The city of Worcester is one of three Bay State communities currently preparing to help those who receive Section 8 assistance for rental housing become homeowners.
A federal housing program that aims to transform Section 8 voucher holders from renters to homeowners is gaining momentum in several Bay State cities.
At least three cities – Lowell, Lynn and Worcester – appear to be well on the road to helping individuals receiving Section 8 assistance for rental housing become homeowners.
Those cities have filed plans and received approval from the U.S. Department of Housing and Urban Development to proceed with programs that allow individuals to apply their Section 8 rent-money assistance toward monthly mortgage payments instead.
Woburn, Quincy and Boston could be the next cities to follow suit. The Boston Housing Authority, which held a meeting in January to explain the program and drew more than 300 interested tenants as a result, is currently drafting its own plan.
And in Lowell, at least two households now receiving rental assistance may be purchasing townhouses by June.
The Lowell Housing Authority filed a plan with HUD last summer, and by September had sent 800 letters to public housing residents. About 60 residents expressed interest and are now working with the authority’s family self-sufficiency department to become homeowners.
“There’s still a few kinks that have to be worked out,” said Mary Karavatsos, director of the Lowell Housing Authority’s family self-sufficiency department, referring to the program.
Karavatsos said the department hopes to annually assist at least 10 households in becoming homeowners under the program.
Pilot programs like those in Lowell are possible because HUD gave all of the nation’s public housing authorities the ability to allow Section 8 voucher holders to use their rental assistance toward mortgage payments back in October 2000.
Public housing authorities that are interested in starting their own Section 8 homeownership programs are required to file an administrative plan with HUD explaining how the program will be implemented. HUD, however, does not provide any additional funding to housing agencies to implement the programs.
Section 8 residents who are interested must meet certain criteria that were set by HUD. For example, prospective buyers are required to undergo credit checks, have a certain income and attend homebuyer counseling and training programs. Bay State Section 8 recipients must work full-time and earn a minimum annual income of $10,300.
Across the country, there have been very few home purchases under the program, according to Aaron Gornstein, executive director of Boston-based Citizens’ Housing and Planning Association.
CHAPA has assisted public housing authorities that are interested in offering Section 8 homeownership programs by providing information and training. Gornstein said CHAPA also has encouraged partnerships between housing authorities and groups that run homeownership counseling programs.
The homeownership initiative recently got a boost when Citizens Bank of Massachusetts agreed to provide financing statewide. Two years ago, there wasn’t a lender that was willing to provide financing for Section 8 homeownership statewide.
Citizens Bank will originate mortgage loans while Fannie Mae will purchase the eligible loans. Representatives from both were at a conference in Worcester earlier this month announcing the Section 8 Homeownership Initiative.
But the biggest challenge to making homeownership programs successful, especially in Massachusetts, are the high home prices, according to housing leaders.
In Middlesex County, for example, the median price for a single-family home soared above $300,000 last year, according to The Warren Group, parent company of Banker & Tradesman.
In contrast, the median prices for single-family homes in Franklin, Hampden and Hampshire counties hovered between $114,450 and $150,000. In Worcester County, the median price for a single-family home last year was $171,000.
‘Additional Resources’
With that kind of difference in home prices, the homeownership programs for Section 8 tenants are more feasible in Central and Western Massachusetts, said Gornstein.
“We’re expecting we’re going to have to give additional resources to buyers in the Greater Boston area,” he said.
There has been some discussion, for example, about combining Section 8 assistance with the state’s Soft Second Loan Program for people wanting to purchase a home in Greater Boston, he said. The Soft Second Loan Program, administered by the Department of Housing and Community Development, lowers borrowing costs for homebuyers by dividing a mortgage into two amounts.
Under the Soft Second Loan Program, buyers are qualified based on the first mortgage, which is 75 percent of the purchase price. The “soft-second” mortgage is 20 percent, with the remaining 5 percent coming from the buyer’s down payment
In addition to high home prices, another challenge – particularly for smaller local housing authorities – is the lack of resources and staff to develop and implement homeownership programs.
The Worcester Housing Authority, the second largest in New England, had one full-time employee in charge of drafting and filing an administrative plan, with another official overseeing the process. Once approved, the program also needs to be administered by a staff.
“A lot of the smaller local housing authorities don’t have the staff and resources that are required to dedicate to this program,” said Fred Hurlbrink, director of leased housing for the Worcester Housing Authority.
Next month, the housing authorities in Worcester and Lynn are holding informational meetings for service providers and interested public housing tenants about the Section 8 homeownership program.
Once those meetings take place, the Worcester Housing Authority will have a better idea of how many people might be served by the program, said Hurlbrink.
The Lynn Housing Authority, which received HUD approval for its homeownership program in December, is currently working with one Section 8 renter who is trying to get pre-approval for a mortgage, said Dawn Whelan, the authority’s community and neighborhood development assistant.
Lynn housing officials already had gotten three lenders – Eastern Bank, Salem Five Cents Savings Bank and HomeVest – to participate in the program before Citizens Bank made its commitment.
Whelan said the authority is hoping to help 20 people become homeowners under the pilot program.
Knowing the challenges that are involved, Gornstein said CHAPA has set a “modest goal” – hoping that approximately 200 households throughout the state are helped under these programs to become homeowners.
In Lowell, residents may have an easier time finding affordable housing to buy because of the Residents First Development Corp., a nonprofit spinoff of the city’s Housing Authority, according to Karavatsos.
The nonprofit has developed low-income housing that is ideal for Section 8 residents interested in becoming homeowners.
In a similar fashion, Urban Edge, a Roxbury-based community development corporation, is hoping to help Section 8 renters purchase new or already-existing units it has developed.
However, according to Mossik Hacobian, executive director of Urban Edge, many renters with Section 8 assistance can’t find rental units in the Boston area, and thus many vouchers are going unused.
Hacobian is hoping that getting some of the income-eligible individuals to use their Section 8 vouchers toward purchasing a home might free up and even spur the development of more rental units.
Urban Edge has teamed with Neighborhood Housing Services of the South Shore in Quincy to offer homebuyer counseling to Section 8 tenants and is hoping to help at least 45 households become homeowners within the next three years in Boston and on the South Shore.
Once Section 8 renters do become homeowners, it’s important that they receive the services and support to remain homeowners, according to housing officials.
In Lowell, housing officials are hoping to start a post-homeownership program to make sure that, among other things, new Section 8 homeowners are keeping up with monthly mortgage payments.
