November 6, 2024 • 23 mins
Navigating the path to homeownership can be challenging, especially in today's market. In this episode of The Community Effect, Marietta Rodriguez and Jason Peterson delve into the hurdles first-time homebuyers face, including rising costs and racial disparities. Discover how NeighborWorks provides vital resources like down payment assistance programs and financial counseling to empower individuals and families on their journey to homeownership.
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Episode Transcript
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Voiceover Narrator (00:00):
In every corner of America, there are stories of
resilience, innovation, and theunwavering spirit of community.
Welcome to The Community Effect, thepodcast where we explore the intersection
of community development, affordablehousing, and the impact it has on us all.
(00:21):
The Community Effect, a podcast hostedby Marietta Rodriguez, President
and CEO of NeighborWorks America.
Marietta Rodriguez, President & CEO, NeighborWorks America: Welcome back, listeners, to another (00:30):
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episode of the Community Effect Podcast.
Today we are talking about one ofthe most significant steps many
people will take in their lives.
And that is buying a homeor achieving homeownership.
The journey to a first home can be a longand complicated one, but NeighborWorks and
our partners design tools and have peopleto make the process a little bit easier.
(00:55):
Joining me today to talk aboutsome of those resources and how you
can access them is Jason Peterson.
He's the executive director ofNeighborWorks Home Partners.
An organization based in St.
Paul, Minnesota that helpsresidents of the Twin Cities realize
their dream of homeownership.
Jason, welcome to the show.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Thank you, Marietta. (01:15):
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Thank you for having me.
I'm
Marietta Rodriguez, President & CEO, NeighborWorks America: really excited for this conversation. (01:16):
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Let's start by acknowledgingthe challenges that people
face on the homeownershipjourney because there are many.
What are the financial hurdlesthat your team sees the most?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, still, inventory is a challenge. (01:31):
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There just are not enoughhouses for sale out there.
A healthy housing market has four tosix months of available inventory.
It's easing a bit.
It's about four months across theUnited States, but here in the Twin
Cities, it's less than three months,so that's certainly a challenge.
A second challenge we see is the cost.
The cost of home ownershiphas really increased.
As is the cost of housing in general.
(01:53):
We've seen prices increase upwards of50 percent in the last five years in
many of the neighborhoods that we serve.
And couple that with the risingmortgage rates, the cost of
insurance we've really seen.
While there are a number of myths outthere about needing 20 percent down and
different pieces like that, that justaren't true, there still is that initial
financial barrier to homeownership.
Marietta Rodriguez, President & CEO, NeighborWorks America: And what are the ways that NeighborWorks (02:13):
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Home Partners helps support someonewho's interested in buying a home?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, first and foremost, I think it's (02:20):
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going to be getting that knowledgeand those tools and those resources.
It's that homebuyer education.
It's the one on onehome ownership advising.
So that's delivered in a group setting orin an online setting, and that provides a
really great overview of what to expect.
And looking at your individualsituation and finding out, hey, these
(02:41):
are the things that I need to work on.
I might need to decrease my debt.
I might need to look at my budget.
And so it's really working on those keypieces, um, with a HUD approved counselor.
The nice piece about somethingthat has come up after the COVID
pandemic is gonna be the ability todo a lot of the services virtual.
So I know in our organization, we'rereally able to help folks with those
(03:02):
services all across the state ofMinnesota, and I know a number of our
NeighborWorks America peers all acrossthe country are able to do that as well.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think a lot of people who may be (03:10):
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looking to buy a home or interested inhomeownership Don't realize that there
are these free services that can helpthem learn how to buy a home, learn about
all the people that you encounter whenyou buy a home, a realtor, an insurance
agent, an inspector, a mortgage lender,and they all play a different role.
(03:34):
But we don't buy homes every day.
So having someone guide us throughand share what's happening in that
community I think that's one of thebiggest secrets to homebuying is
that there are homebuyer coaches andcounselors out there that will really
ride alongside you every step of the way.
(03:55):
It can make a big difference.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, it can make a huge difference. (03:57):
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Working with a HUD approved counseloris a really important piece, but
then our organization, our partnerorganizations then really tap
into the industry professionals.
So, as you mentioned, in our homebuyereducation, we bring in a A loan officer,
a realtor, a home inspector, and soreally having those professionals
in to talk about what they do everyday, but then also have that, either
(04:19):
that one on one engagement or thatgroup engagement to talk about that.
After each Homebuyer Education Workshop,and over 90 percent of our survey
respondents, their response to a questionof, what would you have done different
is, I would have taken this class sooner.
Marietta Rodriguez, President & CEO, NeighborWorks America: Jason, if someone is in St. (04:32):
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Paul, Minnesota, obviously, orin the Twin Cities, they can look
for NeighborWorks HomePartners.
To hook up with a housingcounselor, a home purchase advisor.
But if you're not fortunate tobe in the Twin Cities, where
could you find these services?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Fortunately, HUD nationally does (04:48):
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keep a database now of HUD approvedcounselors and HUD approved counseling
agencies, so that is a greatplace to start is HUD's website.
Also, I would encourage folks to checkout NeighborWorks America's website
because NeighborWorks America hasgreat organizations all across the
country that provide similar services.
Marietta Rodriguez, President & CEO, NeighborWorks America: Obviously, homeownership is a critical (05:09):
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tool for stability of a family, butalso for building wealth within that
family and not just for the familythat lives in the home, but we've seen
generational and family wealth growfrom owning property in this country.
Unfortunately, we've seen so manycommunities of color and low wealth
(05:32):
communities left out of this opportunity.
I know that you've designed some programsthat are really addressing the racial
inequities in homeownership straight on.
