KAREN: Hi, welcome to House Talk. Today I’m so excited to have DeeDee Johnson. She is the Director of Homeowner Services with our Bend Area Habitat for Humanity. I know that what she’s going to have to say to us is going to be really interesting today.
DeeDee, I do have one question for you. With the cost of building in Bend and how much it’s going up, has Habitat adjusted to that?
DEEDEE: Thanks for having me, Karen. I’m really excited to be here.
KAREN: You’re welcome.
DEEDEE: Yes, we’ve had to adjust our model just slightly, just to be sustainable for building so that we can continue to build. Our goal is to build 8 to 10 homes per year, with the next couple of years bumping that up to 15 if we can.
KAREN: Wow. Oh my goodness.
DEEDEE: We’re on a strong schedule to do that, but we do know that that is a huge challenge. I think one of the ways that we’re looking at being sustainable so that we can meet that goal is looking at the cost of building and what it costs Habitat to build, and how we sell those homes to families, and how we make that all work together.
For us, we had to start by looking at our cost of building homes. Our land costs, of course, have gone up tremendously – anywhere from $80,000 to $100,000 or more per land, even if someone is being generous with us and working with reduced prices on land. If we can find that, free land is always great, but that’s a little hard to come by these days.
KAREN: [laughs] It might not be realistic.
DEEDEE: Exactly. So we keep moving forward and we look at things like our direct costs. Those are our construction team. Even though we work with many volunteers and we’re very grateful for that, there still are hard costs, direct costs, materials. Materials have gone up.
KAREN: Foundations, all that.
DEEDEE: Absolutely. We have to work with those subcontractors too. We have a great team of folks that we work with all the time, but there’s costs to all that. Those direct costs have gone up by about 30% this year, so that’s made our total cost go up.
KAREN: What a challenge.
DEEDEE: Most of the builders understand that too, so particularly to the affordable housing builders, that is even more and more challenging. And then our overhead and soft costs, too.
In total, it really adds up for us. When you’re looking at what’s affordable for a one, two, three, four person family, that starts to really eat into what we’re looking at in terms of how we sell that to a family and how much we have to subsidize as Habitat.
KAREN: I think it would be how much you have to subsidize, and then does the family have to qualify for a higher amount as well? Or is it kind of equaling out?
DEEDEE: No, we on average right now are probably subsidizing about $100,000 or more per home that we sell to a Habitat-qualified family. That’s where our fundraising comes in, that’s where our ReStore comes in. We’re super fortunate that 100% of our overhead is covered by the ReStore; that means anything that we fundraise for, any donations that come in, can go directly into our programs.
KAREN: Can you explain to our listeners just a little bit? What does it mean to subsidize? When you’re looking at the total price of a home, can you explain that in kindergarten terms? For me. [laughs] Not for our listeners, but for me.
House Talk - Bend, Oregon Real Estate with Karen Malanga
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DEEDEE: Give me an example of what the average home sales price on a three bedroom home might be right now.
KAREN: $350,000, maybe.
DEEDEE: We work with a program that caps out the sales price at about $315,000 this year. We start with that as the sales price, but then we look at each homeowner individually. Once they fit within our qualifying income ranges, then we say 33% of their income goes towards their total housing costs.
That equals a home loan – let’s take an example of maybe $150,000. Then you’ve got a $315,000 sales price on a home, so we’re looking at that gap. We’ve got to close that gap. How do we close that gap? Those are some of the subsidies.
We do partner with the city of Bend. We have different programs that we work with where we might start bringing that price down, but then there’s still a gap between those partnerships, say with the city or with a grant. Then we have the homeowner’s affordability, which is 33% of their income, and that includes their property taxes and their homeowner’s insurance.
So 33% of their income is what they’re paying towards their mortgage. Most people look at that and go, “Wow, I’m paying more than that right now for rent.”
