Strengthening the Ladder for Sustainable Homeownership

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Strengthening the Ladder for Sustainable
Homeownership

• Jeffrey Lubell
• Center for Housing Policy
• Feb. 14, 2006

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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

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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

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Sources of Wealth
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Source Carolina Katz Reid, Achieving the
American Dream? A Longitudinal Analysis of
Homeownership Experiences of Low-Income Households
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Benefits of homeownership
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Risks for low income families
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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

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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

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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?

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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

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Ladder continuum
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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

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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

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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

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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

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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

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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.
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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