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Myths & Realities

“Truth goes out the door when rumor comes innuendo.”-Groucho Marx 

OCEANA’S HOME Partnership is a local non-profit developer of affordable homes serving all of Oceana County since 1987. While we have generally operated with substantial community support, including the support of area officials at all levels, a proposal to develop a subdivision in Hart that we presented last fall ended with a very surprising turn of events: despite the unanimous approval of the Hart Planning Commission, a  motion to approve our plans died for lack of a second at the next Hart City Council meeting.

As we nursed our wounds from that encounter we continued to build successfully in other areas, including  our new Northland Crossing subdivision in the Village of Shelby. But the outcome in Hart remained a question in search of an answer. With a little time and distance we believe we’ve finally identified the most likely suspect — we didn’t complete all of our homework. This column is intended as the first installment of our make up work.

Very basically, we believe we allowed a relatively small group of opponents to define in general terms who we are and what we do  while we focused  too narrowly on the specifics of our proposal. As a result, that discussion generated more than its share  of misinformation — about us, about our housing products, about the need for affordable housing in general, about the place of affordable housing in our communities. And, that misinformation ruled the day, much as the Groucho Marx quote above suggests is often the case.

Without addressing the specifics of the earlier Hart proposal, which we’ll leave for another time and place, we’ll try to shed a bit more light on the fundamentals of our work in this space. In doing so we’re confident that we’ll find more than enough common ground on which all of us, residents and officials alike, can work toward better meeting the housing needs of the entire Oceana community.
 

 In a fundamental sense, housing is central to the way people live, how they feel about themselves, and their ability to develop self-esteem, be good parents and acquire the skills and stability necessary for work. -Rachel G. Brat, Department of Urban and  Environmental Policy, Tufts University

 
Housing is indeed fundamental. A national survey released just this last September by the National Association of Realtors found two thirds of Americans  concerned about the cost of housing in their communities and more likely to vote for a candidate who works to make housing more affordable. We believe most Oceana residents, including the Hart officials who rejected our earlier proposal, share this sentiment. Despite the area’s relatively low wage rates our once very favorable housing costs have been rising rapidly, pushed largely by recreation, resort and retirement incomes derived from higher wage markets outside this area. With local property values climbing more than 10% annually, far outpacing area wage gains, more and more residents, including those whose families have been long time area homeowners, are finding it impossible to afford that part of the American Dream.
Housing is just as fundamental to the well being of  communities as it is to individual families. Recent news coverage has identified a number of county wide concerns centered around the high cost of serving residents located well beyond the area’s existing communities and the utility and related services those communities provide. The Herald-Journal Viewpoint of February 12 discussing the cost of providing needed transportation to folks living without nearby access to basic services is the most recent example. Costs of providing ambulance service raised similar concerns over the past year. Add to that the cost of providing Sheriff patrols. Or of providing school bussing. Or of carving up more and more farmland for more and more 2 and 3 acre home sites. Even if the production value of area farms isn’t of concern to you given the ever growing role of large corporate farms elsewhere, what will the impact be on our sense of rural place or upon tourists who continue to value the area’s farmscape as much as they do our waterfronts? The blighting influence of an ever increasing supply of aging mobile homes has also been in the news of late. But without affordable alternatives, results are predictable: manufactured housing has become the fastest growing segment of the housing stock in rural areas, accounting for 38 percent of homes built in the last five years, according to the 2001 American Housing Survey.

Location issues apply within communities as much as they do to county wide concerns. In this context it has always made sense to families with children to find housing near schools. Doesn’t it make at least as much sense to school boards and  local councils and their taxpayers who pay for the costs of bussing and improving, repairing and patrolling the roads needed to move more and more students to and from more distant locations? Yet many of our communities make a concerted effort to keep “those” people, usually young families with starter home incomes, on the outskirts of town. This was not always the case. The housing booms of the late 40s and the early 60s which account for the lions share of existing homes in each of our communities provided “those” same young families with starter home incomes a number of housing choices close to schools, services and jobs.
Speaking of jobs, a recent Herald-Journal article also filled us in on the possibility that 50 new employees may soon be transferred to one of our communities. Add to this the often reported expectation regarding job growth in the area’s three Agricultural Renaissance Zones. Even if most of these new workers earn executive salaries, where will their administrative assistants, secretaries, and  janitors live with their families? In outlying areas or on the other side of town, further increasing the cost of serving these areas?

