Chairman Sarbanes, Ranking Member Gramm, and Members of the Subcommittee, thank you for the opportunity to represent Habitat for Humanity International. I am Tom Jones, the Managing Director of the Washington Office of Habitat for Humanity International for the past ten years. The Washington Office is a part of the Executive Office of Habitat for Humanity International, located in Americus, Georgia. The Washington Office serves as Habitat for Humanity International’s presence in the nation’s capital. We are privileged to represent Habitat for Humanity International with Congress and the Administration, professional and industry groups, international groups and foreign embassies, other non-profits, labor unions, business corporations, and NGO’s.
On behalf of Habitat for Humanity International, I am deeply grateful for the opportunity to testify before the Senate Banking Committee. The Members of this Committee have shown their commitment to expanding housing opportunities for families seeking to improve the quality of their lives by passing meaningful legislation and holding hearings, such as this one, to determine the appropriate level of federal spending on housing needs. Many Members of this Committee have actively demonstrated their support for self-help housing and homeownership by building alongside Habitat for Humanity volunteers and homeowners to construct simple, decent Habitat homes. In fact, The Houses the Senate Built program has now recruited sixty United States Senators, including Senator Sarbanes, every single Member of the Housing and Transportation Subcommittee, and Senators Bayh, Johnson, Bennett, and Crapo to build homes in their own states during this year. Our hope is that this partnership with the Senate will place the issue of affordable housing at the forefront of the nation’s agenda and raise the awareness of the American public that access to affordable, decent and safe housing is an opportunity every person and family should have.
Secretary Martinez has also reiterated this conviction and shown his unwavering commitment to homeownership, particularly for minorities and low-income persons—who fall far behind the nation’s historic homeownership rates. It has been an honor to work with the Secretary on several Habitat builds and he and his staff have put in countless hours on their most recent Habitat project, The House the HUD Secretary Built, in South East Washington, DC. Habitat for Humanity is firmly committed to working with the Secretary and the Department and with other housing groups, such as the Homeownership Alliance, to increase homeownership opportunities for low-income families and to enable more minorities to take advantage of the nation’s most vigorous housing market in history.
Habitat for Humanity has spent the past twenty-five years building affordable homes for homeownership in partnership with families who do not qualify for mortgages in the conventional market. Supported by private donations, government partnerships to "set the stage," volunteer labor and homeowner’s "sweat equity," the homes are sold for no profit and financed by zero-interest, long-term mortgages that each family can afford. The average Habitat house selling price was $48,585 in 2000. In September of that same year, we built our 100,00th house worldwide, providing shelter for more than half a million people. We have now built over 120,000 homes worldwide, with over 42,000 homes built and renovated in the United States, by 1,628 affiliates located in all fifty states. Habitat is operating in 84 countries worldwide with nearly 500 international affiliates. We have been named the 15th largest homebuilder in the U.S., in units completed, according to Builder Magazine. The national foreclosure rate for a Habitat home is about 1%.
Our homeowner families are typically first-time homebuyers who earn wages below 50 percent of the area median. Just over 71% of Habitat homeowners are minority and almost half are single parents raising school-aged children. Homeowners contribute 300—500 hours of their own labor in the building of their house and other Habitat homes. By partnering with Habitat, families are able to move from substandard, deteriorating, overcrowded, and unsafe housing, sometimes even homelessness, into their very own homes they purchase with an affordable mortgage and build with their sweat of their brows. Homeownership impacts the lives of its homeowners beyond the building of a house: families gain substantial financial equity, stability for their children, an enhanced sense of pride, safety and dignity, and a legacy to pass to their children.
Homeownership, particularly in areas blighted by disinvestment and economic distress, can be the key to community transformation, one house at a time. Homeowners are more likely to maintain their properties and be committed to the overall health of their neighborhoods. Stable housing attracts economic development, favorably impacts school systems, and promotes active community organizations. While it may not be an option for every family, homeownership is one of the most important building blocks for stronger communities and families.
The success of Habitat for Humanity in creating homeownership opportunities for thousands of Americans who would otherwise never have the chance to own their own home is, in part, due to the generous support of Congress and the Administration. Since 1996, Congress has appropriated funding for the Self-Help Homeownership Opportunity Program, commonly known as SHOP, and the Capacity Building for Habitat for Humanity program, part of the Section 4 Capacity Building funds that benefit other housing and community development organizations. To date, funding received by Habitat for Humanity for SHOP alone will change the lives of over 26,000 people—including almost 17,000 children—who would not become homeowners otherwise. We are deeply grateful for this funding and pleased that the Administration has announced a significant increase in the SHOP program. The success of the SHOP program speaks for itself and we urge Congress to consider SHOP as an essential piece of the nation’s overall strategy to expand homeownership to low-income households.
