While the affordable housing crisis in the Washington region sometimes seems to be intractable, local governments and nonprofit agencies are working to find sustainable solutions for low- and moderate-income families.
Among the lesser-known programs available are housing vouchers — resources to supplement household income to pay for rental housing — that can also be used to assist families who want to buy a home.
One Prince William County couple, Deborah Jackson and her husband, say the Homeownership Voucher Program and the support of the county’s Office of Housing and Community Development allowed them to fulfill their dream of becoming homeowners.
Jackson received a housing voucher for 13 years to help the couple afford rental housing in Harrisburg, Pa., and in Manassas. They used that same housing-voucher program to buy their first home in Triangle, Va., in December — a 3,700-square-foot five-bedroom, three-bath residence that was built in 2009.
“I took home buyer classes and learned about budgeting and preparing for the expense of homeownership,” Jackson says. “I learned how to improve my credit score so we could qualify for a loan, too.”
Like many families preparing for homeownership, regardless of whether they receive a housing subsidy, Jackson spent five years improving her credit and saving money for a down payment. Once she felt ready to buy, she contacted a lender for a pre-qualification and found a real estate agent.
“We managed to accumulate $24,000 over five years in a savings account that we established with the help of the housing office,” Jackson says. “Even with that money and our loan pre-qualification, it took at least six months before we found a house to buy. We put in bids on some foreclosures, but were outbid, and then found a pre-foreclosure to buy.”
Now that Jackson has moved into her residence, she has been able to start a home-based business taking care of elderly people.
Ana De Leon, a housing-voucher recipient and a recent home buyer in Washington, persevered for four years and took homeownership classes, attended financial workshops, saved for a home, improved her credit and took advantage of several homeownership programs to reach her goal. A single mother with two daughters, she first found out about the possibility of buying a home when she attended a seminar on how to finance college. She participated in the Family Self-Sufficiency Program offered by the D.C. Housing Authority to help low- and moderate-income families develop financial skills and to save for future goals, including homeownership.
“One of the best aspects of these programs is that I found out that a nonprofit would match up to three times my savings if I could save up $1,000 in six months to three years, so when I completed the program I had my $1,000 plus another $3,000 for down payment funds,” De Leon says. “Even after three years of getting ready to buy a home, it took another year after that to find a home and another six months to move into my home because it wasn’t quite ready. But now I have a brand-new home and I’m completely prepared to be a homeowner.”
De Leon says the housing voucher helps her pay the mortgage, and the District’s first-time home buyer tax credit eliminates her property taxes for the first five years. She also qualified for down-payment assistance.
Still, the number of families that have been able to buy a home through the Homeownership Voucher Program is relatively small.
“It’s not an easy process and it takes several years before most families can get their credit score and finances to the point that a lender will approve them for a loan,” says Eric Brown, director of the Prince George’s County Department of Housing and Community Development. “It takes a lot of commitment and dedication by the home buyer.”
De Leon encourages everyone she knows to look into the programs offered by the District government, but also wants people to be realistic.
“I couldn’t have become a homeowner without all the help and education I received, but people need to know that they can’t expect a home to just fall out of the sky and into their laps,” says De Leon. “It was a very time-consuming process and took a lot of hard work, but it’s so worthwhile now that I own a home.”
The amount available for a housing voucher is the same for both renters and homeowners. The maximum income allowed for voucher recipients is 80 percent of the area’s median income, and is based on a sliding scale according to family size. In the Washington region, the median income established by the Department of Housing and Urban Development is $109,200; a family of four could have an income as high as $87,350 and still receive a voucher. However, 75 percent of new vouchers are reserved by law for very low-income households that earn 30 percent or less of the area’s median income.
In the District, about 100 families have purchased homes since the program started in 2005, with the help of housing vouchers and the Family Self-Sufficiency and homeownership assistance programs. Another 158 people are enrolled in programs to help them work toward the goal of homeownership. In Prince George’s County, 66 families have purchased homes with the help of the voucher program since 2005. In Fairfax County, which began piloting the program in 1999, 28 families have purchased homes. In Prince William County, 19 families have been able to buy homes through the program since it started in 2005. In Montgomery County, 16 families have been helped since the program began there in 2000.
“Before anyone gets into a homeownership program they need to decide whether they are ready to commit to owning a home,” Brown says. “A lot of people worry about what will happen if they lose their job and they worry about the possibility of a foreclosure. Some people are more comfortable with the rental voucher because adjustments can be made more easily there if someone loses their income.”
The Homeownership Voucher Program, started by HUD in 2000, is available in some, but not all, jurisdictions around the country. Each local housing authority can decide how much to budget for homeownership vouchers and how to administer the program. The general requirements from HUD are as follows:
●Participants must already have a rental-housing voucher. If they don’t, they must apply first for a rental voucher. In many jurisdictions, because of budget constraints, there is a wait list to receive a voucher.
●Participants must be first-time home buyers, defined by HUD as not having owned a home for at least three years.
●Participants must meet a minimum income eligibility standard set by the local public housing authority (such as $24,000 in Montgomery County) or no less than the federal minimum hourly wage multiplied by 2,000 hours — which is $7.25 per hour, or $14,500 in annual income. The minimum income for a family with disabilities is based on federal supplemental security income.
●At least one adult in the family must be employed full time and have been continuously employed for at least one year. An elderly person or a person with disabilities who may or may not be employed is given the benefit of the employment requirement.
●Participants must complete a homeownership and housing counseling program.