Tell us a little bit aboutsome of those efforts.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, so In the state of Minnesota, (05:46):
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we are in the unfortunate position tohave one of the larger racial disparity
gaps in homeownership in the country.
Just to give a specific example, in 1950,46 percent of black families owned a home.
In 2020, seven years later, And only 25percent of black families own a home.
(06:07):
So that decreased by 20%.
So we certainly have some verylarge disparities here in Minnesota.
A one tool that we started to pilotin 2017 was a first generation
down payment assistance program.
A key component of homeownershipis wealth generation.
The average homeowner hasnet wealth of about 250, 000.
(06:30):
The average renter has a net wealth ofabout 6, 000, and so a first generation
buyer is not likely to have that familywealth to make that initial down payment.
So a focus for our program wasthat first generation piece.
We piloted that program for aboutthree years and found out that over
90 percent of the folks utilizing thatprogram represented BIPOC communities.
(06:51):
And so we worked with our statelegislators and our state finance agency.
And in 2023, we were able to launcha 150 million first generation
down payment assistance programhere in the state of Minnesota.
That program now a third ofthe dollars have been utilized.
And about 80 percent of thosedollars are going to BIPOC
(07:13):
families to purchase a home.
Marietta Rodriguez, President & CEO, NeighborWorks America: That's amazing. (07:14):
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Congratulations.
Thank you.
And with that program, whatcan someone expect to receive
in down payment assistance?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, so that program you can expect (07:22):
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to receive under its, under the wayit's currently structured is about
32, 000, between 32, 000 and 35, 000.
Our average home price here is about320, 000, so that's about 10 percent
of the purchase price, so that,that's, that's a significant amount.
Um, what's important for us in the waythat program is structured is it is
(07:43):
structured in a forgivable manner, andso it forgives over a five year period.
Marietta Rodriguez, President & CEO, NeighborWorks America: So if the family or the buyer sells that (07:48):
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home Before that five year term, then theywould pay a portion of that back to the
Jason Peterson, Executive Director, NeighborWorks Home Partners: fund. (07:55):
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That's correct.
Yep.
It's pro rated based on that.
Correct.
Marietta Rodriguez, President & CEO, NeighborWorks America: So essentially you're like (07:59):
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everybody's rich uncle.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Essentially what we're really trying (08:02):
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to do is even the playing field.
I was fortunate when I was younger,my parents were able to provide
me with a small down payment.
I bought a very modest home, but thatwas the reason I was able to do that.
And there are a lot of folksthat aren't able to do that.
So that's really our goalis to really focus on that.
Marietta Rodriguez, President & CEO, NeighborWorks America: Your organization built a great (08:17):
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capacity to make down payment assistanceloans through a program called LIFT.
Am I right about that?
Jason Peterson, Executive Director, NeighborWorks Home Partners: The Neighborhood LIFT program was a (08:28):
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great program for our organizationand our markets as it also provided
a significant amount of downpayment in a forgivable manner.
There was at one point when almost4 percent of the transactions
occurring in Minneapolis and St.
Paul had a Lyft loan attached to it.
So it had real impact.
It was really amazing.
(08:49):
But not only did it impact so positivelythe community, but also our organization.
It provided us not only thecapital, but also the technical
assistance and the expertise.
We were able to get the systems weneeded in place, bring on the staff.
And most importantly, I think showthat not only could we do this, but
(09:09):
it can be done at a large scale.
And when I was testifying for this firstgeneration down payment program, one of
the questions, was there enough inventory?
And this was in 2023, and we had justfinished up our most recent round of Lyft.
And I was able to point back to,we have had success at that scale
with the program post pandemic.
And so really highlighting like thisworks not only for an organization,
(09:32):
but also within the community.
Marietta Rodriguez, President & CEO, NeighborWorks America: For those of you that may not realize, (09:34):
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LIFT was an initiative where NeighborWorkspartnered with Wells Fargo to provide
down payment assistance to over,ultimately over a 12 year period,
25, 000 people and over 80 marketsnationwide, including Minnesota.
And it really did jumpstart themarket for first time homebuyers.
(09:56):
Right now, Jason, you're alsorunning a pilot program for
Halal Mortgage Financing.
What does that program look like?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah. (10:05):
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So, um, we also piloteda program about 2018.
I'm working with fee based firstmortgage financing, and so those are
folks that are accessing fee basedlending who are interest adverse.
That is, uh, an area, we have alarger population within Minnesota
that seeks to access that type ofprogram, and there was not resources
(10:27):
available for the down payment.
Most of the down payment assistancedid not pair with fee based first
mortgage financing, We had such successwith that that we actually went to
our state legislature in 2023, um,to seek some additional dollars to
bring that statewide when we receiveda 10 million appropriation to be
able to really expand that work.
Marietta Rodriguez, President & CEO, NeighborWorks America: And tell us about when you say (10:49):
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fee based, how is that differentthan another lender, for example?
Jason Peterson, Executive Director, NeighborWorks Home Partners: There's no interest involved in (10:56):
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the transaction, and so that,that's the big difference.
While there is not interest, thereare fees, so the cost is not less.
So I do want to highlight this isn't.
It's an interest free program.
It is just structured differentlywhere, due to religious purposes,
interest is not something that isacceptable within a real estate
transaction for certain communities,and so it's structured as a fee based.
(11:18):
And so we structure our program andwork with first mortgage lenders
who are working with that community.
Marietta Rodriguez, President & CEO, NeighborWorks America: What I'm hearing from you And I (11:25):
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think is an important point isflexibility and meeting the customer
where they are is really critical.
