Bob Zdenek

Homeownership As A Asset Building Strategy
Robert O. Zdenek, DPA
Senior Consultant
U.S. Dept. of Health and Human Services
Office of Community Services

Homeownership As A Asset Building Strategy
I. Overview and Introduction

Homeownership As A Asset Building Strategy
Homeownership is a central goal of U.S. Social
Policy- highest percentage of homeowners ever
over 2/3 of American households
Homeownership and asset building opportunities
are fueled heavily through the U.S. taxcode.
Michael Sherraden estimates, using 2000 data
that:
$75.2 billion for homeownership and
$89.7 billion investments and business property.
54% of the benefits went to homeowners with
incomes over $100,000 and
91% to homeowners with incomes over $50,000.
This is out of a total of $288 billion

Homeownership As A Asset Building Strategy
Our public sector response to housing
both (rental and homeownership) is very
categorical, fragmented and
decentralized.
Race and class have huge impact on
homeownership and asset opportunity.
Black Wealth and White Wealth written
by Melvin Oliver and Thomas Shapiro
documented that Caucasians had 11
times the net wealth of Blacks (1987).

Homeownership As A Asset Building Strategy
Much higher level of asset poverty in
U.S. than income poverty. Haveman
and Wolff define asset poverty as the
ability to live at the poverty level for
three months with income disruption.
Income poverty was 12.6 percent in
2000 and asset poverty was 25 percent.
Real estate markets in many urban
areas have exploded.

Homeownership As A Asset Building Strategy
II. Capacity/Resources for
housing and homeownership

Homeownership As A Asset Building Strategy
A significant industry of communitybased
development non profits (CBDOs)
has emerged. The last national census
in 1999 found that there were
3600 CBDOs and that the total number of
houses produced were
550,000 with about 40% for homeownership.
The vast majority of IDA initiatives as of
2003 were sponsored by community-based
non profits.

Homeownership As A Asset Building Strategy
Federal housing resources tend to be either
block granted through local and state
government (Community Development Block
Grant and HOME Investment) or in partnership
with financial institutions such as the Federal
Home Loan Bank System that has an Affordable
Housing Program (AHP).
Several regional FHLBB’s (New York, San
Francisco, Kansas City) provide match funding
for IDA initatives often called IDEA program at a
3 to 1 rate up to $10,000.

Homeownership As A Asset Building Strategy
Family self sufficiency funds-
The U.S. Department of Housing and Urban
Development (HUD) has an initiative for
individuals living in public housing or who
have Section 8 certificates under their
voucher program.
Individuals whose income increases while
they are living in public housing or have
Section 8 certificates can invest some of their
excess income in escrow savings accounts
that could be linked to a IDA program.

Homeownership As A Asset Building Strategy
Community Reinvestment Act (CRA) and fair lending
laws-
This legislation was enacted in 1977 and requires
that lending institutions who take deposits from a
low income community are required to reinvest in
those communities.
Activists and community organizations can
challenge financial institutions mergers and
acquisitions where there is limited community
reinvestment.
Before tougher laws and regulations were enacted
in the 1990’s, low and moderate income
borrowers received only 19 percent of all home
mortgage loans made in the U.S. By 2001, their
share had surged to 28.4 percent.

Homeownership As A Asset Building Strategy
National housing and community
development intermediaries-
National community development
intermediaries (Local Initiative Support
Corporation, Enterprise Foundation and
Neighborhood Reinvestment Corporation)
plus many regional and local intermediaries
have been critical to the growth of affordable
housing in the U.S. These intermediaries
assemble financial resources, provide
technical support and engage a wide array of
stakeholders.

Homeownership As A Asset Building Strategy
III. Issues and challenges
for low and moderate
income homeownership

Homeownership As A Asset Building Strategy
Income and cost of housing- Hot
real estate markets, especially on
both coasts are making
homeownership extremely
challenging for low and moderate
income citizens. IDA
accountholders find that housing
prices have escalated over 75%
since they start saving.

