by Nancy Hanson
HUD’s Self -Help Homeownership Opportunity Program helps make self-help building sites affordable
At the Lower Valley Housing Corporation (LVHC), we believe that the Mutual Self-Help Homeownership program administered by the United States Department of Agriculture (USDA)’s Rural Development (RD) agency is the finest method of delivery of affordable housing. USDA RD funds are only available in rural communities. When LVHC started its program, traditional lenders would not lend in rural areas. One reason was those lenders believed that the cost of production would exceed the value of the collateral.
Over time, LVHC successfully convinced lenders that mutual self-help homes in rural El Paso County would appraise for enough to secure the loans and the homes would hold their value. The Texas Department of Housing & Community Affairs (TDHCA), WestStar Bank, Bank of America, Wells Fargo, and JPMorgan Chase have since financed LVHC-produced houses.
These lenders provided affordable long-term mortgages such as low-interest USDA Section 502 loans or zero-interest-rate Housing Trust Fund “Bootstrap” loans from the Texas Department of Housing.
Over time, LVHC successfully convinced lenders that mutual self-help homes in rural El Paso County would appraise for enough to secure the loans and the homes would hold their value.
LVHC specializes in Mutual Self-Help Housing. Working with groups of 6 to 12 applicants, LVHC teaches families how to work together to build their homes. The families’ sweat equity contribution, about two-thirds of the labor, drives down the cost of each house. This helps make the monthly payments affordable to very low-income families.
Most of the people living in our County commute to work in the city of El Paso. Some workers are employed by the local school districts and others are engaged in farm work. Many of our residents live in the “county” outside of any designated town. In these instances, developments hooked into existing water and sewer systems. LVHC developed over 550 homes like this in Cielo Azul, Notre Dame, Green Desert and Horizon Hills. El Paso County has about 340 “Colonias” that have not been remediated as of today. These areas are heavily populated but they lack decent facilities. Little by little, however, USDA and Texas Water Development Board are bringing in water and sewer to the colonias.
One of the resources that helps LVHC make homes more affordable is the Self-Help Homeownership Opportunity Program (SHOP). SHOP funding, provided by the U.S. Department of Housing and Urban Development (HUD), is administered through several intermediaries including the Housing Assistance Council (HAC). SHOP provides up to $15,000 per unit to acquire land, make infrastructure improvements, or pay certain planning or development costs for self-help homeownership. The program requires these homes to meet stringent energy efficiency and water conservation standards. Homeowners must be low-income individuals and families and must contribute at least 100 hours of sweat equity. All of these features work together to make the home affordable to families with very low-incomes.
Since 2004, HAC awarded LVHC four rounds of SHOP financing to acquire and develop more than 200 residential lots in rural El Paso County. LVHC may retain up to 90 percent of the funding, which can then be used for similar affordable housing objectives. LVHC has used the “recoverable” portion of the HAC loans to repay the bank loan to buy the land and develop the lots. These savings are passed on to the homeowner, reducing the cost of the lot by at least 35 percent.
From March 2012 through December 2013, LVHC assisted 60 Self-Help owner-builders using SHOP funding. The homebuyers’ incomes ranged from $13,900 to $21,432. Over half of the families were headed by single women and the average age was 30.
LVHC is dedicated to helping lower-income residents of El Paso County to live in safe, decent homes in good neighborhoods that they can afford to pay for and that they are so proud to call home. The SHOP program helps us work with very low-income owner-builders and improve the quality of life in the Rio Grande Valley.
Nancy Hanson is the Executive Director of Lower Valley Housing Corporation in Fabens, Texas. LVHC, specializing in the production of mutual self-help housing, is dedicated to helping lower income residents of El Paso County to live in safe, decent homes in good neighborhoods.