Are there other examples where yourorganization has been able to be more
flexible than what you might see ina traditional financial institution?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, I think that's critical, especially (11:44):
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as we're looking at focusing onaddressing the racial disparity gap.
Another example is we are participatingwith two partner organizations on a
special purpose credit program right now.
So this down payment program focuseson serving foundational black families.
So these are families that have beentraditionally Not served, um, but
(12:05):
you know, have been living in theUnited States now for centuries.
And so this program provides somesignificant down payment assistance
to foundational black families.
Another example I'd like to raiseup would be we're about to launch
a unique first mortgage program.
That will be serving folksbuying manufactured homes
(12:26):
on cooperatively owned land.
And so this is a really unique placethat's, um, hasn't had a lot of interest.
Hasn't had a lot of, uh, willingness fromtraditional lenders, but has a huge need.
You know, you can purchase a manufacturedhome in Minnesota for about 150, 000.
Um, and so it's one of the few kind ofreally affordable places to do that.
(12:47):
Um, and unfortunately, a lot of themanufactured home parks in our, in our
states, um, are owned by investors.
And so that's really challenging.
So we're partnering with agreat partner in North Country
Cooperative Foundation who works to.
Organize these co ops so folks will beable to buy and own their land, own their
space, and then we are financing those.
Marietta Rodriguez, President & CEO, NeighborWorks America: Those are great examples. (13:08):
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I love the manufacturedhousing work there.
I think that's a market that has beenignored for a long time and unsupported.
So congratulations.
On that work.
Let's zoom into the homeowner.
We talked about homebuyer education,getting that done, but let's, let's
even, you know, zoom out if you maynot be ready to buy today, but you
(13:30):
know, it's something you want to do.
How would you recommend?
Someone get ready for the purchase.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Um, the first step that I would (13:36):
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suggest is to connect with aHUD certified housing counselor.
The first question to find out is whereyou're at in that home ownership journey
and how close you are to being ready.
Your credit score affects the typeof mortgage you can get and the rates
you can get, your savings or debt.
And a big thing is understandingthen too, what you can afford.
So just because you might bea pre approved for a certain
(13:58):
amount with the first mortgagelender, Like what can you afford?
You never know when that rightopportunity is going to come for you.
So I would really strongly suggest that ifyou work, um, with a HUD approved housing
counselor, they're going to be able toprovide that really that roadmap for you
on what that looks like and whether or notthat is one year, five years, 10 years.
One of our counselors just celebrated,uh, the purchase of a home with
(14:22):
one of their clients who they hadworked with for over 10 years.
Wow.
Um, and so, you know, you neverknow when that's going to be, so
that would really be my first step.
Marietta Rodriguez, President & CEO, NeighborWorks America: I'm wondering if you think the pandemic (14:29):
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changed the housing market significantly.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, it did for sure. (14:36):
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We've, I think one of the challengesthat we still see is the inventory piece.
Coming out of the great recession,we definitely had a number of home
builders that moved out of thatmarket here that did start to pick up.
But then when COVID hit, wehad a number of folks that
moved back out of that space.
I think an opportunity certainly isthe shift and where folks can work
and the work from home environment.
(14:58):
The other piece that, that we've seenchange a bit in our market specifically
is more shared equity opportunities.
So that would be maybe purchasingin a land trust or looking at a
cooperative opportunity, lookingat accessory dwelling units.
And so there's been some interestingopportunities for ownership that
I don't think were as present.
And I think that.
(15:18):
That has come about also as a result ofthis pandemic and people really looking
at where they want to spend theirtime when they're spending their time.
So I think that there's some coolthings that are happening that
came as a result of that, butthere's a lot more opportunity.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think that is something that we'll see (15:31):
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more proliferation and that may dictatethe kind of home you're looking for.
You may need more space toaccommodate a workplace or a desk.
You mentioned shared equity and you gaveus some examples, but for someone who
may not be completely familiar with theterm, unpack that a little bit for us.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Sure. (15:52):
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So in a traditional home ownershipsituation, somebody would
say own a single family home.
So they would own that home on their own.
There's shared equity situationswhere really that equity is
shared, that ownership is shared.
So looking at, for example, a landtrust model, in that case, somebody
does own their home, but they areleasing their land, but they are then
(16:13):
working with that community basednonprofit with that property to be
able to have an ownership opportunity.
And then when they move on, that remainsa home ownership opportunity for others.
If you look at different co op models,it's folks coming together that may
not have been able to purchase ontheir own to purchase that together.
That's very powerful.
(16:33):
So you then get to make decisions,you get to have control, and then
you do have equity out of that.
It is shared, but you do have that equity.
Marietta Rodriguez, President & CEO, NeighborWorks America: And are you finding in those (16:41):
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situations, resale is a challenge?
Because it's a little bit of adifferent flavor of homeownership.
Jason Peterson, Executive Director, NeighborWorks Home Partners: We are not finding that (16:49):
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as a challenge at all.
If you look at the land trust model,usually if somebody purchases a
land trust home, it's usually at amuch more affordable purchase price.
When they do choose to sell, theydo not get the entire appreciation
of the equity in that time.
That is shared and that is actuallyreinvested back into the property.
But we've seen no challenges withfolks being able to sell that.
(17:11):
You walk away with less money,but the amount you need to get
into home ownership is also less.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think your organization has done an (17:17):
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incredible job of really understandingthe market dynamics and what the needs are
with the programs that you've discussed.
Let's look a little bit into the future.
What do you think you'll beworking on in the next decade?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Something that is really starting to (17:32):
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be more of a focus for us is going tobe that home ownership preservation.
For us, we've started to domore post purchase advising.