SELF-HELP HOMEOWNERSHIP OPPORTUNITY PROGRAM (SHOP)
Congress originally authorized the SHOP program in 1996. It is a competitive grant program, administered by HUD, providing funds to non-profit, self-help housing organizations to "set the stage" for building homes below prevailing market rates; money can only be used to purchase land and fund infrastructure expenses, such as streets, utilities, water and sewer connections, and environmental clean-up. For every $10,000 SHOP award, on average, one home must be constructed. SHOP families invest 250—500 hours in sweat equity and earn below 80% of the area median income. SHOP funds have been used to complement the work of Habitat affiliates in every state, making it possible for our larger affiliates to build multi-lot Habitat neighborhoods, for fledging, all-volunteer run affiliates to establish regular building programs, and for every affiliate in-between to overcome the largest obstacle to house building—land and infrastructure expenses.
Habitat for Humanity competes with other non-profit housing organizations for the use of SHOP funds and our affiliates, in turn, compete for the funds awarded to Habitat for Humanity International (HFHI). Historically, our affiliate’s requests have exceeded available funds by over 40 percent. In the past round of FY01 SHOP awards, our affiliates requested $28 million from an available $11 million award from HUD. HFHI anticipates requests to exceed $30 million from affiliates for the FY02 round of funding, yet to be awarded from HUD. It is our firm belief that the infusion of even more federal money into the SHOP program will result in a substantial increase in requests from affiliates. In fact, the most common request we receive in the HFHI/Washington Office from local affiliates all over the country is regarding additional funding for SHOP. The cost of land and site development has increased so much that affiliates receiving SHOP awards in each of Habitat’s eight regions far exceeds the average SHOP award; nationally, the combined average of land and infrastructure expenses is $21,720. This amount must be raised by affiliates before house construction can even begin.
The success of the SHOP program can be measured by numbers of homes produced: with the inclusion of the FY01 awards, when mandated deadlines are met, SHOP funds will result in a total of 7,382 homes. This translates into 26,132 Americans whose lives have been changed—over 16,551 of whom are children—living in their own home. For every $10,000 investment, the dream of homeownership becomes a reality. SHOP can also be measured by the amount of private resources leveraged. Habitat affiliates and other self-help housing groups raise an additional four to ten times the amount of the initial investment of $10,000 to construct each house.
The other large user of the SHOP program is the Housing Assistance Council (HAC), a national nonprofit technical assistance organization. In five SHOP competition rounds since 1996, HUD has awarded $37 million to the Housing Assistance Council. HAC conducts its own competitions and has passed this funding on to 137 local nonprofits in 40 states, helping 4,368 low-income families build self-help homes using sweat equity, mostly in rural areas. 2,450 of those homes are fully or substantially complete, with the rest in various stages of development. The families are all first-time homebuyers and put an average of nearly 1,000 hours of sweat equity into their houses. In most of the local programs, the homebuilding families work together in groups of eight to ten. They learn about their homes by building them and develop a community by working together.
Some of the local groups that are using HAC's SHOP program include Colorado Housing Inc., Community Action Commission of Fayette County (based in Ohio), Florida Low-Income Housing Associates, Interfaith Housing of Western Maryland, Proyecto Azteca (based in the Texas colonias), Self-Help Enterprises (in rural California), Self-Help Housing Corporation of Hawaii, and Southern Maryland Tri-County Community Action.
Habitat for Humanity and the Housing Assistance Council recommend the following proposal to enhance the effectiveness of the SHOP program: increase the current limit of $10,000 per unit to at least $15,000 per unit to more accurately reflect the actual cost of acquiring and developing land, and enable the HUD Secretary to determine a higher average, via a waiver, for housing in particular geographic regions where elevated land costs and infrastructure improvements make the cost of acquisition too costly for affordable housing development. According to our data, the national average per unit cost to "set the stage" for building a Habitat house is $21,720 ($10,217 for land and $11,512 for infrastructure). Data from HAC reveals similar land and development costs of $22,000 per unit. In some regions of the country, the cost of land and site development is so astronomical that additional resources of four to ten times the amount of a SHOP award is needed before construction on the house can commence, creating serious obstacles for affiliates and other self-help housing developers in the area. Consider the cost of land and site development for the following Habitat affiliates:
The Housing Assistance Council also reports that many of its users of SHOP funds have very high land and site development costs. Some examples include:
It is our hope that HUD and Congress will support raising the maximum SHOP award to at least $15,000, as we strongly believe this change will make SHOP even more competitive and attractive to affiliates and other self-help housing groups, who will work even harder to find the additional private resources necessary to pursue their building programs.
