It’s no secret that the institutional money that once funded mortgage originations now finances companies that buy houses available only as rentals. Result: Low-and-moderate-income home buyers who could afford a home have essentially been shut out of the market.
At the same time, home prices in many working-class neighborhoods in the Bay Area are at their lowest levels in over a decade. Faced with this opportunity, we’ve brought the private, philanthropic, and non-profit sectors together to address a nationwide issue through local investments.
A Solution You Can Help Grow
Right here in the East Bay, we have created a model that can be used nationwide to acquire, rehabilitate, and offer for purchase by low-and-moderate-income families some of the nation’s 2.2 million foreclosed homes.
With seed money from the East Bay Community Foundation, two of our individual donors, and three of our corporate partners, the Foundation has put together a system with five participants from the for-profit and nonprofit sectors that has so far acquired 11 homes. Five have been sold to low-moderate income families. The others are in contract for sale or in stages of re-hab.
Families in those homes have combined mortgage and insurance costs less than their previous rents. They acquire full equity rights to their homes. The program is self-funded with profits from the sale of each home plowed back into the project for acquisition and rehabilitation of subsequent homes. The only government participation in the project is matching money for potential down-payment assistance.
As one of our homeowners puts it: “Homeownership has big rewards. It’s life changing.”
It Really Works
Here’s how we do it:
- Staley & MacArthur, a for-profit real estate development firm, helps identify properties for the project and rehabilitates the homes.
- The non-profit Self-Help Community Development acquires the homes to eventually sell to low-and-moderate income families and oversees the entire acquisition, rehabilitation, and re-selling process.
- One PacificCoast Bank is providing financing to acquire and rehabilitate the homes.
- The East Bay Community Foundation and its funding partners provide money to a bank for a fund that guarantees the project against losses in case a house is not sold for an amount above the originating acquisition and rehabilitation costs. The fund also acts as a line of credit that enables the project to acquire foreclosed properties with “cash in hand.”
- The non-profit Community Housing Development Corporation of North Richmond helps to identify qualified families and provides them with financial counseling, down-payment assistance and post-purchase counseling.
- The nonprofit East Bay Asian Local Development Corporation also helps to identify qualified families.
The project — funded by the Cordes Foundation and the Randall T. Lang Fund, both under the umbrella of the East Bay Community Foundation, and by three corporate partners — has been recognized by the Council on Foundations and by the Federal Reserve Bank of San Francisco as a unique best practice.