Hopefully, planning efforts currently underway at the county and local level, and similar efforts sure to follow as the need for more affordable housing options becomes ever more apparent, will begin to look at these life cycle and workforce housing needs, topics we’ll address again in  later columns. Stay tuned.  

 A rumor without a leg to stand on will get around some other way.  -John Tudor

MYTH: OCEANA’S HOME Partnership (OHP), Channel Housing Ministries (CHM) and Oceana Habitat for Humanity (OHFH) are all the same organization.

REALITY: OHFH has always operated entirely independent of CHM and OHP. Board members for CHM were instrumental in bringing the local Habitat affiliate into existence in 1994 but the two boards have always operated separately. CHM provided administrative support under contract to OHFH until late 2000 when OHFH was able to hire its own part time staff. CHM and OHFH continue to share a common mission and cooperate when and where they can, but how they are funded, staffed and operated are very different. Watch for more on this later in this series. As for OHP, there is no separate board or formal organization. OHP is a project of CHM.  The distinctive name was adopted when the CHM board reorganized in 1993 and began a housing program that was very different than the fix up, paint up type of small home repair projects  that had been the focus since its founding in 1987. Though other services have been added over time, that new in 1993 OHP project remains pretty much intact today — buying properties and building new or completely rebuilding existing homes for resale to new homebuyers.

MYTH: There is no need for an “affordable housing” program like OHP in Oceana County

REALITY #1: Oceana has the greatest housing need among all 83 counties in Michigan, this according to a just released publication from the Michigan State Housing Development Authority based on the latest census and unemployment data available.
 

REALITY #2:  According to a January 28, 2004 document released by the Michigan State Housing Development Authority the City of Hart has been identified as an Eligible Distressed Area (EDA). An EDA is an area that, because of disinvestment and demographic dislocation, represents underutilized infrastructure and exhibits higher than statewide average levels of economic distress.  More specifically, an EDA must meet all of the following requirements:  A. The municipality shows a negative population change from 1970 to the date of the most recent census.  B. The municipality shows an overall increase in the state equalized value of real and personal property of less than the statewide average increase since 1972. C. The municipality has a poverty rate, as defined by the most recent census, greater than the statewide average. D. The municipality has had an unemployment rate higher than the statewide average unemployment rate for three of the preceding five years.
 

REALITY #3: Area property values have been increasing by at least 9% annually in each of the last 10 years far outstripping area wage gains during that same time. Given this disparity and the economic distress identified above, there’s little room to wonder why the county housing needs score also cited above  is so high and why so many hard working Oceana families are finding it difficult to find and retain decent affordable housing. OHP is part of the solution but more is required. Private developers need to become more involved.  And  help is needed from local and county officials to help make that possible: help  in assembling land or at least identifying desired development areas with ready access to schools and services, help in extending roads and utilities needed to serve these areas, removing unnecessary regulatory burdens that make it far easier to build outside of town where all of us will pay more to serve those developments, etc.
 

MYTH: Non profits like OHP are taking work away from the private sector.
 

REALITY #1: The reverse is actually true. Except for funds used to administer our programs, all of our funding is paid to private builders, landlords, lenders, suppliers and other service providers, all of whom are private area business. Even those funds reserved for administration go to private area businesses and individuals. If OHP or some non-profit like OHP were not in existence none of these funds, about $1.4 million dollars in  2004 alone, would show up in the local economy at all because no one else serves the market we do. Not only is there not enough profit to be made, there is not enough return on investment at the time of sale to cover all costs.  Not quite the proposition that attracts private business to the task. OHP can do so only because we tap public and other patient investors in a manner that allows us to leave a significant investment in the home and to defer our return on that investment until the home is sold to buyers who would not otherwise qualify for our homes. Our builder partners, at least 5 general contractors and even more subcontractors, understand this. Rather than viewing us as competitors they view us as a client without whom they would not be building the 10 homes we hope to complete this year. 
 