We've incorporated this intosome of our programs to really
provide that ongoing support.
As we're working with folks that mightbe first generation homebuyers or folks
that don't have that experience, it'sreally helping folks understand what home
(17:54):
ownership is, and then we've been ableto tie that to some financial incentives.
We were just working with a family whopurchased about six months ago, and
through this post purchase opportunity,we were able to provide a 5, 000
grant, and their water heater went out,so we were able to cover that cost.
I think on the purchase side, I thinkwe're going to see more shared equity.
I really think we are.
(18:14):
It's a way for folks to get intoproperties, um, in a more affordable way.
And I do think that we're going to seea lot more folks that are going to be
moving away from some of the urban cores.
But also, um, different types ofstructures within the urban core.
So I'll give you a specificexample in the city of Minneapolis.
They actually lifted a lot of theresidential zoning requirements.
(18:35):
And so now there's a lot more opportunityto build accessory dwelling units or
other different, um, types of structureswhere you can have a little more
density, which is an important piece.
Cause again, we need moreplaces for folks to live.
So.
Those are areas that I thinkwe'll continue to see growth in.
Marietta Rodriguez, President & CEO, NeighborWorks America: One of the things that I think is truly (18:52):
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remarkable about your work and yourstory in the Twin Cities is you've been
able to build capacity to take someof these more specialized programs.
online, but also take them to scale.
And you've been able to access statefunding or government funding in a way
that has really not been available.
(19:15):
How were you able to serve upyour capacity so that it garnered
political will to also invest?
Jason Peterson, Executive Director, NeighborWorks Home Partners: I will go back to Neighborhood (19:24):
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Lift and some other really greatcapacity building support that
NeighborWorks America has provided.
That's really been importantfor us to be able to show that
we can do this well at scale.
Once we were able to showthat, we really started small.
So we started working with cities,doing down payment and home
(19:44):
repair programs within a numberof cities around the Twin Cities.
Then we started working with counties.
And then we really started working withlegislators, but it was a lot of time.
We spent a lot of time with legislators.
I spent a lot of timetestifying, but well worth it.
It's been really exciting to really sitdown with legislators and talk through
solutions that we've proved the conceptout and they're really excited about that.
Marietta Rodriguez, President & CEO, NeighborWorks America: And it seems like it's (20:07):
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a nonpartisan issue.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, it is a nonpartisan issue. (20:09):
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Actually, we had the bill comeforward two years in a row.
The first year, we actually had aRepublican put the bill forward.
The second year, we had aDemocrat put the bill forward.
And we had support fromboth sides of the aisle, so.
Marietta Rodriguez, President & CEO, NeighborWorks America: One thing we haven't spoken about, but I (20:21):
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sure is top of mind, particularly beingin a state like Minnesota, but how do you
think about climate and climate resilienceshaping the journey of a home buyer?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, that's a really important (20:35):
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piece, especially as we focus on somemodels that haven't been focused on
before, such as manufactured housingand some of these different pieces.
Um, I mean, certainly, you know, theextreme weather, um, that we face
in Minnesota, um, is different, youknow, across other parts, but we
still have a lot of extreme weather.
So what we've been really focused on, onour home repair side, but then also when
(20:59):
we help folks buy homes is, um, makingsure that you're understanding what
you're getting into and the cost of that.
Because.
You can get into, you know, situationswhere, um, you, you're not thinking
about what that extreme weather or whatthat climate change might do to that.
And so.
Marietta Rodriguez, President & CEO, NeighborWorks America: Home buying can be very seductive, right? (21:14):
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You fall in love with the house.
You're starting to picture yourfurniture there or what your
yard is going to look like.
I don't know, you're pretty busy andyour organization is pretty busy, so you
may not go to very many home closings,but when you or your team hands over
the keys to a brand new homeowner,tell us about what that emotion is.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, that's why we do it. (21:40):
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That's why we get up every day.
It's just the thrill of it's amazing.
We work with so many people thatnever thought it would be achievable.
And you walk into the closingswhere there's kids and they're like,
I can't wait to get to my room.
I can't wait to have a room.
It's just incredible.
And in any given year, we helpabout 300 families buy a home.
We help about 150families keep their home.
(22:03):
We're always so thrilled and sohappy for each and every family.
Marietta Rodriguez, President & CEO, NeighborWorks America: It's changed their lives forever. (22:07):
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Jason Peterson, Executive Director, NeighborWorks Home Partners: Forever. (22:09):
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Yes.
Yes.
It's amazing.
Marietta Rodriguez, President & CEO, NeighborWorks America: Well, Jason, I've really enjoyed (22:12):
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hearing about these programs, enjoyedhearing about what you're doing.
It's incredible.
Thank you for what your team andwhat you do every single day in
Minnesota for the Twin Cities.
It's remarkable.
And please continuedoing what you're doing.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Awesome. (22:30):
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Thank you so much for having me, Marietta,and I greatly appreciate NeighborWorks
America's support in our work.
Marietta Rodriguez, President & CEO, NeighborWorks America: As we wrap up today's episode, I want (22:38):
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to encourage all of our listenersto check out NeighborWorks America's
homeownership programs at www.
neighborworks.
org, especially for those of youthat are looking to take the next
step in buying your first home.
There is a directory you can lookup a NeighborWorks organization.
We have organizations in everystate including the District
(23:00):
of Columbia and in Puerto Rico.
Thank you Jason for joining us todayand thank you listeners for joining us.
Until next time, thisis The Community Effect.
Voiceover Narrator (23:13):
This is The Community Effect brought to
you by NeighborWorks America.