Carol Erhard, a director of the homeownership division at the Fairfax County Department of Housing and Community Development, says the amount of the payment received by families is similar whether they are renting or buying a home.
Still, when they are buying, the subsidy takes into account the following expenses that are not included in a rental subsidy: principal and interest on the mortgage; mortgage insurance; real estate taxes; home insurance and an allowance for maintenance expenses; utility expenses; and major repairs and replacement.
In most jurisdictions, families must pay 30 percent of their adjusted monthly income. The rest of the monthly payment will be covered by a housing voucher. However, in some areas, the amount of the subsidy is based on a calculation of the cost of homeownership in the community. Affordability limits may also be set by the local program.
The amount of down payment that home buyers in this program must save depends on the jurisdiction and the loan program, but most require at least 1 percent of the home value.
“Each family in the housing voucher program sets up a personal goal for savings and plan on how much more they can save as they earn more money,” says Adrianne Todman, executive director of the D.C. Housing Authority. “We help them set up an escrow account for their money to act as a tough-love program and make sure they put their money away. Sometimes, families choose to use their escrow account for a security deposit on a rental home or for a college fund for their kids instead, which is fine. The purpose of everything we do is to develop self-sufficiency for families”
In Fairfax County, buyers must also fund an escrow account for maintenance expenses with a minimum balance of $1,000, Erhard says. If funds are needed from the account, the homeowners are required to pay back the money into the escrow account.
The vouchers for a home purchase are reevaluated annually to accommodate for changes in the participants’ income. Elderly and disabled individuals can keep getting the voucher for their entire lifetime, while working families are limited to 15 years after the initial purchase date if they financed the property with a mortgage term of 20 years or longer. During that time, the subsidy will stop once the household income has risen above the limits set by the housing authority, regardless of whether the voucher is applied to rent or to a mortgage.
“There’s a six-month grace period after the voucher ends when we keep checking in with the family to make sure they’re successfully handling the payments on their own,” says Lynn Hayes, director of housing resources for the Housing Opportunities Commission in Montgomery County. “The families continue to have access to housing counseling after the voucher ends, just like any other homeowner who needs help.”
While the homeowners don’t need to share any equity with the government if they sell in the future, they are obligated to let the housing authority know if they sell the property while receiving a voucher. The homeowners won’t be able to receive a voucher if they buy another home, because the program is limited to first-time buyers, says Bonnie Hodge, assistant director of housing resources for the Housing Opportunities Commission in Montgomery County.
“After the voucher ends, the families are completely responsible for all costs associated with the home,” Erhard says. “The support and education they have received is meant to make them self-sufficient.”
One requirement of the Homeownership Voucher Program that protects home buyers is that two home inspections are required before a home can be purchased.
“Every home must have a home-quality inspection by the housing authority and then a second one by an independent home inspector hired by the buyers before we can approve a home purchase,” Hayes says. “That’s one more step to make sure the homeowners know that the home they are buying is safe and what it will take to maintain the home.”
Once buyers have completed their homeownership education courses, improved their credit — if necessary — and accumulated a down-payment fund, the process of buying a home is similar to the experience of any other buyer. While housing agencies sometimes recommend lenders and real estate agents familiar with their programs, the buyers choose their own professionals to help them finance and find a home.
“The housing voucher is just one more income stream that helps someone qualify for a loan,” Todman says. “Our participants are also eligible to access first-time buyer financing programs.”
The voucher can be paid directly to the lender or to the family, depending on the rules of each housing authority.
“From our point of view, we treat every credit applicant the same as long as they can meet the loan guidelines,” says Thomas Woodward, branch manager of Paramount Residential Mortgage Group in Manassas, who worked with Jackson for her mortgage financing. “Borrowers have to meet our minimum credit standards, have sufficient income to repay the loan and have a debt-to-income ratio that meets our guidelines.”
Woodward says that Federal Housing Administration loans are often the best option for borrowers with limited cash for a down payment, because all of the funds for the down payment can come from a gift or government program as long as the borrowers have a credit score of 580 or above.
“We find that people who have participated in a homeownership education program are very easy to work with because they have already worked on their credit and understand the loan process,” says Woodward.
Buyers with a housing voucher face similar challenges as other first-time buyers such as saving for a down payment, but the biggest challenge can be finding a home that meets their budget.
“It’s a reality check for buyers to match what they think they can afford with what they can actually find in their price range,” Brown says.
The lack of affordable housing is a problem throughout the Washington region, so one priority of the DCHA, Todman says, is to work with development partners to create more moderately priced homes.
“For instance, one redevelopment site in Ward 7, called MetroTowns at Parkside, turned a 42-unit public housing development into 42 new public housing units and 82 new homes for buyers,” says Todman. “Twelve families who participated in our programs, including De Leon, bought homes in that development last year.”
In Fairfax County, it can also be hard to find an affordable home, so many participants there try to buy one provided via the county’s inclusionary zoning policy.
“While we have seen an increase in the number of lenders interested in assisting purchasers of affordable dwelling units, some lenders aren’t willing to approve a loan for an affordable dwelling unit because of the restrictive covenants on the property,” Erhard says. “The county wants the option to sell it to another family in that case, which means the lender doesn’t have as much control in the event of a foreclosure.”
Erhard talks to local lenders about the Homeownership Voucher Program so they understand the value of the voucher and the financial education of participants.
“The ultimate goal is for families to no longer need a subsidy at all,” Erhard says. “Our hope is to have every family get the benefit of staying in the same home for the long-term to become part of the community and to have their children attend the same school.”