We subsidize. There’s still a gap. There might be a silent second in there for the homeowner that sits on that loan but doesn’t have any interest, and it just sits there silently. But again, that’s still something Habitat has to bring to the table upfront on every home. If that’s $100,000, then that’s what it is.
KAREN: I was part of a project that was down south of town by Avion Water, actually. I represented maybe 10 homes down there at a reduced commission, and then the city also put in a silent second. They had monies that they were offering to help buyers be able to afford. It’s almost similar to that.
DEEDEE: It is. City development block grant funds, reduced and deferred SDC’s. We don’t have SDC’s waived, but we do get some reduced and deferred SDC fees (system development costs). Just putting that shovel in the ground is a minimum of $20,000 to build a home, so it really helps in terms of the partnership that the city has for affordable housing. We’re grateful for that.
All those types of partnerships are what make it affordable, but still we’re left with that gap. We’re still left.
KAREN: Yeah, you still sometimes have a gap.
DEEDEE: Right. On every home, we have a gap. For us, our goal is to actually reach out there to get a broader range of homeowners that can afford maybe a little bit higher home loan, but they’re still struggling to find and purchase a home in the area.
KAREN: Can we talk about that when we come back? It’s time to take a break.
DEEDEE: Absolutely. Thank you.
KAREN: Welcome back to House Talk. This is Karen Malanga, Principal Broker at RE/MAX Key Properties and NestBend.com. I’m sitting here with DeeDee Johnson, Director of Homeowner Services for the Bend Area Habitat for Humanity. We were just talking about applicants and how they can qualify for a home through Bend Area Habitat for Humanity.
DEEDEE: Right. I know it’s a long [title].
KAREN: It is. [laughs]
DEEDEE: We look at three things. Basically, we look at their income. There is a range that we select applicants in, and that range is actually larger than I think most people might think. That’s ability to pay.
Willingness to partner; of course, every Habitat has a strong background and base in volunteerism, so there’s some pieces in there under willingness to partner.
We also look at their need. In Bend, need is pretty broad. Sometimes it’s substandard housing. Most times it tends to be that folks really just cannot afford to stay in the area, to keep their jobs and still live here.
When we look at the ability to pay, our income guidelines go from about 40% of the area median income up to about 80%. That might mean for a family of three, we’re looking at now having to just boost that bottom income guideline a little bit. When we talk about our costs and how much it costs to build here in Bend, we had to bump that up a little bit this year.
So for family sizes one, two, three, and four, the minimum income guidelines are $30,000 annually or about $2,500 a month. Whatever that means. That can be working wages, that can be fixed income – however you combine that, if the applicants can make about $2,500 a month, then they fit the minimum income guidelines for us.
But we can go up higher. 80% of the area median income guidelines for a family of three is about $45,000-$46,000. But our board has also given us permission to do two homes a year that go even higher than that, up to 100% of the area median income.
So if people are still really struggling, they’re prequalified for a loan but they really just can’t find a home in their price range, Habitat might still be that option for them.
KAREN: I didn’t realize that. I didn’t realize that you could go up that high with the income.
DEEDEE: We’re really reaching out to our working class community and letting people know, yes, you might be the fit for Habitat. I think the lower income ranges are still that old model of “Habitat gives away homes,” and you’re working hard for it. You’re earning it. You put a lot of sweat equity and labor into this, but you’re also buying your own home.
KAREN: Income is only one part of the application process, correct?
DEEDEE: Right. Every month we do information sessions. We do about two application cycles a year, where we take about 8 to 10 families, sometimes more, into the program. That varies. You have to watch our website for that, BendHabitat.org.
Every month we do information sessions. They can start by either coming at a noon session or a 5:30 session and find out about it. What does this “willingness to partner” mean? What does need look like? Ability to pay? What about my debt?
The beautiful piece that we’ve been doing – and it’s a free service to the community, so it’s beneficial for folks to come into an information session sooner than later – we do what’s called a one-on-one client intake after that. If someone says “I think this is for me, but I’m not sure,” we sit down with them privately one-on-one.
