While at the Rural Housing Playbook Regional Conference in Iroquois a couple weeks ago, I heard rural South Dakota community representatives say that in addition to developing new housing stock (like the Governors House), they need to (1) do a lot more to clean up old dilapidated buildings and (2) develop housing prices in the $40,000 - $70,000 range.

Recently, I learned about a bill before Congress - the Community Regeneration, Sustainability, and Innovation Act of 2009 - that could become a valuable tool for accomplishing both.

According to a fact sheet by an organization supporting the measure, the Regeneration Act would

“build the capacity of these local governments to prevent, demolish, manage, and reclaim vacant and abandoned properties through an array of effective strategies and tools.”

The Fact Sheet goes on to list the following as eligible activities:

I’m still trying to learn about the measure, but it sounds like an opportunity for communities to buy abandoned properties and develop innovative ways to get them back on the tax role.  (Perhaps that would include the establishment of Purchase, Rehab, Resell programs).

What I fear, however, is that the measure has been written in such a way that small communities won’t be able to take advantage.  I’ve read several other blogs urge their readers contact their congressional delegation in support of the legislation.  Perhaps rural advocates need to do the same, and make sure that there’s a place for rural communities as well. 

Note:  Thanks to the Smart Growth America blog for making me aware of the Regeneration Act.  In addition to this nice article, the blog offers creative ways for urban areas to look at growth issues.

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Home Demolition — A Housing Strategy?

May 21st, 2009

When most people think about Habitat for Humanity programs, they think of volunteers helping homeowners build new homes.  The New York Times, however, tells us of a Saginaw, MI Habitat affiliate who has added demolition to its mission.

Saginaw is approximately 100 miles northwest of Detroit, and has experienced outmigration due to tough economic times in the automotive industry.  In describing Saginaw, the article notes:

Saginaw… is a city of contrasts: neighborhoods of enormous, well-kept homes (this was, after all, a lumber town before it was a car town) but also blocks of vacant lots and shuttered houses.

Sounds like a lot of rural communities in our part of the country could meet this description as well. Nice, new homes often sit out on the edge of town, while older homes in the community’s core have often rotted away.

Although my preference is for purchase, rehab, resell programs rather than demolition, anyone who accepts the evidence of broken window theory will appreciate the importance of maintaining tidy neighborhoods.  And because the organization’s volunteers tear out recyclable features (ie - cabinets, fixtures, sinks, etc…) for resell, the organization is also generating income to complete its mission of helping people get into new or rehabbed houses. 

The bottom line is that communities with vacant houses need to deal with the issue. Saginaw’s Habitat for Humanity chapter appears to be pointing the way to one solution.

Photo by: piddix/Flickr

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Communities to benefit from Neighborhood Stabilization Program

November 23rd, 2008

Does your rural community have foreclosed or abandoned properties?  If so, you’d better get your community members together to figure out how to take advantage of the Neighborhood Stabilization Program.

Set up by the Housing and Economic Recovery Act of 2008 (Congress’ first attempt to bailout the housing markets), the Neighborhood Stabilization Program provides grant funds to states and communities. 

The purpose of the money is “to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes.” (HUD description) In South Dakota, Governor Rounds authorized South Dakota Housing Development Authority (SDHDA) to administer the program. 

If you hear a clock ticking, it’s because South Dakota should receive its share ($19.6 million) in the first quarter of 2009. (click here for your state’s allocation) Then, states have 18 months to commit those funds to projects.  That’s operating at light speed for the federal government! 

While $19.6 million is a lot of money, there’s going to be tremendous interest in it.  Currently, South Dakota’s plan calls for 20% to go to Sioux Falls, 20% to Rapid City, and 20% to the Indian Reservations.  But let’s get down to the details.  How can your rural community use this infusion of capital? 

What the money can be used for?

That’s a lot to mull over, and you don’t have a lot of time to do it.  Those communities that have a community plan - one like the Rural Housing Playbook advocates - are probably ready to act right away.  I hope those who aren’t ready yet get right to work because I’m sure your community could benefit from this opportunity.   

 

Learn more about the Neighborhood Stabilization Program in your state

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Why I think Rural Communities need Rehab Housing Programs

November 19th, 2008

I’ve been talking to a lot of people here at the SDHDA’s Annual Housing Conference about Northeast Housing Initiative’s Rehab Program.  The conversation turned to why I’m so passionate about rehab housing programs.  In case you’ve missed it, I believe South Dakota’s rural communities could really benefit from a rehab housing program, and here are my reasons why. 

