Western States Housing Consortium

Rural Gateway Best Practices

Overview

Low-income homebuyers, particularly those whose income is so low that they are unable to save for a down payment, or are unable to purchase a home through traditional sources, are able to invest in their futures by having the opportunity to use their own labor to build their home. Their labor reduces the cost to purchase the home, effectively providing the source of their down payment so they can qualify to purchase a home.

HUD's Self-Help Homeownership Opportunity Program (SHOP) provides the seed capital needed to facilitate the development of self-help homeownership opportunities for low income persons.

Background

The Western States Housing Consortium, led by Tierra del Sol Housing Corporation, has overseen the provision of SHOP funds in 3 states in the Western region of the US - Arizona, Colorado and New Mexico, predominantly in underserved rural areas and colonias along the US-Mexico border. The Consortium is a group of experienced self-help housing providers that work collaboratively to leverage resources, knowledge and experience to provide a comprehensive approach that responds to serious housing and socioeconomic needs.

The Consortium works together to address the lack of infrastructure that prevents development, and increase affordable housing opportunities that creates healthy and sustainable communities, improved housing conditions and asset building for low-income households. New home subdivisions are built to meet visitability standards and incorporate many LEED practices to reduce the impact on the environment. Homes built through the program also contribute to the tax base of low income communities.

The communities where SHOP funds are invested have high rates of poverty, and cost burdened homeowners and renters. A large percentage of the housing supply are mobile homes, an indicator for substandard housing and the need to improve the quality of the housing stock. For many living in the communities where SHOP opportunities are available, employment is part-time, seasonal or dependent on agriculture, making it difficult to purchase a home through traditional methods.

To address this, the Consortium develops their self-help homes to meet ENERGY STAR® standards and works with lenders to ensure the homebuyer's total house payment (principal, interest, taxes and insurance) is below 30% of their monthly income. These methods ensure the long-term affordability of the home and reduces the number of cost-burdened homeowners in the community.


Lessons Learned

The impact that SHOP funds have in every community where these investments are made is profound. Low income families have secured long-term affordable housing and are building assets. SHOP funds have leveraged significant private and other funds, along with substantial labor from the homebuyers to produce these homes. New homes in low income communities contribute to the tax base and make it an attractive place to raise a family. Household stability contributes to stable neighborhoods where residents are invested in their community.

2010 SHOP Grant

The 2010 SHOP grant produced 49 homes that appraised at an average of $125,983. Through sweat equity and volunteer labor contributions, the cost of the homes was reduced to an average of $108,927, a savings of $14,983. The Consortium leveraged $4,036,070 in other funds to use $866,898 of SHOP funds, a rate of $4.65 of leveraged funds for every $1 of SHOP.

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A single parent 2-member household in Vado, NM that earned $14,535/year (below 30% of the area median income), provided 954 hours of sweat equity labor to purchase a home valued at $129,000 for $94,072, a savings of $34,928. HOME funds provided $19,371 to reduce the family’s mortgage to $74,701. The home was built to meet ENERGY STAR® standards and was also equipped with photovoltaic solar energy that further reduced the costs to occupy the home. The family reported their average electric bill was below $35 a month.

2011 SHOP Grant

The 2011 SHOP grant produced 45 homes that appraised at an average of $132,765. Through sweat equity and volunteer labor contributions, the cost of the homes was reduced to an average of $123,910, a savings of $8,855. The Consortium leveraged $6,094,579 in other funds to use $700,000 of SHOP funds, a rate of $8.70 of leveraged funds for every $1 of SHOP.

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A single parent 3-member household in Somerton, AZ that earned $22,880/year (below 80% of the area median income), provided 2,581 hours of sweat equity to purchase a home valued at $125,000 for $112,780, a savings of $12,220. The family was previously paying more than 30% of their income for rent.
 
 
 

2012 SHOP Grant

The 2012 SHOP grant produced 39 homes that appraised at an average of $138,376. Through sweat equity and volunteer labor contributions, the cost of the homes was reduced to an average of $130,943, a savings of $7,433. The Consortium leveraged $7,142,447 in other funds to use $653,660 of SHOP funds, a rate of $10.92 of leveraged funds for every $1 of SHOP.

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A single parent 2-member household in Alamosa, CO that earned $27,662/year (below 80% of the area median income), provided 456 hours of sweat equity with 457 hours of volunteer labor to purchase a home valued at $150,000 for $144,000, a savings of $6,000. The homebuyer was very happy about the stability that homeownership gave her family.

2013 SHOP Grant

The 2013 SHOP grant produced 38 homes that appraised at an average of $132,095. Through sweat equity and volunteer labor contributions, the cost of the homes was reduced to an average of $120,821, a savings of $11,244. The Consortium leveraged $4,014,161 in other funds to use $666,929 of SHOP funds, a rate of $6.02 of leveraged funds for every $1 of SHOP.

6-member household in San Luis, AZ

A 6-member household in San Luis, AZ that earned $22,058/year (below 50% of the area median income), provided 1,760 hours of sweat equity to purchase a home valued at $141,000 for $115,554, a savings of $25,446. The family was previously over-crowded and paying more than 30% of their income for rent.