An Opportunity for Bellingham First Time Home-Buyers
Four months ago I got a call from a woman named Susan Burke, an economics professor at WWU.
She and her friend Jodi Litt had created a program to help people who wanted to get into home-ownership, but couldn't afford it on their own.
She explained how the program worked, and how they had helped two buyers with no down payment funds, and who did not qualify for a mortgage proportionate to Bellingham's prices, not only achieve home ownership but also gain 6 figures in equity.
They had additional properties that fit into the program.
They had one local lender fully on board, and were interviewing others.
They were being asked by cities and foundations to speak and give presentations.
She was calling me, Susan explained, because they were ready to develop and expand the program, and could they come on board at BNP to do so?
I'll explain what they created, and where things are at today.
The struggle is real
Bellingham's single family median price over the past 90 days has been $716,000.Those homes sold in a median time of 6 days for just over 3% above list price.
That is indicative -- like the past few years -- of multiple buyers competing for the same homes.
For the successful buyer of that median home, the monthly cost is no joke.
With a 20% down payment and a 6.3% interest rate, add in taxes, insurance, utilities and general maintenance, the cost is about $4500/month, or $54,000/year.
If a household spends more than 30% of their income on direct housing expenses, they are considered "cost burdened.
"For that median home above, if your household brings in less than $180K/year, you are considered cost burdened.
Per the most recent data from the US Census Bureau (Note: this link is no longer active), $180K/year is about 300% of the median household income in Bellingham.
Hence, the local housing crisis.
Yet home-ownership continues to be the #1 path to wealth-building and stability -- not in spite of those price tags, but because of them.
Over the past 20 years, Bellingham's annual appreciation rate on that median single family home has been 6.56%.
It is a time for creative programs to help people overcome the income-to-housing cost gap, and to help more renters become homeowners.
The Birth of "A Hand Up Home"
Susan and Jodi, who I mentioned earlier, took inspiration from an experience Susan had in her early 20's in Palo Alto.
As a young professional in the Bay Area, Susan wanted desperately to buy a home.
She saw home ownership as a gateway to housing stability and wealth generation.
However, she didn't have family money to get her started, and couldn't save enough for the down payment.
An acquaintance saw Susan's determination to succeed and invested in a starter home with her.
It was her step onto the real estate escalator, and she continued her ownership and wealth-building-through-equity journey since that first home.
Decades later, Susan shared her story with Jodi, and a plan was hatched to help others do the same.
Thus, their program, A Hand Up Home, was born.
The Basics: What is this program?
A Hand Up Home (AHUH) partners investor money from a Social Impact Investment Fund, with would-be home buyers who don't have the full down payment + closing costs in savings, or the income level needed to qualify for a purchase on their own.
The buyer who will move into the home, called the "occupant partner", goes through the traditional pre-approval process with SaviBank here in Bellingham (other banks are being interviewed to join the program).
However, the occupant partner must only only qualify for a portion (30-50%) of the total purchase amount.
The investors put up the balance of the purchase price as cash, so the total purchase amount is raised between the two parties.
The property itself must be a multi-unit property like a main house with an accessory dwelling unit (ADU), or a duplex, for example.
The occupant partner lives in one of the two units, paying their share of the mortgage and rent for the % that AHUH owns, and rents out the other unit at the market rate.
All operating expenses like taxes, insurance, utilities, maintenance and repairs -- and the rental income -- are split with the AHUH investors at the same proportion as the ownership stake.
All monies, as well as the bookkeeping and accounting, are handled by an AHUH administrator, and there is a brief meeting with the occupant partner once a month to ensure everyone stays on the same page.
Building wealth over time
The owner occupant lives there, participates in the management of the property and the rental income, and -- significantly -- also participates in the equity gain over time.
The owner occupant can, after a minimum holding period of 3 years or so, choose to:
Buy the investors out entirely (refinance) and keep the home.
Incrementally buy more of the ownership stake, such as 10% per year, etc.
Or sell the home and take their share of the equity, moving on to something else.
Notably, these are not "permanently affordable homes" like other programs such as Kulshan Community Land Trust or Habitat for Humanity.
There is not an income maximum that excludes some buyers from participating, nor a requirement to help physically build the structures.
A Hand Up Home meets with candidates of the program, takes them through an interview and, for those interested in partnering, a mandatory class.
In the words of A Hand Up Home on the program's website, the occupant partner could be described this way:
You have stable/ steady employment, good credit, and the ability to pay closing costs and/or part of a down payment.
You are on an upward income trajectory with solid career goals in view and an understanding that real estate brings not only stability to housing, but also generates real wealth.
You are hungry to get into real estate and need a break to get started.
You possess an ability to think out of the box and realize that your first home may not be your forever home.
Most importantly, you see that the sooner you can get into home ownership the better.