In every corner of America, there are stories of
resilience, innovation, and theunwavering spirit of community.
Welcome to The Community Effect, thepodcast where we explore the intersection
of community development, affordablehousing, and the impact it has on us all.
(00:21):
The Community Effect, a podcast hostedby Marietta Rodriguez, President
and CEO of NeighborWorks America.
Marietta Rodriguez, President & CEO, NeighborWorks America: Welcome back, listeners, to another (00:30):
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episode of the Community Effect Podcast.
Today we are talking about one ofthe most significant steps many
people will take in their lives.
And that is buying a homeor achieving homeownership.
The journey to a first home can be a longand complicated one, but NeighborWorks and
our partners design tools and have peopleto make the process a little bit easier.
(00:55):
Joining me today to talk aboutsome of those resources and how you
can access them is Jason Peterson.
He's the executive director ofNeighborWorks Home Partners.
An organization based in St.
Paul, Minnesota that helpsresidents of the Twin Cities realize
their dream of homeownership.
Jason, welcome to the show.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Thank you, Marietta. (01:15):
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Thank you for having me.
I'm
Marietta Rodriguez, President & CEO, NeighborWorks America: really excited for this conversation. (01:16):
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Let's start by acknowledgingthe challenges that people
face on the homeownershipjourney because there are many.
What are the financial hurdlesthat your team sees the most?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, still, inventory is a challenge. (01:31):
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There just are not enoughhouses for sale out there.
A healthy housing market has four tosix months of available inventory.
It's easing a bit.
It's about four months across theUnited States, but here in the Twin
Cities, it's less than three months,so that's certainly a challenge.
A second challenge we see is the cost.
The cost of home ownershiphas really increased.
As is the cost of housing in general.
(01:53):
We've seen prices increase upwards of50 percent in the last five years in
many of the neighborhoods that we serve.
And couple that with the risingmortgage rates, the cost of
insurance we've really seen.
While there are a number of myths outthere about needing 20 percent down and
different pieces like that, that justaren't true, there still is that initial
financial barrier to homeownership.
Marietta Rodriguez, President & CEO, NeighborWorks America: And what are the ways that NeighborWorks (02:13):
undefined
Home Partners helps support someonewho's interested in buying a home?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, first and foremost, I think it's (02:20):
undefined
going to be getting that knowledgeand those tools and those resources.
It's that homebuyer education.
It's the one on onehome ownership advising.
So that's delivered in a group setting orin an online setting, and that provides a
really great overview of what to expect.
And looking at your individualsituation and finding out, hey, these
(02:41):
are the things that I need to work on.
I might need to decrease my debt.
I might need to look at my budget.
And so it's really working on those keypieces, um, with a HUD approved counselor.
The nice piece about somethingthat has come up after the COVID
pandemic is gonna be the ability todo a lot of the services virtual.
So I know in our organization, we'rereally able to help folks with those
(03:02):
services all across the state ofMinnesota, and I know a number of our
NeighborWorks America peers all acrossthe country are able to do that as well.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think a lot of people who may be (03:10):
undefined
looking to buy a home or interested inhomeownership Don't realize that there
are these free services that can helpthem learn how to buy a home, learn about
all the people that you encounter whenyou buy a home, a realtor, an insurance
agent, an inspector, a mortgage lender,and they all play a different role.
(03:34):
But we don't buy homes every day.
So having someone guide us throughand share what's happening in that
community I think that's one of thebiggest secrets to homebuying is
that there are homebuyer coaches andcounselors out there that will really
ride alongside you every step of the way.
(03:55):
It can make a big difference.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, it can make a huge difference. (03:57):
undefined
Working with a HUD approved counseloris a really important piece, but
then our organization, our partnerorganizations then really tap
into the industry professionals.
So, as you mentioned, in our homebuyereducation, we bring in a A loan officer,
a realtor, a home inspector, and soreally having those professionals
in to talk about what they do everyday, but then also have that, either
(04:19):
that one on one engagement or thatgroup engagement to talk about that.
After each Homebuyer Education Workshop,and over 90 percent of our survey
respondents, their response to a questionof, what would you have done different
is, I would have taken this class sooner.
Marietta Rodriguez, President & CEO, NeighborWorks America: Jason, if someone is in St. (04:32):
undefined
Paul, Minnesota, obviously, orin the Twin Cities, they can look
for NeighborWorks HomePartners.
To hook up with a housingcounselor, a home purchase advisor.
But if you're not fortunate tobe in the Twin Cities, where
could you find these services?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Fortunately, HUD nationally does (04:48):
undefined
keep a database now of HUD approvedcounselors and HUD approved counseling
agencies, so that is a greatplace to start is HUD's website.
Also, I would encourage folks to checkout NeighborWorks America's website
because NeighborWorks America hasgreat organizations all across the
country that provide similar services.
Marietta Rodriguez, President & CEO, NeighborWorks America: Obviously, homeownership is a critical (05:09):
undefined
tool for stability of a family, butalso for building wealth within that
family and not just for the familythat lives in the home, but we've seen
generational and family wealth growfrom owning property in this country.
Unfortunately, we've seen so manycommunities of color and low wealth
(05:32):
communities left out of this opportunity.
I know that you've designed some programsthat are really addressing the racial
inequities in homeownership straight on.
Tell us a little bit aboutsome of those efforts.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, so In the state of Minnesota, (05:46):
undefined
we are in the unfortunate position tohave one of the larger racial disparity
gaps in homeownership in the country.
Just to give a specific example, in 1950,46 percent of black families owned a home.
In 2020, seven years later, And only 25percent of black families own a home.
(06:07):
So that decreased by 20%.
