The Wilmington Housing Authority is among a limited number of authorities across the country that opt into federal programs that forge paths to homeownership for low-income families, but even the U.S. Department of Housing and Urban Development admits the programs are under utilized and present barriers that may discourage housing authorities from offering them altogether.
Public housing authorities that opt into the Housing Choice Voucher program for homeownership must shift funding for public rental housing to the homeownership program, which could limit the total number of households they can help.
“Shifting resources to a homeownership program limits the amount of funding and number of rental units they can assist,” according to a HUD spokesperson.
Since the Wilmington Housing Authority began offering homeownership assistance, the programs have seen adjustments and shifts in strategy, its Executive Director Ray Fitzgerald said, which has limited the number of eligible homes. In the past 10 years, the authority has sold 17 homes to low-income families, Fitzgerald said.
LANDLORD-TENANT ISSUES:How Delaware lawmakers failed to strengthen tenant rights
HOUSING CRISIS:Why it is so hard to find affordable housing in Delaware
What you need to know about federally-assisted homeownership programs in Wilmington:
1. Two separate programs
HUD offers two programs that housing authorities can voluntarily participate in: the Housing Choice Voucher and Section 32 homeownership programs.
Under the voucher program, families can purchase a unit owned by the housing authority or homes sold on the private market using the voucher to cover monthly homeowner expenses.
The Section 32 program specifically allows for public housing tenants to purchase units, usually scattered sites like the one longtime Wilmington resident Thomas Seeney III has lived in, owned by the housing authority. In order for a home to be eligible, it must meet certain physical conditions and code requirements, according to HUD.
2. Who is eligible?
Both programs have eligibility requirements for participants, including income limits, employment, completion of homeownership and housing counseling programs, and other financial expectations.
Those applying for assistance through the voucher program must also be first-time homebuyers.
HOUSING MARKET:Need a bargain home in Delaware that’s not falling apart? Here are the best places to look
The Section 32 program’s requirements are slightly different, and require the housing authority to craft a plan for any necessary repairs to the unit and submit to HUD for approval.
3. Wilmington’s homeownership program evolution
The Wilmington Housing Authority first launched its homeownership program in 2010, making nearly 270 properties eligible. By 2015, that number had dropped to 70, according to figures provided by the housing authority.
The authority currently offers just 19 homes it owns for purchase, removing many units – including Seeney’s 27 E. 23rd St. row home – in recent years due to the extensive repairs needed.
“We reduced the number of houses because we didn’t want houses in the program where we had to put a significant amount of money into them to renovate,” Fitzgerald said.
He said the strategy now is to transfer those authority-owned scattered site homes to a recently formed nonprofit that has fundraised to help pay for repairs to the deteriorated units and eventually will act as property manager of the homes.
Families can still apply for financial assistance when purchasing a home on the private market, but Fitzgerald noted authority-owned sites provide additional support to households throughout the process.
4. Homeownership programs’ shortcomings
While limited financial resources – and no dedicated funding source for homeownership – create obstacles that may deter local housing authorities from offering assistance for homeownership, affordable housing experts say another shortcoming is the fact that none of the programs are mandatory.
Michael Stegman, a nonresident fellow for the Housing Finance Policy Center at the Urban Institute, said about one in five housing authorities opt into the program.
“There are roughly 3,400 housing authorities in the country and 736 of them have opted in at one time or another to the homeownership option,” he said. “Roughly 78% of housing authorities do not do voucher homeownership.”
The number of homes eligible for purchase also remains low, Stegman noted. The largest offering comes from the Philadelphia Housing Authority with 465 units, he said.
Stegman said the way the programs are structured also makes it challenging.
“It’s very labor intensive and there are a lot of challenging rules that enable a voucher to be used to buy a home,” he said. “Then, the maximum amount of time that a voucher can be used in homeownership is for 15 years and most mortgages go beyond 15 years.”
HOUSING AUTHORITY REVAMP:Residents move into first phase of Wilmington mixed-income development
The homeownership voucher program also “contemplates” a fund to assist with down payments, but it was never implemented and there’s no separate funding source for that endeavor.
5. Potential program improvements
Conversations are taking place between federal officials and large loan companies, like Freddie Mac and Fannie Mae, that could expand not only affordable homeownership opportunities but the number of private property owners who accept federal housing vouchers, Stegman said.
The loan providers are exploring ways to convert rental housing vouchers to homeownership vouchers; encourage more property owners to accept housing choice vouchers; and encourage property owners to submit rental payment reports to credit bureaus, Stegman said.
The latter could have a meaningful impact on low-income households who have low or no credit scores, which often prevent someone from qualifying for a mortgage.
To create an effective homeownership program, Stegman said federal officials may need to pass legislation creating a program. As it currently stands, the programs exist through regulation under existing housing law, which doesn’t provide separate funding for homeownership efforts.
“What you’re trying to do is fit a square peg in a round hole,” he said. “You’ve got to stay within the broad dictates of the legislation and still try to make that tenant-based assistance work on both the rental side and help pay for homeownership expenses.”
Got a tip? Contact Amanda Fries atafries@delawareonline.com. Follow her on Twitter at @mandy_fries.
