Open the Door on Housing

February 21, 1994|By NEAL R. PEIRCE

WASHINGTON — Washington.--Advocates for low-income housing waited, cowering, for what they feared would be a big hit in the Clinton administration budget.

But the deep slashes didn't materialize. Some programs were indeed cannibalized to pay for others. To fund priority programs -- expanded aid for the homeless, for example -- big cuts were announced in elderly housing and public housing.

Overall, though, Housing and Urban Development Secretary Henry Cisneros was able to fend off the ax-wielding budgeteers to give HUD nearly $1 billion more in budget authority ($26.1 billion) than the year before.

Is $26 billion what Washington should be spending on housing? Housing advocates say that with the abominable conditions in which millions of Americans live today, $26 billion falls far short of need. The 1980 HUD budget, inflation-adjusted to today's dollars, was $62 billion. But through deep cuts in the Reagan-Bush years, the effective outlay now is just 42 percent of that.

The fact is the federal government is pumping out huge and constantly increasing dollars for housing. It's just not low-income people's housing. The megabucks are going to the home mortgage interest deduction, the fiscal featherbed of the middle class. The deduction is costing the federal Treasury $51.8 billion this year, projected to soar to $68.8 billion by 1999.

If we ever had the intestinal fortitude to put our dollars where true needs are, we could not only shelter the homeless but expand homeownership to the millions of lower-income Americans desperate to get a toe in the front door of the middle class.

Why should a $200,000-a-year physician or lawyer get a big tax break to step up from a $250,000 to a $500,000 home, while a poor working family, trying to raise four kids on $25,000 a year, has a devilish time raising a down payment and will likely hear at the local bank that its case ''falls outside our underwriting guidelines''?

The HUD folks know this, and it grates. But at least for now they're politically powerless to correct it. What they do hope to achieve in the near term, with Federal Housing Administration chief Nicolas Retsinas taking a lead, is a shift in federal law to target more of HUD's existing moneys to homeownership for lower-income people. There's to be a new FHA 100 percent financing program in urban revitalization areas, for example, and moneys to assist first-time homebuyers through state housing finance agencies.

Could all this make a difference in city neighborhoods? Yes, says Margo Kelly, Boston field director for the federally chartered Neighborhood Reinvestment Corp.

The most important goal, says Kelly, is ''to increase the stakeholders in a neighborhood so they have something to defend, protect, take care of.''

Neighborhood Reinvestment has a campaign for homeownership currently focused on 55 of its 182 Neighborhood Housing Services (or ''NeighborWorks'') programs nationwide. The program finds renters who have enough monthly income to sustain a mortgage and then works to make them ''bank ready'' through training, counseling and special assistance with closing costs and getting underwriting standards relaxed.

Pamela Cane of Burton, Mich., lived with her two sons in a trailer in her mother's backyard. Recently divorced, she was on welfare. But today Pamela is in her own home, which she's renovated herself. The mortgage -- which she got without a down payment -- is held by the Burton Neighborhood Housing Services, and the local welfare department is making the mortgage payments until Pamela graduates from nursing school and can make the payments on her own.

By a thousand and one such ''customized arrangements,'' Neighborhood Reinvestment is showing how the combination of training, intervention with banks and knowing how to deal with government agencies, can make the improbable happen. Then it follows up with intensive post-purchase counseling. ''In terms of vulnerability,'' notes Kelly, ''the first 18 months is the most critical time period for a loan.''

What all this means is that millions of families now stuck in substandard rental units could become homeowners. What's missing is a friendly local partner like one of the NeighborWorks organizations, and then the right financing mechanisms. As much as money, the problem is overcoming a cultural hurdle. Lower-income people crave middle-class status, but the system in most places today is anything but user friendly.

Neighborhood Reinvestment reports home ownership costs less than former rent payment for 40 percent of its new homeowners. Seventy-eight percent of the families the program helped get homes in 1993 had incomes of less than $30,000. Sixteen percent had incomes under $15,000 a year.

And here's the diversity of the ''new America'' writ large. Forty-three percent of the families Neighborhood Reinvestment has helped are headed by women; 46 percent are African-American; 11 percent are Hispanic.

There's real equity in all of this -- leveling the playing field so that millions now on the outside can get on the inside of homeownership. And it's also about building safe and secure neighborhoods.

If we shifted federal law so that America's existing homeowners gave back 10 percent of their deduction to such programs, just think of the difference it could make.

Neal R. Peirce writes a regular column on urban affairs.

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