We’re trained in doing mortgage pre-counseling, and we look at their goals and say individually, let’s do a soft credit pull. Let’s look at where your debt is at. Is your debt-to-income in range? Can we connect you with some other community resources? What are the other affordable housing programs in the area?
We share it all, and our goal is to get them prequalified so that when the application cycle comes around, they can apply for us or they can apply for another program that might be a fit. But we really want to keep our community here. We want to keep it thriving, and all of that, our economy.
KAREN: Have it all work together.
DEEDEE: Yeah. How do we keep everyone here?
KAREN: I think that’s nice that you do the individual one-on-one, because I do think that people tend to open up more. If someone’s coming there, they may have had an issue in the past, or they could have medical debt or something. It’s not something they want to bring out in a group setting.
DEEDEE: Yeah, it is really nice. It’s very confidential. We let them set the goals. If home ownership is the option, it’s just a matter of priorities. This could be a short period of time, but we want to look at what it’s going to take for you to get prequalified.
We do go through a traditional lending program, although we have some benefits. We can talk a little more about that, too. But we really want them to be able to purchase a home if they can get there, if that’s the goal.
KAREN: Do they actually get out there with a hammer and a nail?
DEEDEE: Absolutely. Once they’re approved into the program, it takes about a year to 15 months before they purchase their home. But we have a certain number of sweat equity hours that we put in the construction site. They don’t have to know a thing about it. We can work with folks that have disabilities, and we have ranges of things that they can do. We also put them to work at the ReStore.
KAREN: Oh, you do? I didn’t know that.
DEEDEE: Yeah, absolutely. They learn about it all. We have classes, we connect them with a mentor. We have a pretty broad-based program that we put them through.
KAREN: Just for a small example, say someone comes in and they qualify, and you’re moving them through the process and their home is starting to go up. How many hours do they get to maybe build in their home?
DEEDEE: On their own personal home? Before they start building on their home, they might be working on other homes. But because our construction process is very similar, they’re going to learn a lot of the same skills. But we do reserve a certain number of hours for them to be working on their own home.
KAREN: I think that is so cool.
DEEDEE: So they can write on the boards behind the walls. They can stamp in the concrete, and their kids and their family can be –
KAREN: That’s super fun.
DEEDEE: It is. It’s a neat process.
KAREN: That’s a really neat process. We’ll learn more about your processes after this break. Thank you so much.
Hi, this is Karen Malanga, Principal Broker at RE/MAX Key Properties and NestBend.com. I’m back with DeeDee Johnson. She’s the Director of Homeowner Services at our Bend Area Habitat for Humanity.
We’ve been having a great discussion. DeeDee, can you explain some of the benefits of Habitat partnership while you’re going through the program?
DEEDEE: Absolutely. We talked a little bit earlier about matching families with a mentor or individuals with a mentor. We do that so that they can walk alongside, be another set of eyes and ears, maybe ask questions.
The only prerequisites we require is that they’ve been a homeowner for at least 5 years so they have a little bit of a basic understanding.
KAREN: The mentor, not the applicant?
DEEDEE: Right, exactly.
KAREN: Just want to be clear. [laughs]
DEEDEE: They’re not a relative, and they can’t be a boss. We don’t want to put anybody in that situation, because they’re doing assignments monthly with the mentor alongside doing other classes and all of their other sweat equity. But that mentor can help maybe ask the questions that the applicant might not be thinking of.
We really open up their lives, look at financials. We assume that we reach a certain age and we should know things, so this is a real opportunity. A lot of people are embarrassed to admit, “I’ve never really done a budget this way.”
KAREN: Or checked my credit score, ever.
DEEDEE: Right. We just open it all up, and that mentor is a key person that really helps nurture that applicant along.