So we certainly have some verylarge disparities here in Minnesota.
A one tool that we started to pilotin 2017 was a first generation
down payment assistance program.
A key component of homeownershipis wealth generation.
The average homeowner hasnet wealth of about 250, 000.
(06:30):
The average renter has a net wealth ofabout 6, 000, and so a first generation
buyer is not likely to have that familywealth to make that initial down payment.
So a focus for our program wasthat first generation piece.
We piloted that program for aboutthree years and found out that over
90 percent of the folks utilizing thatprogram represented BIPOC communities.
(06:51):
And so we worked with our statelegislators and our state finance agency.
And in 2023, we were able to launcha 150 million first generation
down payment assistance programhere in the state of Minnesota.
That program now a third ofthe dollars have been utilized.
And about 80 percent of thosedollars are going to BIPOC
(07:13):
families to purchase a home.
Marietta Rodriguez, President & CEO, NeighborWorks America: That's amazing. (07:14):
undefined
Congratulations.
Thank you.
And with that program, whatcan someone expect to receive
in down payment assistance?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, so that program you can expect (07:22):
undefined
to receive under its, under the wayit's currently structured is about
32, 000, between 32, 000 and 35, 000.
Our average home price here is about320, 000, so that's about 10 percent
of the purchase price, so that,that's, that's a significant amount.
Um, what's important for us in the waythat program is structured is it is
(07:43):
structured in a forgivable manner, andso it forgives over a five year period.
Marietta Rodriguez, President & CEO, NeighborWorks America: So if the family or the buyer sells that (07:48):
undefined
home Before that five year term, then theywould pay a portion of that back to the
Jason Peterson, Executive Director, NeighborWorks Home Partners: fund. (07:55):
undefined
That's correct.
Yep.
It's pro rated based on that.
Correct.
Marietta Rodriguez, President & CEO, NeighborWorks America: So essentially you're like (07:59):
undefined
everybody's rich uncle.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Essentially what we're really trying (08:02):
undefined
to do is even the playing field.
I was fortunate when I was younger,my parents were able to provide
me with a small down payment.
I bought a very modest home, but thatwas the reason I was able to do that.
And there are a lot of folksthat aren't able to do that.
So that's really our goalis to really focus on that.
Marietta Rodriguez, President & CEO, NeighborWorks America: Your organization built a great (08:17):
undefined
capacity to make down payment assistanceloans through a program called LIFT.
Am I right about that?
Jason Peterson, Executive Director, NeighborWorks Home Partners: The Neighborhood LIFT program was a (08:28):
undefined
great program for our organizationand our markets as it also provided
a significant amount of downpayment in a forgivable manner.
There was at one point when almost4 percent of the transactions
occurring in Minneapolis and St.
Paul had a Lyft loan attached to it.
So it had real impact.
It was really amazing.
(08:49):
But not only did it impact so positivelythe community, but also our organization.
It provided us not only thecapital, but also the technical
assistance and the expertise.
We were able to get the systems weneeded in place, bring on the staff.
And most importantly, I think showthat not only could we do this, but
(09:09):
it can be done at a large scale.
And when I was testifying for this firstgeneration down payment program, one of
the questions, was there enough inventory?
And this was in 2023, and we had justfinished up our most recent round of Lyft.
And I was able to point back to,we have had success at that scale
with the program post pandemic.
And so really highlighting like thisworks not only for an organization,
(09:32):
but also within the community.
Marietta Rodriguez, President & CEO, NeighborWorks America: For those of you that may not realize, (09:34):
undefined
LIFT was an initiative where NeighborWorkspartnered with Wells Fargo to provide
down payment assistance to over,ultimately over a 12 year period,
25, 000 people and over 80 marketsnationwide, including Minnesota.
And it really did jumpstart themarket for first time homebuyers.
(09:56):
Right now, Jason, you're alsorunning a pilot program for
Halal Mortgage Financing.
What does that program look like?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah. (10:05):
undefined
So, um, we also piloteda program about 2018.
I'm working with fee based firstmortgage financing, and so those are
folks that are accessing fee basedlending who are interest adverse.
That is, uh, an area, we have alarger population within Minnesota
that seeks to access that type ofprogram, and there was not resources
(10:27):
available for the down payment.
Most of the down payment assistancedid not pair with fee based first
mortgage financing, We had such successwith that that we actually went to
our state legislature in 2023, um,to seek some additional dollars to
bring that statewide when we receiveda 10 million appropriation to be
able to really expand that work.
Marietta Rodriguez, President & CEO, NeighborWorks America: And tell us about when you say (10:49):
undefined
fee based, how is that differentthan another lender, for example?
Jason Peterson, Executive Director, NeighborWorks Home Partners: There's no interest involved in (10:56):
undefined
the transaction, and so that,that's the big difference.
While there is not interest, thereare fees, so the cost is not less.
So I do want to highlight this isn't.
It's an interest free program.
It is just structured differentlywhere, due to religious purposes,
interest is not something that isacceptable within a real estate
transaction for certain communities,and so it's structured as a fee based.
(11:18):
And so we structure our program andwork with first mortgage lenders
who are working with that community.
Marietta Rodriguez, President & CEO, NeighborWorks America: What I'm hearing from you And I (11:25):
undefined
think is an important point isflexibility and meeting the customer
where they are is really critical.
Are there other examples where yourorganization has been able to be more
flexible than what you might see ina traditional financial institution?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, I think that's critical, especially (11:44):
undefined
as we're looking at focusing onaddressing the racial disparity gap.
Another example is we are participatingwith two partner organizations on a
special purpose credit program right now.
So this down payment program focuseson serving foundational black families.
