Innovating at the Epicenter of the Foreclosure Crisis

| Posted: May 19th, 2011

As Robert Lerman pointed out in his blog last month, it’s common these days to see neighborhoods pock-marked with vacant homes where the need for decent, affordable housing is highest.  But on a recent visit to my hometown of Riverside, California, I caught a rare glimpse of how a local community organization has reinvented itself and created a model for how local affordable housing developers can adapt to the new landscape.

In the 1990s, large numbers of people priced out of the Los Angeles and Orange County real estate markets moved to Riverside for its relatively inexpensive housing.  But high demand then drove up prices there and made homeownership increasingly unaffordable for Riverside’s sizable low- income population.

During this run-up, the local Habitat for Humanity worked hard at fundraising and planning but typically could build only a couple of affordable homes each year.  I remember my sister, then on the Habitat board, describing the agonizing selection process for families and the frustration of having to pick just one or two “deserving” households.

Fast forward to 2011, and Riverside has the unlucky distinction of being a “double trouble” metro, suffering from large job losses and plummeting home prices. Riverside metro also has one of the country’s highest rates of serious mortgage delinquency and the state’s second-highest foreclosure rate. Even some Habitat families couldn’t weather this storm.  Several were evicted as the economic downturn combined with the epidemic of sub-prime lending that accompanied Riverside’s housing bubble.

But Habitat Riverside has responded to these challenges by creating a brand new model to better serve its community. It has shifted away from new construction in favor of renovating foreclosed and abandoned properties in distressed neighborhoods by leveraging funds from the Neighborhood Stabilization Program (NSP).

Because rehab requires fewer permits than new construction, Habitat’s housing production has taken off.  Last year, it partnered with the County of Riverside’s Economic Development Agency to rehab nine homes in one of the most distressed areas right outside city limits.

Since these rehabilitations are so much less expensive than new construction, Habitat can now serve not only more families but also lower- income families than would ordinarily qualify for its homeownership program. New homes are sold to families with combined incomes of 50 to 80 % of the Area Median Income (AMI), but Habitat sets aside rehabilitated homes for families earning less than 50% AMI.

Habitat Riverside also aims to keep these people in their homes.   Before they buy, families enroll in the local community action agency’s Individual Development Account (IDA) program—a matched savings incentive program that helps them put aside money for a down-payment on their mortgage and other home-related expenses.  Then, post-purchase, Habitat families attend workshops developed with the community action agency, the Fair Housing Council, and TURN (Today’s Urban Renewal Network) to nip potential problems in the bud and provide on-going support to new homeowners.

Finally, Habitat inaugurated its new “Helping Hands” program to prevent the eviction of low-income elderly, veteran, and disabled residents living in mobile home parks.  Habitat and its volunteers perform repairs and do the clean-up that property management requires of its residents.  Last year, Habitat kept some 50 mobile home residents from losing their place to live.

In all, Habitat Riverside served 61 households in 2010, compared to 2 in 2009.  The total doesn’t sound like much in the county’s sea of foreclosures, but what if all of our nation’s affordable housing developers and local governments reassessed their mission and fearlessly reinvent their approach?  We might look back at these times and say that this is when it all started changing for the better.

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