  1. It helps prevent people from living in substandard homes. Way too often people, who can afford a $60,000 house, settle for a lesser quality house because that’s what is available in the community at the time. The house may be priced at around $45,000, but needs an additional $20,000 - $25,000 in renovations. The homeowner moves in with the intent of taking on the renovation sometime in the future, but for this reason or that, the improvements never happen. Maybe the homeowner couldn’t acquire the remodeling loan. Maybe they couldn’t figure out how to do the renovations while living in the house. And maybe, the money they’d intended to spend on renovations was eaten up by the high energy costs of living in a poorly insulated house. What’s scary is that while living in the house the homeowner exposes his/her family to the hazards of lead-based paint, poor electrical wiring, or a leaking roof.
  2.  It makes homeownership possible for more people. I hope everyone understands how the Northeast Housing Initiative’s program works: They provide gap financing to income qualifying individuals. Specifically, this means NEHI provides a loan of 20% of the purchase price as down-payment assistance. This enables the bank to loan the remaining 80%. Because NEHI’s loan is a 0% interest, zero payment (during the life of the first mortgage), more families are able to qualify for purchasing a house. And since the NEHI has rehab standards, we know the homeowner is not living in a substandard home.
  3. It’s good economic development for rural communities. It’s no secret our rural communities need residents. Often economic development focuses on job development - which is good - but we have to recognize economic development isn’t just about jobs! In many ways a rehab housing program, based on the NEHI design, is really an economic development incentive that can be used to attract people to our rural communities. And I highly recommend communities develop a “people attraction” strategy as a part of their economic development plan.
  4. It’s a beautification program. Driving through the older housing neighborhoods in rural communities can be very depressing. Empty houses, overgrown grass, and junked cars, leave the impression of hopelessness. At times communities attempt to address the situation by tearing down the junk houses with the city taking ownership of the newly vacated lot. The dream is that someday, someone will buy and build a house on the lot. Dreams, however, seldom materialize without a plan and some hard work. A rehab housing program is a program that could help that dream become a reality before the housing deteriorates to the point of needing to be torn down.

I realize a rehab housing program won’t save any rural community, but I definitely believe it’s part of the answer.  Whether you agree or disagree, I hope you’ll share your thoughts so that we can build a dialog.

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Northeast Housing Initiative Interview

November 12th, 2008

One of the reasons we created the blog was to help people network and learn from each other.  That’s exactly what I did back in 2003.  After hearing about the innovative housing work being done by Northeast Housing Initiative (NEHI) of Nebraska, I gave Linda Kastning, NEHI’s director,  a call.  In a nutshell, NEHI had created a “purchase, rehab, resell” housing program, and I’d heard it had helped a lot of families get into homes.  Linda was extremely gratious with her time and knowledge, and we’ve stayed in periodic contact ever since. 

When some questions about rehab housing in rural communities recently emerged, I instantly decided that the best way to answer those questions was to try to connect Linda to a broader audience.  What you find below is a short interview with her.  I’m sure she’d be willing to answer any questions you have, either on the blog or via the contact information provided below.  I’d also encourage people to share other succussful programs that they are aware of.

 

Please describe what you do at NEHI

NEHI helps people buy their first home through our purchase/rehab/resell program. The buyers find their lender and their house.  NEHI purchases the house, assists the buyer in getting the rehab work done, and then sells the house to the buyer for the cost of the house plus the rehab.  At closing, NEHI comes in with up to 20% of the selling price as down-payment assistance, which means the lender only has to loan 80%.  NEHI’s loan is 0% interest and is due in full 30 days after the buyer 1) pays off the house, 2) sells the house or 3) defaults.  If the buyers live in the house until it is paid off, they have equity in the house to borrow the amount of the loan.

The beauty of this program is that it keeps the buyers’ payments affordable for 30 years so their life can go through the normal ups and downs, and the house’s major systems are in good working order when the buyer moves in.  Our hope is that they will have no major expense for 5-10 years.

Why did you develop the program? 

The main reason Northeast Housing Initiative (NEHI) started was Northeast Nebraska had no ongoing housing programs. Until about 1993, the only housing programs available were through CDBG grants, which were awarded to city and county governments who can prove that at least 51% of their population is below certain income guidelines, and which must be spent within a year or two. Once HUD HOME funds and Nebraska Affordable Housing Trust Funds became available, we could have more continuity to our programs.