Homeownership As A Asset Building Strategy
Growth of predatory lending-
The number of conventional lending
institutions have declined significantly
in low income communities and have
been replaced largely by predatory
lending practices—
sub prime balloon loans, check
cashing, pay day lending, refund
anticipation loans (RALs).

Homeownership As A Asset Building Strategy
Housing stock-
Housing stock has aged in urban, innersuburban
communities and rural
communities. Many of the houses are over 50
years old and with public subsidies declining
there have been few units built even with the
impressive growth of non profits.
Affordable housing is being converted into
market rate housing in neighborhoods once
the government restrictions end.

Homeownership As A Asset Building Strategy
Location and mobility of jobs-
Regions have emerged as a major
economic engine and job creator and
these locations are often far from
where large concentrations of low
income and moderate income
residents reside.
Transportation is another barrier with
a mediocre transportation system.

Homeownership As A Asset Building Strategy
Race and class issues-
It is more difficult for minority citizens
and residents to be underwritten for
conventional loans. More likely to be
targeted for predatory lending
practices

Homeownership As A Asset Building Strategy
IV. Homeownership and asset
building continuum and
process

Homeownership As A Asset Building Strategy
Start with financial education and
credit counseling issues for
homeownership.
CSD found that with other factors
consistent that up to 12 hours of
financial education lead to a 22
percent greater likelihood to deposit
save (American Dream
Demonstration- Sherraden)

Homeownership As A Asset Building Strategy
Checking and savings accounts with
direct deposit-
Federal Reserve Board research shows that
up to 30 percent of all Americans are
unbanked.
Importance of having mainstream banking
including credit unions and other community
development financial institutions (CDFIs).
Direct deposit very important for savings as
is refunds from Earned Income Tax Credits
(EITCs)

Homeownership As A Asset Building Strategy
Individual development accounts
(IDAs) allow people to save and
receive matched funds towards
asset purchase.
IDAs are sort of a mid-term
strategy and tool in the asset
accumulation process.

Homeownership As A Asset Building Strategy
Asset specific support-
Neighborhood Reinvestment Corporation and
their local NeighborWorks organizations offer
an excellent array of asset specific support
for homeownership including
homebuyer clubs (Manna pioneered this),
pre-purchase and post-purchase training for
future homebuyers.
NRC supports over 70 homeownership
centers (HOCs) throughout the U.S.—a onestop
center for homeownership.

Homeownership As A Asset Building Strategy
Asset purchase-
importance of follow-up and postpurchase
support and training. Asset
preservation as an important goal of
this.

Homeownership As A Asset Building Strategy
V. Experience of IDA initiatives
with homeownership

Homeownership As A Asset Building Strategy
Assets for Independence Act
(AFIA) is the largest single funding
source for IDAs. We only have
data for the first two years.

Homeownership As A Asset Building Strategy
Over 50% of AFIA accounts
opened have been for
homeownership.
5358 individuals have attended
home purchase courses.
151 purchased homes in first two
years and withdrew $274, 629.

Homeownership As A Asset Building Strategy
CFED completed a national survey
of IDA programs with 192 program
responses.
7,931 individuals had completed
asset purchase with 1,951 for
homeownership and 744 for home
repairs.
Both figures represent one-third of
total asset purchase.

Homeownership As A Asset Building Strategy
VI. Concluding Thoughts

Homeownership As A Asset Building Strategy
Asset building and continuum does
work for moving low and moderate
income people towards
homeownership but it usually
takes time.

Homeownership As A Asset Building Strategy
Accelerated costs of
homeownership is making it more
difficult for IDA accountholders to
achieve homeownership and there
is an increasing shift of activity
away from homeownership.

Homeownership As A Asset Building Strategy
Importance of supply of decent
affordable housing and the role of
nonprofits in the U.S. and public
sector in other countries.
Asset specific support very
important for homeownership
opportunities