So these are families that have beentraditionally Not served, um, but
(12:05):
you know, have been living in theUnited States now for centuries.
And so this program provides somesignificant down payment assistance
to foundational black families.
Another example I'd like to raiseup would be we're about to launch
a unique first mortgage program.
That will be serving folksbuying manufactured homes
(12:26):
on cooperatively owned land.
And so this is a really unique placethat's, um, hasn't had a lot of interest.
Hasn't had a lot of, uh, willingness fromtraditional lenders, but has a huge need.
You know, you can purchase a manufacturedhome in Minnesota for about 150, 000.
Um, and so it's one of the few kind ofreally affordable places to do that.
(12:47):
Um, and unfortunately, a lot of themanufactured home parks in our, in our
states, um, are owned by investors.
And so that's really challenging.
So we're partnering with agreat partner in North Country
Cooperative Foundation who works to.
Organize these co ops so folks will beable to buy and own their land, own their
space, and then we are financing those.
Marietta Rodriguez, President & CEO, NeighborWorks America: Those are great examples. (13:08):
undefined
I love the manufacturedhousing work there.
I think that's a market that has beenignored for a long time and unsupported.
So congratulations.
On that work.
Let's zoom into the homeowner.
We talked about homebuyer education,getting that done, but let's, let's
even, you know, zoom out if you maynot be ready to buy today, but you
(13:30):
know, it's something you want to do.
How would you recommend?
Someone get ready for the purchase.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Um, the first step that I would (13:36):
undefined
suggest is to connect with aHUD certified housing counselor.
The first question to find out is whereyou're at in that home ownership journey
and how close you are to being ready.
Your credit score affects the typeof mortgage you can get and the rates
you can get, your savings or debt.
And a big thing is understandingthen too, what you can afford.
So just because you might bea pre approved for a certain
(13:58):
amount with the first mortgagelender, Like what can you afford?
You never know when that rightopportunity is going to come for you.
So I would really strongly suggest that ifyou work, um, with a HUD approved housing
counselor, they're going to be able toprovide that really that roadmap for you
on what that looks like and whether or notthat is one year, five years, 10 years.
One of our counselors just celebrated,uh, the purchase of a home with
(14:22):
one of their clients who they hadworked with for over 10 years.
Wow.
Um, and so, you know, you neverknow when that's going to be, so
that would really be my first step.
Marietta Rodriguez, President & CEO, NeighborWorks America: I'm wondering if you think the pandemic (14:29):
undefined
changed the housing market significantly.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, it did for sure. (14:36):
undefined
We've, I think one of the challengesthat we still see is the inventory piece.
Coming out of the great recession,we definitely had a number of home
builders that moved out of thatmarket here that did start to pick up.
But then when COVID hit, wehad a number of folks that
moved back out of that space.
I think an opportunity certainly isthe shift and where folks can work
and the work from home environment.
(14:58):
The other piece that, that we've seenchange a bit in our market specifically
is more shared equity opportunities.
So that would be maybe purchasingin a land trust or looking at a
cooperative opportunity, lookingat accessory dwelling units.
And so there's been some interestingopportunities for ownership that
I don't think were as present.
And I think that.
(15:18):
That has come about also as a result ofthis pandemic and people really looking
at where they want to spend theirtime when they're spending their time.
So I think that there's some coolthings that are happening that
came as a result of that, butthere's a lot more opportunity.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think that is something that we'll see (15:31):
undefined
more proliferation and that may dictatethe kind of home you're looking for.
You may need more space toaccommodate a workplace or a desk.
You mentioned shared equity and you gaveus some examples, but for someone who
may not be completely familiar with theterm, unpack that a little bit for us.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Sure. (15:52):
undefined
So in a traditional home ownershipsituation, somebody would
say own a single family home.
So they would own that home on their own.
There's shared equity situationswhere really that equity is
shared, that ownership is shared.
So looking at, for example, a landtrust model, in that case, somebody
does own their home, but they areleasing their land, but they are then
(16:13):
working with that community basednonprofit with that property to be
able to have an ownership opportunity.
And then when they move on, that remainsa home ownership opportunity for others.
If you look at different co op models,it's folks coming together that may
not have been able to purchase ontheir own to purchase that together.
That's very powerful.
(16:33):
So you then get to make decisions,you get to have control, and then
you do have equity out of that.
It is shared, but you do have that equity.
Marietta Rodriguez, President & CEO, NeighborWorks America: And are you finding in those (16:41):
undefined
situations, resale is a challenge?
Because it's a little bit of adifferent flavor of homeownership.
Jason Peterson, Executive Director, NeighborWorks Home Partners: We are not finding that (16:49):
undefined
as a challenge at all.
If you look at the land trust model,usually if somebody purchases a
land trust home, it's usually at amuch more affordable purchase price.
When they do choose to sell, theydo not get the entire appreciation
of the equity in that time.
That is shared and that is actuallyreinvested back into the property.
But we've seen no challenges withfolks being able to sell that.
(17:11):
You walk away with less money,but the amount you need to get
into home ownership is also less.
Marietta Rodriguez, President & CEO, NeighborWorks America: I think your organization has done an (17:17):
undefined
incredible job of really understandingthe market dynamics and what the needs are
with the programs that you've discussed.
Let's look a little bit into the future.
What do you think you'll beworking on in the next decade?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Something that is really starting to (17:32):
undefined
be more of a focus for us is going tobe that home ownership preservation.
For us, we've started to domore post purchase advising.
We've incorporated this intosome of our programs to really
provide that ongoing support.