The person who started our organization and program saw that in order for a village to keep its school, they needed to attract young families. In order to attract young families, they needed to make buying a home easy. So they started out with a down payment program in the village. But then he saw that in order to run a program efficiently, we needed a population base of at least 20,000 and in order to do that, we needed to be regional. So we started out with three counties and have now expanded to six. We try to take all the legal requirements and simplify them, leading our customers through the maze of buying that first house.

 

How do you finance your program? 

 

Key elements to our program’s success are:

 

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Northeast Housing Initiative - A success story

November 7th, 2008

I’ve been working on an interview with Linda Kastning of Northeast Housing Initiative (NEHI) of Allen, NE.  Until that’s ready, Linda gave me permission to reprint a story from NEHI’s upcoming annual report. 

Since 2000, NEHI, Inc. - Northeast Housing Initiative has been strengthening our communities through the development of affordable housing in our six-county region. NEHI buys houses that need improvements, makes the necessary repairs, and then resells the properties. Prospective first-time homebuyers in the area learn about the responsibilities of homeownership through NEHI affiliated homebuyer education classes and access HUD HOME and Nebraska Affordable Housing Trust funds for down-payment and closing costs for their purchase through NEHI’s programs and the Nebraska Department of Economic Development. 

Local communities and families benefit from NEHI’s work. One example can be found in Wakefield, where Jesse and Jena Kaufman purchased their home. They moved in with their son, Timothy, in December 2007 after a major repair funded by NEHI. In the older, two story home, Jesse completely resided the exterior with vinyl instead of painting and saved enough money to replace the enclosed back porch with a deck, replace the water heater and install a dishwasher. Windows and doors were replaced and code standards were met. “It was a lot of work, but it was worth it,” Jesse said. 

Besides funding the home improvements, NEHI also provided down-payment assistance to help the young family. “We couldn’t have bought a house without NEHI’s help. We didn’t have any experience working with lenders and realtors,” Jena said. “We needed someone to talk to when there were unexpected expenses and decisions to make about the house and the closing. NEHI was there to help us make those decisions.”

You’ll learn more about Northeast Housing Initiative’s work in my future interview with Linda, but I want to lift out two important points from the above story.  First, because NEHI established a code of standards, we know that this family is living in a quality home.  Second, NEHI provided valuable assistance to the homebuyers in the lending process.  My guess is that if we had more organizations like Linda’s, we wouldn’t have this mortgage foreclosure crisis.  Keep up the good work, Linda.

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Rehab Housing in Miner County, SD

November 5th, 2008

Does your community have a house like the one to the right in need of rehab?  Before answering, you’re probably going to ask “what do you mean by rehab?”

That was the question posed to Joe Bartmann last week when he spoke to the Independent Community Bankers of South Dakota.

Rehab housing typically refers to the renovation of older houses that are in need of significant repair (i.e. — new windows, furnace, foundation, roof, etc…).  In other words, it’s about the non-cosmetic improvements necessary to make a house livable.

Early in our work in Miner County, SD, we recognized that way too often older homes languished on the market far longer than they should have.  Some buyers didn’t want the trouble of renovating a house.  Some couldn’t see the post-construction potential of an old dilapidated house. Others needed to move into a house right away, and couldn’t wait for construction. And all too often, we found that buyers could not afford to renovate a new house while still living in (and paying for) their old house.

In short, a multitude of barriers prevented older homes from being purchased, further depressing an already fragile housing market.

The Solution

We turned to a “purchase, rehab, resell” concept, which we discovered from Linda Kastening of Northeast  Housing Initiative of Allen, NE.   In this concept, the not-for-profit purchases a house in need of repair. They complete the rehab work and then sell it to a qualified buyer.

When we first started to investigate this concept back in 2003, I hadn’t discovered HGTV and had never heard of “flipping houses”; but that’s sort of what the concept is about.  In our case, however, there was an important difference:  our primary motivation was to develop affordable housing and revitalize our community — not make a quick buck.

To help offset the risk associated with the project, we turned to the Department of Housing and Urban Development’s (HUD) Rural Housing and Economic Development program.  The grant helped reduce some of the risk associated buying homes on speculation.

Questions

The program has had some fits and starts, and I think we’ve learned a lot.  It’s safe to say that it’s more difficult than your favorite “do it yourself” show makes it look.  Since I’m no longer directly involved in the housing work in Miner County, I hope to interview Tami Severson who currently manages the program.

But before signing off today, let me answer a couple questions Joe was asked last week.

In sum, I think the concept is a viable option to most rural communities hoping to address their housing needs.  Just keep in mind that like most things in life, it’s a lot harder than it looks at first glance.

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