HHDC 2009: New Ventures, New Challenges, New Rewards

Housing Rehabilitation: The Next Big Thing
Over the past year the HHDC has taken the necessary steps to prepare for its rehabilitation housing initiatives.  It is the goal of the HHDC to create a work program that divides its development projects between new construction and housing rehabilitation.  Part of this transition process has involved increasing the capacity of the current HHDC staff.  Training in energy auditing and home inspection has been completed and both have prepared staff for work in housing rehabilitation.  Additionally, such training will position the HHDC well in applications for project funding.  The HHDC has, and will continue to pursue several funding sources, specifically for rehabilitation.

Housing rehabilitation presents new challenges along with the potential for high rewards.  Securing funding may be the easiest part of this entire initiative.  Properties in this category are anything but consistent and often times are hard to completely assess on the front end.  Additionally, building a contractor base and business model for such work is challenging when starting from scratch.  Challenges aside, the HHDC is confident and committed to hit the ground running and figure it out along the way.

The rewards come in many forms with rehabilitation housing projects.  First, the HHDC will reach an income niche that cannot be served with new construction and allow families that might otherwise find themselves in a home that is unsafe, unhealthy, and inefficient to purchase a home that is like new.  Secondly, rehabilitation housing can stabilize neighborhoods that are blighted by poor housing stock and foreclosed properties while revitalizing a sense of pride in ownership.  Finally, the HHDC can incorporate “green” design elements into the homes and increase the energy efficiency of older homes, thereby lowering utility costs for our homeowners that need assistance the most.

New Construction: Proven Models Meet New Obstacles but Remain Successful
This past year was a year of changes for the HHDC single family new construction business model.  Changes in funding priorities by the HHDC’s traditional partners, GMHF and MHFA, led the HHDC to revise its work program as the year progressed.

We first looked to take steps that would make the Corporation run more efficiently and financially independent.  To do this, the HHDC formulated plans to manage cash flow and maintain production goals.  First the Corporation took a proactive approach to limit the amount of units under construction at one time.  At the same time, the HHDC began to deliberately pay down its receivable to the HRDC and seek financial independence by securing funding in new and creative ways.  One crucial element to the success of this action plan was the sale of current inventory.

Current market conditions have actually proven favorable for our traditional workforce market.  Interest rates have hit historic lows and first time homebuyer incentives, such as the stimulus plan’s $8,000 tax credit have blown the doors wide open for buyers that have acceptable credit.

The stimulus bill also created new opportunities to partner even more with one of our strongest allies, USDA Rural Development.  Rural Development loan programs experienced an infusion of money from the federal government that has made a drastic impact on access to mortgage financing.  Many of the current financial incentives are short term solutions, but currently essential to our success.

Sunset Meadows Overview
Sunset Meadows is the HHDC’s latest rural subdivision in the Bemidji Area.  It is currently serving as the building location for the ICWC program and will continue to be the primary location for the ICWC in the upcoming year.  The concept for Sunset Meadows was to create a long-term location for our rural building initiatives.  The subdivision has an integrated recreational trail system that is designed to accommodate biking, walking, and running.  In Sunset Meadows the HHDC is also experimenting with some new building designs.  We are building smaller, more energy efficient homes with advanced heating systems.  The intent is to hit an affordable price point while offering the “greenest” designs that we can afford to produce.

High School Program
The High School class will continue this coming year with the construction of one home.  There will be some big changes for the program as our long time instructor, Rod Bauman, has retired this past year.  Rod will be difficult to replace, but his protégé, Jeff Olson, seems up to the challenge.  The HHDC is very excited to continue our work with the School as it is one of our most successful and long standing partnerships.  Rod has expressed interest in working with the HHDC in different capacities, perhaps working on purchase rehabilitation projects.

In the upcoming year the high school program will be building a home in the Mayer Estates subdivision, which is another one of the HHDC’s subdivisions, created two years ago.

Housing rehabilitation presents new challenges along with the potential for high rewards.

Challenges aside, the HHDC is confident and committed to hit the ground running and figure it out along the way.

This past year was a year of changes for the HHDC single family new construction business model. 

Usage of Affordable Mortgage Financing is High; Availability in 2009 in Question

For many years the Headwaters RDC has supported the efforts of developers of affordable housing by accessing financing products for use by moderate income home buyers.  In 2008 Headwaters RDC helped Beltrami, Clearwater, Hubbard and Lake of the Woods counties and the City of Mahnomen receive allocations of Minnesota City Participation Program (MCPP) low interest mortgage financing.  Despite limited use of funds statewide, more than $3.3 million of MCPP mortgage funds were utilized in the Headwaters Region in 2008.  Due to challenges with selling bonds, the MCPP program has been delayed, and may even be suspended, in 2009.

Headwaters RDC also worked with lender consortia in Beltrami County and the Park Rapids area to obtain Community Activity Set Aside (CASA) mortgage financing to support the construction and sale of affordable single family housing in those communities by affordable housing developers and their partners.  Commitment of the CASA funds has been lighter than anticipated, likely attributed to the challenging housing market combined with stringent targeting of the financing.