CAPACITY BUILDING FOR COMMUNITY-BASED HOUSING GROUPS
Capacity Building is the key to increasing the organizational strength of community-based nonprofits. The Capacity Building for Habitat for Humanity program, as part of Section 4 Capacity Building funds which benefit notable groups such as LISC and the Enterprise Foundation, enable Habitat affiliates to impact communities on an even more significant scale by jumpstarting house production. Habitat affiliates essentially operate as local Community Development Corporations (CDCs), with their own elected board and 501-c-3 nonprofit statuses. Many affiliates have no paid staff and must rely on the good will and hard work of volunteers. Thus the challenge for Habitat for Humanity is to provide technical assistance, training, information, and motivation to increase local building capacity.
The Capacity Building for Habitat for Humanity program, in its fifth year of funding, has been used to:
Within the context of requirements and regulations established for Capacity Building for Habitat for Humanity funds, HFHI also conducts training and development of local affiliates at the local level, working with groups of 30-40 affiliates through its affiliate support system; at the state level in all fifty states; through its eight regional offices; and nationally. The program includes conferences, training events, specialized technical assistance instruction, and provision of leadership at every possible level. Because the majority of Habitat affiliates are located in rural locations, a major focus is on the unique rural needs for training and technical assistance. Likewise, special focus is made on training and assistance for crucial urban areas where housing needs are so great and which present unique challenges, calling for specialized training and technical assistance.
Like the SHOP program, the success of the Capacity Building for Habitat for Humanity program is measured by the increase in numbers of families housed. In the first round of the Capacity Building grant program, 60 Habitat affiliates built 1,976 homes over the course of the three-year grant—67% more houses than they built in the three years prior to the grant. In addition, affiliates must match every Capacity Building dollar with three dollars of private, non-governmental funds and increase their building capacity by a minimum of 15%. This requirement has also been far surpassed; affiliates participating in the 1998 program alone have raised $146 million in private funds to match the $4.5 million in Capacity Building dollars. It is our hope that Congress will support the Administration’s request of $5 million for the Capacity Building for Habitat for Humanity program, as it is crucial to the building efforts of our local affiliates.
SINGLE-FAMILY HOMEOWNERSHIP TAX CREDIT (SFHTC)
While not a part of the HUD budget request, it is important to mention that the Administration has made a significant housing proposal to promote affordable single-family housing development. Habitat for Humanity strongly supports the Administration’s goal to increase homeownership and affordable housing production through a single-family homeownership tax credit, modeled after the highly successful Low Income Housing Tax Credit. The proposed credit of up to 50 percent for the costs of constructing new homes for homeownership or rehabilitating existing properties for families in low-income urban and rural neighborhoods will enable our local affiliates and other housing developers to bridge the gap between the cost of developing affordable housing and the price that low-income homebuyers can pay for a home.
The proposed tax credit will enable thousands of low-income renters to become first-time homeowners, increase the numbers of homeowners among African American, Hispanic, and other minority families, and help to stabilize rising house prices due to an increase in the production and supply of affordable housing. The single-family homeownership tax credit is more than a tool to expand homeownership to thousands of families; it is as a catalyst for neighborhood revitalization and community development. The availability of a new tax credit for homeownership, in addition to other housing programs for low-income families, will expand the range of housing options for families and ultimately result in more families climbing the ladder to wealth and savings.
CONCLUSION
Mr. Chairman, Habitat for Humanity believes that now more than ever, our nation must invest in those sources we value the most—family, home, faith, and community. These are the building blocks of great nations. To provide stable, affordable, decent homes for more families is perhaps one of the greatest investments the federal government can make to ensure the health and wealth of our nation. It is our hope that as you review the Administration’s FY03 proposal for funding for housing programs for those in this country who can least afford adequate shelter, that you would support additional resources to enable low-income families to move from rental households into homeownership and capacity building assistance for front-line, community-based housing providers. Thank you for this opportunity to testify.
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