Much is being written and said about affordable housing; however, very little progress is being made to help those who have lower incomes or live in expensive areas.

Problematically, almost all of what is proposed requires hefty taxpayer funding. And most proposals are for rental apartments, with almost no single-family detached-home opportunities: the American Dream, out of reach for too many.

A recent proposal in Portland calls for a $7 million taxpayer-funded housing bond. But there is another, better way for government to help support and create affordable homeownership, without asking taxpayers for more money. Certainly ownership does not suit everyone. But this is the model we at Habitat for Humanity of Greater Portland use, with great success. Government could do it with significant results.

So, what is affordable housing?

The accepted definition of affordable rental housing is that a family spend no more than 30 percent of their income on rent and utilities, or in the case of ownership, on mortgage, insurance and property taxes. (In this piece I will not discuss rental housing, especially since some Portland-area renters are spending 60 percent to 70 percent of their income on rent, an affordable-housing advocate told the Press Herald earlier this year.)

At Habitat, we believe that homeownership should be attainable for any deserving family, and that our model could become the standard by which government can address this issue. Habitat is the largest builder in the world, and our newest funding option needs to be shared.


So let’s look at how government can truly advance more affordable homeownership.

Here’s how (numbers rounded):

Assume a family income of $45,000. A typical home costs $250,000. A local bank will lend the family $130,000 at current rates. The family’s mortgage payments plus taxes and insurance total $1,125 a month, or 30 percent of income.

So, the big question is: How can the family get the other $120,000 needed to buy the home if the bank only lends what they can afford?

They get the money from the government, which has plenty to support affordable housing. But the government does not give it to the family – they loan it. The loan is very friendly, and the government gets it all back when the family sells the home. It’s called a “silent second mortgage,” carrying very little risk to government, as the home is collateral for the loan (behind the bank loan).

The family never pays interest on the loan! The loan is repaid only when the house is sold.


Where does the government get the money to lend?

Local and state governments and the U.S. government typically have budgets to support affordable housing. Loaning a portion of this money instead of just giving it away is fiscally prudent. It will deliver more homes to those in need.

Another way it could be done is to have an affordable-housing trust fund, which could be funded by tax-deductible contributions, and/or a very small tax on local home sales – say, 1 percent. Some areas successfully deduct a small tax to support conservation, and this is just as worthy a goal. This charge would have minimal effect on buyers and sellers, but the broad scope would generate plenty of money to fund the loan program.

Remember, the loan will be repaid 100 percent at some point in the future, when the home is sold, thereby increasing the funding available for more loans.

Using innovative financing, we can make affordable housing a realistic goal for many more families. It works for Habitat, and it can work for government as well. We can make a difference in the lives and opportunities for many families, so let’s all work together to make the American Dream come true for many more families.

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