It is evident that there is great need for permanent affordable housing options for very low income individuals and families in the Bemidji area.  Providing housing to meet this need has been a daunting challenge.  Several organizations in the Bemidji area are working together to help create stable affordable housing and support services for this vulnerable population. 

The Headwaters Housing Development Corporation has been awarded nearly $4 million by the Minnesota Housing Finance Agency, Greater Minnesota Housing Fund and Minnesota Department of Human Services to help finance a 20 unit supportive and transitional housing development in Bemidji.  The project is intended to provide housing and services to low income families to enable them to make a successful transition from homelessness.   HHDC is the developer of the housing which will ultimately be owned by the Beltrami County HRA.  Other partners in the project include Bi-County CAP, Red Lake HRA, the Leech Lake Band of Ojibwe, and D.W. Jones Management Company.

After the initial site chosen for the project proved infeasible, project partners opted to pursue an alternate location on property owned by the Beltrami County HRA.  The alternate location is directly north of the Bi-CAP offices and is located close to groceries and a variety of employment opportunities.  HHDC hopes to break ground in the spring of 2010.

In February, 2009 the Executive Director of the Hubbard County HRA resigned in order to pursue other interests.   Subsequently, the HRDC and HRA entered into a staff services agreement which began on April 1, 2009.  Under this agreement, the HRDC will help the HRA implement its ongoing program activities, undertake its financial management duties, and develop new initiatives to help the organization achieve its mission consistent with its business model.  The HRDC will utilize a staff team to assist the HRA.  The HRA will continue to employ its Administrative Assistant who will be an integral part of the staff team. 

“The staff team provided by the HRDC will be a valuable asset as we continue to meet housing needs in Hubbard County.  The HRA would be challenged to find a single individual with the capability of providing the range of services offered by the Commission”

– Ray Melander, Chairman, Hubbard County Housing and Redevelopment Authority

Roughly two years ago the Headwaters RDC recognized the need for improving the quality and access to home buyer education programs in the Headwaters Region.  Since then, staff has been certified to provide home ownership education and counseling, began holding Home Stretch workshops in Hubbard and Beltrami Counties, and convened focus groups of key real estate professionals to improve the impact of our program.

The home buying process is complex.  Becoming an educated home buyer will provide potential homeowners with the tools and knowledge to successfully navigate the process and make a wise investment in what probably will be the largest and most important purchase an individual will ever make.  We have identified a seven step process to home ownership that will assist in taking the complexity out of the home buying process.  Those steps are titled:  Ready, Credit, Loan, Shop, Select, Closing, and Keep.  We are in the process of developing a booklet that covers these steps in more detail, with the ultimate goal that the booklet will help potential home buyers recognize that Home Stretch is a necessary first step in the home buying process.

The questions related to each of the seven steps a potential home buyer should address are:

• Are you READY for home ownership?
• Start with a qualified home buyer education program, such as Home Stretch.
• How important is CREDIT?
• The credit report is a history of how credit has been paid back in the past, and affects more than just the ability to get loans.
• How do I find the best LOAN?
• It is important to shop around to select the best mortgage lender and loan product.  Review the products offered by comparing the Truth in Lending Statement and Good Faith Estimate of Settlement Costs.
• Be sure to obtain a pre-approval for a loan prior to shopping for a home.
• How do I SHOP for a home?
• Make a wish list and shop for a home within the pre-approval that was provided by the lender. 
• How do I SELECT a home?
• Once the right home has been chosen, a purchase agreement, including earnest money, will be submitted to the seller.  This begins the negotiation process and will continue until both parties agree to the deal and there is a fully executed purchase agreement.
• What is CLOSING on a loan?
• The closing process is simply the process by which title of the property transfers from the sellers to the buyers. 
• Closing generally occurs 30 – 45 days after there is a fully executed purchase agreement.
• How do I plan to KEEP my home?
• Protect the home by performing necessary maintenance and upkeep. 
• Plan ahead for financial difficulty so the home is protected and contact the lender immediately should problems arise.

Studies have shown that, by carefully considering each of these questions along the path to home ownership, the success of the household will be greatly increased.  The curriculum of Home Stretch is tailored to fully cover each of these steps for the home buyers.  Another advantage of the Home Stretch workshop is that many affordable mortgage products require home buyer education in order to access the assistance.  Households that complete Home Stretch are also eligible for a discounted rate on their private mortgage insurance, if they are required to have such insurance.

It is generally not cost effective to provide Home Stretch workshops in the less populated areas of our Region.  As a result the workshops aren’t offered when a household really needs it.  The households’ option is then to either not attend a workshop or travel great distances to access one.  In the upcoming year the Headwaters RDC will be actively working to increase the availability of Home Stretch in the remainder of the Region by pursing a combination of live training workshops and video conferencing options.  Using the technology of video conferencing would mean a remote site could access the training from the main site anytime it is offered and numbers of households at each individual site becomes much less important.  We are excited that this use of technology will greatly improve access and reduce travel time for potential home buyers, which we believe will lead to more households taking advantage of attending the Home Stretch Workshops.

Our next step is to develop the technologies in house, as well as remotely, to make the video link seamless for the participants.  We must also develop a network of local volunteers that will be willing to coordinate and oversee the remote locations.  Anyone interested in becoming a part of this exciting effort should contact Mary Thompson at the Headwaters RDC.