Lots of growth opportunities, because you are under a little bit of stress. You’re juggling your job, you’re juggling sometimes kids, and you’re now trying to fit in these hours of sweat equity and these classes. What I always say is it’s this opportunity to grow. Where is it that you want to be? What makes you successful not only as a homeowner, but in life? How can we help support that person?
That comes into that wrap-around community support that they get. They’ve got all these volunteers and staff people really rooting for their success. Sometimes they’re in a vulnerable place, but it’s also a whole group of family members that they may not have had before. When they take a stumble or reach some opportunity that is challenging, you’ve got folks saying, “What about this? Have you thought about that?”
Sometimes it’s a matter of connecting them to others in the community that they might not have been aware of before. It becomes this larger extended family.
KAREN: They also have the other applicants going through the process as well, so they can see probably other people facing some similar challenges. Probably different, but in the end it’s all challenges and how to get through them.
DEEDEE: Right. We learn to come out of that place. We’re used to living in a certain way, but maybe you’re trying to take that next leap into being in a different place in your life. Sometimes you get to see other people going through it and go, “Ah, okay, that’s how I can manage that.”
There’s a lot of stress management. We do classes on how to be neighborly, so there’s communication skills that come in.
KAREN: That’s fantastic.
DEEDEE: It’s a lot of things that people don’t really think about that we think are really important.
KAREN: And also home maintenance, too?
DEEDEE: Home maintenance.
KAREN: Because once you own the home, you have to know how to take care of it.
DEEDEE: Right. We’re moving into a post-purchase program. We’re going to roll that out to the community, too, so maybe we can talk about that another time, because that will be open to the public as well.
KAREN: I also think that’s so important here in our environment. People always say, “What do you mean, I have to put that foam thing over my hose bib?” or whatever. [laughs]
DEEDEE: Yeah, “What is that? What is that for?” It is crucial. All of those classes, everything from financial to community to home maintenance and how you protect your investment – and even life planning, beyond wills and testaments.
We bring in experts from the community. Pet ownership, that’s a huge one. We definitely want to talk to families about what it means to own a pet and responsible pet ownership, and the costs of pet ownership. All the fun things that come with your home have a little bit of education that needs to come with them as well.
I think it’s a real opportunity for growth in a lot of different areas that folks may be somewhat surprised about, but pleasantly surprised.
KAREN: It’s such a wonderful opportunity.
DEEDEE: Yeah, it is. And the loan benefits – we don’t require a down payment once they’re accepted into the program. They save for some of the closing costs. We work with a program through the state that is a below market rate interest rate.
Go back to that 33% of your income at the time of your loan application is what you’re paying on your mortgage, and that’s probably less than what you’re paying in rent right now. It’s a beautiful benefit.
KAREN: What happens if you need to move and sell the home? Do you have to be there a certain period? What if your job changes?
DEEDEE: Not at all. There’s a couple unique things about Habitat for Humanity, and one of those is our Right of First Offer. If someone comes to us and says “We would like to move” or “We need to move” for some reason, Habitat would look at that and say, okay, you’ve been in your home X number of months.
We’ll purchase that home for what you’ve paid us, less your property taxes and homeowner’s insurance, of course. You don’t have to be in your home for any certain number of years, but if you’ve been in your home 10 years, then we have a shared equity model where the homeowner starts earning more equity. It costs Habitat more to purchase that home back. So every year you’re in your home after 10 years, you earn more of that equity and it would cost us more to purchase the home back.
Our goal is, of course, to put another affordable home into the community and allow another family to do that, but sometimes we’re not able to do that always. Then the homeowner needs to pay off any of those silent seconds or seconds that are sitting on the home if they do sell it on the open market.
KAREN: DeeDee, we have to go, but it’s been amazing. How can someone find you and learn more about it?
DEEDEE: BendHabitat.org. Home ownership, right there.
KAREN: Okay, we’ve got to go. Thank you.
DEEDEE: Thank you.