As we're working with folks that mightbe first generation homebuyers or folks
that don't have that experience, it'sreally helping folks understand what home
(17:54):
ownership is, and then we've been ableto tie that to some financial incentives.
We were just working with a family whopurchased about six months ago, and
through this post purchase opportunity,we were able to provide a 5, 000
grant, and their water heater went out,so we were able to cover that cost.
I think on the purchase side, I thinkwe're going to see more shared equity.
I really think we are.
(18:14):
It's a way for folks to get intoproperties, um, in a more affordable way.
And I do think that we're going to seea lot more folks that are going to be
moving away from some of the urban cores.
But also, um, different types ofstructures within the urban core.
So I'll give you a specificexample in the city of Minneapolis.
They actually lifted a lot of theresidential zoning requirements.
(18:35):
And so now there's a lot more opportunityto build accessory dwelling units or
other different, um, types of structureswhere you can have a little more
density, which is an important piece.
Cause again, we need moreplaces for folks to live.
So.
Those are areas that I thinkwe'll continue to see growth in.
Marietta Rodriguez, President & CEO, NeighborWorks America: One of the things that I think is truly (18:52):
undefined
remarkable about your work and yourstory in the Twin Cities is you've been
able to build capacity to take someof these more specialized programs.
online, but also take them to scale.
And you've been able to access statefunding or government funding in a way
that has really not been available.
(19:15):
How were you able to serve upyour capacity so that it garnered
political will to also invest?
Jason Peterson, Executive Director, NeighborWorks Home Partners: I will go back to Neighborhood (19:24):
undefined
Lift and some other really greatcapacity building support that
NeighborWorks America has provided.
That's really been importantfor us to be able to show that
we can do this well at scale.
Once we were able to showthat, we really started small.
So we started working with cities,doing down payment and home
(19:44):
repair programs within a numberof cities around the Twin Cities.
Then we started working with counties.
And then we really started working withlegislators, but it was a lot of time.
We spent a lot of time with legislators.
I spent a lot of timetestifying, but well worth it.
It's been really exciting to really sitdown with legislators and talk through
solutions that we've proved the conceptout and they're really excited about that.
Marietta Rodriguez, President & CEO, NeighborWorks America: And it seems like it's (20:07):
undefined
a nonpartisan issue.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yes, it is a nonpartisan issue. (20:09):
undefined
Actually, we had the bill comeforward two years in a row.
The first year, we actually had aRepublican put the bill forward.
The second year, we had aDemocrat put the bill forward.
And we had support fromboth sides of the aisle, so.
Marietta Rodriguez, President & CEO, NeighborWorks America: One thing we haven't spoken about, but I (20:21):
undefined
sure is top of mind, particularly beingin a state like Minnesota, but how do you
think about climate and climate resilienceshaping the journey of a home buyer?
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, that's a really important (20:35):
undefined
piece, especially as we focus on somemodels that haven't been focused on
before, such as manufactured housingand some of these different pieces.
Um, I mean, certainly, you know, theextreme weather, um, that we face
in Minnesota, um, is different, youknow, across other parts, but we
still have a lot of extreme weather.
So what we've been really focused on, onour home repair side, but then also when
(20:59):
we help folks buy homes is, um, makingsure that you're understanding what
you're getting into and the cost of that.
Because.
You can get into, you know, situationswhere, um, you, you're not thinking
about what that extreme weather or whatthat climate change might do to that.
And so.
Marietta Rodriguez, President & CEO, NeighborWorks America: Home buying can be very seductive, right? (21:14):
undefined
You fall in love with the house.
You're starting to picture yourfurniture there or what your
yard is going to look like.
I don't know, you're pretty busy andyour organization is pretty busy, so you
may not go to very many home closings,but when you or your team hands over
the keys to a brand new homeowner,tell us about what that emotion is.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Yeah, that's why we do it. (21:40):
undefined
That's why we get up every day.
It's just the thrill of it's amazing.
We work with so many people thatnever thought it would be achievable.
And you walk into the closingswhere there's kids and they're like,
I can't wait to get to my room.
I can't wait to have a room.
It's just incredible.
And in any given year, we helpabout 300 families buy a home.
We help about 150families keep their home.
(22:03):
We're always so thrilled and sohappy for each and every family.
Marietta Rodriguez, President & CEO, NeighborWorks America: It's changed their lives forever. (22:07):
undefined
Jason Peterson, Executive Director, NeighborWorks Home Partners: Forever. (22:09):
undefined
Yes.
Yes.
It's amazing.
Marietta Rodriguez, President & CEO, NeighborWorks America: Well, Jason, I've really enjoyed (22:12):
undefined
hearing about these programs, enjoyedhearing about what you're doing.
It's incredible.
Thank you for what your team andwhat you do every single day in
Minnesota for the Twin Cities.
It's remarkable.
And please continuedoing what you're doing.
Jason Peterson, Executive Director, NeighborWorks Home Partners: Awesome. (22:30):
undefined
Thank you so much for having me, Marietta,and I greatly appreciate NeighborWorks
America's support in our work.
Marietta Rodriguez, President & CEO, NeighborWorks America: As we wrap up today's episode, I want (22:38):
undefined
to encourage all of our listenersto check out NeighborWorks America's
homeownership programs at www.
neighborworks.
org, especially for those of youthat are looking to take the next
step in buying your first home.
There is a directory you can lookup a NeighborWorks organization.
We have organizations in everystate including the District
(23:00):
of Columbia and in Puerto Rico.
Thank you Jason for joining us todayand thank you listeners for joining us.
Until next time, thisis The Community Effect.
Voiceover Narrator (23:13):
This is The Community Effect brought to
you by NeighborWorks America.
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