Mayor Tom Potter and Commissioner Erik Sten have launched the Operation Home Owner and Minority Equity (HOME) committee, a 10-year initiative to close the home-ownership gap for communities of color by putting citizens of color in about 13,000 homes.
However, the HOME committee must first find resources, including grants and loans, to achieve both home ownership and affordability goals. Given this challenge and the goal, success isn't likely. Why? The logistics of the plan simply do not pencil out without more financial resources if we are committed to a successful homeownership program.
Consider the following:
The goal is 12,600 first-time minority homeowners by 2015. According to industry experts, you have to screen at least 30,000 families to get 12,600 valid applicants. Experts say it costs $1,000 per family to provide marketing, screening, homeownership education and counseling over the next decade. That works out to about $60 million for the next 10 years. Let's assume the 12,600 successful families will require another $2,500 for closing costs, and another $31.5 million is needed over the decade.
Lastly, industry experts estimate that one-third of the 12,600 — or 4,200 — families will require down payment assistance to achieve affordability, at a cost of $15,000 per family. That total is another $63 million over 10 years.
In addition, if we were to assume a low average mortgage of $180,000 per family (and that is about $100,000 less than many homes in the area), the pool of loan funds used could exceed $2.3 billion. Based on these assumptions, an estimate of what it might cost to achieve the goals of Operation Home is set out in the figures below:
The Economics of Implementing Operation HOME:
Marketing homeownership pre-counseling to 30,000 households by 2015 $30,000,000
Homeownership education and counseling to 12,600 households by 2015 $31,500,000
Down-payment assistance to 4,200 households by 2015 $63,000,000
Minority loan funds for 12,600 households by 2015 $2,268,000,000
One of the key issues facing Operation HOME is where to get the estimated $120 million in grants ($30 million, plus $31.5 million, plus $63 million – see figures above) needed to put 13,000 minorities in homes. Experts say there are few available sources for grants and operating funds for the Portland Development Commission or the city to achieve these goals. Consequently, without resources, which stand currently at $0, the initiative may founder on good wishes alone.
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