Affordable Housing Institute : US

Should housing assistance be linked to particular tenures?  What if the assistance can be better deployed in another tenure? 

 

In the US, rental subsidies fund rental housing, and homeownership subsidies fund homeownership, and never the tenure twain shall meet.  Is this wisdom, habit, or mere prejudice repeated to the level of received wisdom?

 

Section 8 vouchers, the nation’s predominant form of appropriated assistance, are designed to work with rental housing — and more than 99.9% of them do.  But in the right circumstances, Section 8 can become the stepping stone to homeownership, as the Tacoma (WA) News-Tribune reports (hat tip: Knowledgeplex):

 

Sergey Goncharov came from Russia six years ago looking for a better life and the right to practice his Christian faith without scrutiny.

 

The Goncharovs are one of 14 local families who have bought homes through the Home Ownership Program, which is run by the U.S. Department of Housing and Urban Development. They put their Section 8 housing vouchers toward a mortgage payment instead of monthly rent, turning a government subsidy into a long-term investment.

 

Welcome to the American Dream, Goncharovs … we’re glad you’re here.

 

 

On the face of it, this is remarkable: fewer than 0.1% of all Section 8 vouchers go to homeownership.  Yet it is also unremarkable: once someone has leaped into homeownership, the family’s total cost of occupancy is likely to rise more slowly than inflation, if only because more than half is in the (fixed) debt-service payment (that wonderful level-payment self-amortizing loan arising from a fixed-rate loan).  So if you can find the down payment, and the market doesn’t suddenly invert on you, your odds of making it increase every month you pay that bill.

 

To make homeownership work with Section 8 vouchers, several conditions must be present:

 

Lower-value properties.  Vouchers are priced at the metropolitan statistical area (MSA) level, but house prices vary.  So we would expect to find home buyers choosing lower-priced locations:

 

Most homes range from $ 70,000 and $ 200,000, depending on family size, debts and what the family can afford.  Many are in the Parkland-Spanaway area, but some families find good deals in Lakewood and Tacoma.

 

Natural supply-and-demand will generally mean that economics will work better in the donut around the high-rent urban core:

 

 

 

South of Tacoma, at the metropolitan area periphery

 

Is that such a bad thing?  Stimulating first-time home buyers in markets that can benefit from regeneration or new capital infusion?

 

Earning your way into the program.  The step up is neither an entitlement nor a handout: participants have to do something before they can convert:

 

They must have a full-time job for a year, unless they’re elderly or disabled, and need to show a decent credit history – no collections or late payments for two years.

 

Homeownership requires financial literacy and responsibility.  Participants are also given mandatory education:

 

Aspiring homeowners must attend 17 hours of classes on budgeting, credit repair, down payment assistance and home maintenance.

 

Surrendering a sinecure in exchange for an opportunity.  Converting from rental to homeownership also requires a choice, leaving something behind:

 

There’s a 15-year cutoff once a participant starts making mortgage payments – unless the recipient is disabled or elderly – unlike regular rental assistance, where there’s no limit.

 

By the way, notice the de facto segregation of Section 8 recipients into three groups — elderly, disabled, and needy families (everyone else) — each group of which is differently treated.  If political trends hold, this crack will turn into a fissure, and then a chasm of eligibility and treatment differentiation.

 

Were it up to me, I’d make the cutoff much sooner than 15 years, which seems awfully generous … but the principle is a good one.

 

Self-selection based on choice.  Even now, only a tiny fraction of Tacoma’s population have chosen this road:

 

Rowlands said dozens sign up but often can’t improve their credit. Many fail to attend classes. They learn the road to home ownership is intense and don’t live up to the standards banks require for loan approval, he said.

 

And a few success stories do not a program prove:

 

It doesn’t work for everyone. There are about 2,600 families on Section 8 served by the Pierce County Housing Authority. Tacoma has another 3,500 families.

 

Still, policy based on micro-statistics is better than anecdote ….

 

People make their own housing choices …

 

In the long run, they sometimes spend more of their own money, usually paying around 40 percent of mortgage payments – 10 percent more than they would as renters, said Tanya Miller of the Tacoma Housing Authority.

 

… and we should let them.

 

To these participants, the program is about more than a house. There’s a freedom in ownership that’s absent when renting – a self-reliance that’s empowering, they say.

But those locals who do purchase homes using vouchers have been successful.  None of the 14 households has defaulted on a loan or failed to make payments, officials from both housing authorities said.

 

There are unexpected benefits.  Beyond imprinting financial literary, the education internalizes the responsibilities of homeownership, with surprising ‘free’ results:

 

There have been other good-news stories.  Five families working with the Pierce County Housing Authority have purchased homes with their own income and savings, without using their vouchers.

 

Two Tacoma families got raises just as they were ready to close on a home, boosting their income above low-income public housing limits.  They’re still going to purchase, but with their own money instead of government assistance, Miller said.

 

In the US, we have become accustomed to tenure rigidity: tying assistance to particular forms, even as there is plenty of evidence that tenure options shift as markets shift. 

 

Do we measure progress by homes subsidized or families who graduate?

 

Should we?

 

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