REALITY #2: OHP is a private company. Except for our access to public and other patient investors that allow us to serve a market that private for-profit firms cannot otherwise serve as discussed above, the only real difference between OHP and any other private business in this community is that we do not distribute profits. All of our income is used to build or rehab homes and deliver related services. Any profit is reinvested in the same way.  
MYTH: Even accepting that OHP as a non-profit is a private business, it still has an unfair advantage over its for-profit competitors.

MYTH: Even accepting that OHP as a non-profit is a private business, it still has an unfair advantage over its for-profit competitors.

REALITY #1: If there is any unfair advantage, it is limited to two area’s of relatively minor impact: OHP is exempt from the Michigan sales tax and we can access a very small pool of public and other patient investment funds available only to non-profits. In either case, any advantage exists only because we occupy a niche in the market that no one else apparently wants to fill —  our for-profit counterparts could form a non-profit arm to access these same benefits as many for-profits across the state have done. In all other ways we are treated exactly the same: we and our employees pay the same payroll and income taxes, all of our properties are subject to the same real estate and transfer taxes, we buy our real estate and our supplies from the same sellers and at the same cost, etc.
 

REALITY #2: Even accepting that the above advantages are unique to OHP, we do not use them to compete with our for-profit counterparts for the same market. Instead of competing, we provide our for-profit partners access to a market that they otherwise could not profit from.
 

REALITY #3: More than not competing, we are working to encourage area for-profit developers to take a more active role in the affordable housing market.  A much larger pool of public and other patient investment funds than we currently tap is available to for-profit as well as non-profit builders. Area for-profit firms have done little to tap these funds. That’s not the case elsewhere. In fact, about 80% of the affordable housing in the US is provided by for-profit firms.  Non-profits alone cannot serve this entire market , here or elsewhere. Hoping to bring for-profits into the mix we are working with the Oceana Housing Council and the Community Foundation for Oceana County, sponsors of an area wide Housing Summit on March 31st at the Optimist Hall in Shelby. One of the scheduled presenters, Mark McDaniels of the Great Lakes Capital Fund, is expected to outline a number of funding sources and strategies available to for-profit developers interested in serving this market. Other public and private lenders are also expected to be available.
 

MYTH: OCEANA’S HOME Partnership (OHP)  builds migrant housing.
 

REALITY: While migrants are an important part of the area community and its economy and deserving of decent affordable housing, OHP has never built migrant housing. Since our reorganization in 1993  when we first embarked on what is still our basic home building program, all of our homes have been sold to Oceana residents who occupy their home as their principal place of residence, generally meaning at least 8 months in any 12 month period. That requirement is built into eligibility guidelines at entry to our program and  into  mortgage documents at completion, making properties that no longer meet that requirement subject to foreclosure. If the critics meant to say that we serve Hispanic families, we proudly acknowledge that our home sales roughly match the makeup of the area’s population — about 15% of our homebuyers are Hispanic. Some of these families did settle out of the migrant stream but they did so with enough permanence and success to qualify for required mortgage financing. Its also worth noting in this context that Fair Housing has been the law for nearly 40 years and we are committed to Fair Housing principles, just as we believe most Oceana residents are.
 

MYTH: OHP gives homes away to families who cannot afford to maintain them.
 

REALITY #1: All OHP homes sold in the last 10 years have been sold to families at their appraised value on affordable terms. Affordable in this context is based on the same criteria banks use to determine how much mortgage borrowers can handle without limiting their ability to meet other obligations, including property maintenance. Generally that means buyers can devote no more than 30% of their income to meet housing costs. Where there is a gap between what buyers can afford to borrow under these guidelines and the price of the home, OHP offers a second  mortgage that defers that portion of the principle. The biggest difference between the OHP second mortgage and those commonly provided by other sellers is that the OHP second is deferred with no interest charged for as long as the home remains the original buyer’s principal place of residence. Where that no longer applies or when ownership transfers to new owners, the OHP second is paid off. Otherwise, the OHP homebuyer is treated like any other buyer — they must qualify for financing from the same sources and under the same terms as everyone else.
 

