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Strengthening the Ladder for Sustainable Homeownership Jeffrey Lubell Center for Housing Policy Feb. 14, 2006
Presentation Goals • To articulate a framework for grant-making related to homeownership that meets an identifiable need and is consistent with the goals of funders working to help low-income families build assets • To lay the foundation for a conversation among funders on how to work together to advance this framework
Summary • Homeownership is a double-edged sword -- One of the most important asset-building opportunities -- Can be risky, especially for low-income families • Policy innovations can help make homeownership a safer, more reliable asset-building vehicle -- Homeownership education and counseling -- Homeownership retention • Need to focus on strengthening the ladder for sustainable homeownership for VLI families
Sources of Wealth 3 Source: Carolina Katz Reid, Achieving the American Dream? A Longitudinal Analysis of Homeownership Experiences of Low-Income Households
Key considerations • Homeownership remains the “American Dream” for many families • If there is no clear and credible path to sustainable homeownership, families will pursue anyway; great potential for exploitation • Decision is not binary on / off • We can and should promote policy innovations to make homeownership safer • There are millions of potentially vulnerable low-income homeowners
My conclusions • From an asset-building perspective, the goal must be “sustainable homeownership” rather than just homeownership • Major policy implications • Homeownership education needs to be stronger and much more widely available. Help families: • Determine if homeownership is a good idea, and if so, when and under what terms • Prepare to assume responsibilities of homeownership • Need to pay as much attention to homeownership retention as we do to homeownership attainment • Variability by market / neighborhood
Ladder for sustainable h-ship • Integrates homeownership into asset-building continuum • How do we help families determine if homeownership makes sense for them? • What strategies need to be employed for families that are one-year away from being ready? Three-years? Five-years? • How do we maximize chances that homeownership leads to positive outcomes? • How do we help families that achieve homeownership sustain it? 8
Why focus on VLI families? • A ladder to sustainable homeownership for VLI families complements the “asset-building” focus on strengthening families and neighborhoods • Maximum opportunity to impact policy • Most players are focused on making homeownership more affordable for families in the range of 60 to 80% AMI • Relatively little attention has been paid to strengthening the ladder to homeownership for very low-income families (roughly 30-60% of AMI) • To be effective in countering predatory lending, the path to homeownership must be clear • There are millions of VLI homeowners
Post-purchase + foreclosure prevention counseling Loan Funds Insurance Home repair Retention Subsidy retention: Silent seconds or CLTs Downpayment Assistance Shared equity Mortgages Community Land Trusts Limited Equity Coops Sec 8 h-ship Alternative Tenure EITC / VITA IDAs Family self- sufficiency Alternative fin svcs Asset-Building Financial ed Credit repair Pre-purchase Post-purchase Foreclosure prevention Education / Credit Repair “Ladder” continuum 10
Report recommendations • Low-cost interventions that: • Advance the field generally, and • Promote homeownership w/in particular communities • Impact local decision-making • Help local governments make better decisions about how to spend flexible resources • Expand capacity of nonprofits • Convening role • Need for independent analysis & related public policy advocacy
Principal strategies • Homeownership Education • Strategic plan for making more universally available • Stronger and more efficient delivery mechanism • Homeownership retention • Insurance products • Loan funds to prevent foreclosure • Elevate prominence of goal • E.g., add homeownership retention to allowable uses for IDAs and other asset-building programs
Other key focus areas • Affordable rental housing as a platform to sustainable homeownership • FSS and Section 8 homeownership • Additional policy development needed to maximize impact • Incorporating asset-building into subsidized rent policy • Integrating EITC outreach / tax prep into assisted housing • More effective rent to own strategies • Alternative forms of tenure • Community land trusts, limited-equity coops, equity finance mortgages • Maintain affordability, while still allowing for equity build-up
Other key focus areas (cont) • Employer-assisted housing • Source of new funding for affordable homeownership or rental housing • Addressing NIMBY and other development barriers • Reduce construction costs • Public-private partnerships • More strategic use of public funding • Subsidy layering • More research needed on experiences of low-income homeowners
Linking A-B and H-ship Conversations • Going beyond homeownership “referrals” • Policy development at national, state and local levels • Neighborhood interventions to strengthen ladder for sustainable homeownership • Linkages between financial education and homeownership education • Essential similarities between pathways to homeownership and other savings goals
Savings Pipelines Goal Education/Counseling Savings Access to Capital Outcome -- Favorable Home Loans -- Downpayment Assistance -- Section 8 Homeownership Homeownership Education Home-ownership CarPurchase Debt Reduction Retirement Security Home-ownership CarPurchase Debt Reduction Retirement Security Savings Products -- IDAs -- FSS -- America Saves -- Bank accounts -- Alternative savings products -- EITC split refunds Car Ownership Education -- Favorable Auto Loans -- LICO Programs Financial Literacy Education Credit Counseling / Repair Debt Reduction Education -- Debt Consolidation -- Long-Term Care Insurance -- Reverse Mortgages -- Term Life Ins. Retirement Savings -- IRAs -- 401(k) -- Whole life ins. Retirement Security Educ.
Conclusions / Opportunities • Policy development is needed to maximize the asset-building potential of homeownership • Homeownership education • Homeownership retention • Other opportunities: FSS, Section 8 homeownership, Alternative Tenure • Need to integrate homeownership and asset-building conversations • Someone or some entity needs to be responsible for moving this agenda forward