REALITY #2: The financing mechanism for homes sold in 2004 and future years will be slightly different but the basic principles remain. Instead of a second mortgage to fill the affordability gap when the home is sold and later “recapturing” that value when ownership transfers in some future year, OHP will “retain” the value of the land at the front end by placing the land in trust, selling only the improvements on the land—the home, garage and related drives, walks and patios— and leasing exclusive rights to use the land to the homebuyer under a 99 year renewable lease. Here, the retained value of the land is expected to fill the affordability gap, making the second mortgage unnecessary. The CLT, by retaining ownership of the land, also retains equity gains attributable to the increasing value of the land, providing a means for assuring the long term affordability of the home first developed by OHP, an outcome not possible with second mortgages. Then, with fast rising property values,  homes frequently sold outside the affordable market in as little as three years. Additional CLT details are available in our sales brochure. Call 873-2222 and we’ll send one to you.
 

MYTH: OHP homes are sold to “those” people on terms that really don’t give them a stake in caring for their home or yard or their neighbors for that matter.
 

REALITY: Current OHP home designs and pricing serve families very much like the working families who already live here and who earn at or near the median income. “Those” people, it seems,  turn out to be our friends and neighbors and relatives who together pay for the largest share of area services. Over the years we’ve been able to serve families earning as low as 30% of the area median income. But today, as our housing costs have risen, and the expectations of our funding sources have changed, so have the incomes of the buyers we’re able to serve. Today OHP’s target buyer is between 60% and 80% of the area median income. For a family of four that means an annual household income of between $28,980 and $38,650. More directly our lowest cost home requires a mortgage of about $70,000 which in turn requires a total household income of about $26,263 annually or about $12.63 per hour for one wage earner working full time year round. At the higher end the required mortgage is about $90,000 which requires a total household income of about $33,330 annually or about $16.03 per hour for one wage earner working full time year round. For the most part, the homes and yards of our buyers are indistinguishable from their neighbors. Only two foreclosures have occurred among more than 80 home sales over 10 years. The stakes appear to be more than adequate. 

This table compares these numbers with median household and family incomes for selected area places.

MYTH: OHP homes are built to a lesser standard than other homes.
 

REALITY: Local contractors build OHP homes using locally purchased materials. These are the same builders using the same materials with the same warranties found throughout the area. Construction standards meet or exceed all codes and all homes are designed  to ensure energy conservation and ease of maintenance. We’ll put our homes up against  any on the market. To take a look at our current projects we strongly encourage you to visit Northland Crossing on the East side of Shelby just off Ferry Street near the Village limits.  We’re certain you’ll be pleased. And by all means watch for open house announcements this Spring and Summer.

MYTH: OHP homes do not fit in with surrounding properties.
 

REALITY: While there may have been a time in our early history when our new builds were noticeably plain or absent some amenities, that has never been true of our rehabs. And it is no longer true of our new builds. As discussed below our projects are not expected to be least cost developments. Instead they are expected to be lead investments that encourage other builders and homeowners to follow. Porches, garages, sidewalks, street and exterior lighting and landscaping are included in every project. Take a drive by our new Northlands Crossing project on the East side of Shelby just off Ferry Street near the Village limits.  We’re confident you’ll find the design and layout pleasing to the eye.
 

MYTH: OHP homes reduce the property values of surrounding homes.
 

REALITY: Exactly the opposite is true. OHP projects are funded in part by the state housing authority's Office of Community Development  to encourage for-profit builders and homeowners alike to make needed infill and rehab investments in distressed communities and neighborhoods where appraisals or returns on investment currently offer little incentive. The objective is not just housing but community and neighborhood development. Our projects are considered lead investments  that will over time encourage other investors to follow. This has already begun to occur in modest ways in many neighborhoods where we’ve worked. 
 

Rumor travels faster, but it don't stay put as long as truth.  -Will Rogers