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The USDA rural self-help housing program is one of affordable
housing’s least-known success stories. Since the early 1970s,
close to three thousand mutual self-help homes have been built
in Washington State with the financial support of the U.S.
Department of Agriculture (USDA) by families participating in
self-help housing programs. Today, this seasoned forerunner to
volunteer self-help programs like Habit for Humanity quietly
continues to counsel homebuyers, subsidize loans, and
consistently produce homes in rural Washington.
Across the nation, the self-help program has enabled more than
forty thousand low-income rural households to become homeowners.
The program is so effective that several existing housing
organizations in our state have recently launched new self-help
programs to offer this opportunity to people who live in their
communities.
How did this program get so successful? Where does it stand in
Washington State? What’s the outlook for the near term? These
are just a few of the questions I posed to self-help grantees,
technical assistance providers, and the USDA.
        
The birth of rural
self-help housing
The birthplace of self-help housing was western Pennsylvania,
where a group of Quakers assisted about 50 coal-mining families
to build their own homes back in 1937.
Twenty-six years later, in 1963, the federal government made its
first self-help housing loans to three farmworker families in
Goshen, California, through the Farmers Home Administration (FmHA).
Before that time, the FmHA could only make housing loans to
farmers, but not to farmworkers. This changed under the Housing
Act of 1961.
Since the early 1960s, the USDA rural self-help housing program
has seen many changes in the way the funding has been
administered and disbursed. The program was originally
administered by the federal Office of Economic Opportunity (OEO),
created in 1964. OEO was disbanded by President Nixon, but rural
self-help has continued under the auspices of USDA.
Bill French, Chief Executive Officer
Sacramento-based Rural Community Assistance Corporation (RCAC)
For a vivid, detailed history of the political ins and outs of
rural self-help housing, no one is a better source than my good
friend Bill French, Chief Executive Officer of
Sacramento-based Rural Community Assistance Corporation (RCAC).
Bill has been involved in running and providing technical
assistance to rural self-help programs since 1968, originally
with Self-Help Enterprises (SHE), the oldest and largest of the
self-help agencies, which was formed in 1965 to serve seven
rural California counties.
RCAC was formed in 1978 when the federal government encouraged
SHE’s board to spin off a multi-state regional program to
provide technical assistance (TA) to other sponsoring
organizations. In 1979 they got their first contract from USDA
to provide TA to self-help housing programs and Bill has served
in the CEO role since then.
RCAC currently has the TA contract to work with self-help
organizations in 13 Western states and U.S. Pacific Territories
like Guam and the Marshall Islands. “Any kind of housing
development is a difficult business to be in,” he says. “One
where unskilled families are going to produce the labor adds
complexity. This is a very complicated program for folks to run.
Advising organizations on how to succeed is what we do.”
California has long been the leader in the number of self-help
homes produced. In fact, the Western region has consistently
accounted for well over half of the rural self-help homes built
in the nation. Washington State ranks fifth among the states for
the overall number of homes self-help participants have built, a
fact few people realize.
The Framework of USDA’s
Self-Help Housing Program
One key aspect of the USDA self-help program (sometimes called
“sweat equity” or “mutual self-help”) is its focus on rural
homeownership. Only communities of about 25,000 or less that are
still rural in character are eligible to participate. The
program provides interest rates as low as 1% and other subsidies
to qualifying low-income households and requires a sweat equity
contribution of about 1200 to 1500 hours per family. It’s a
community building program, with 8 to 20 families working on
each other’s homes for about a year. The program has been so
successful that Congress is struggling to keep up with the
demand for funding, despite ongoing boosts in appropriations and
the strong support of President Bush.
Veronica Romey built a home through the USDA program on San
Juan Island.
Washington currently has about eight nonprofit sponsors, known
as Section 523 grantees, of rural self-help housing
programs. These are organizations that have been approved by
USDA Rural Development to receive self-help grant funds. The 523
grant covers the operating costs of the program like screening
applicants, providing counseling and training to homebuyers,
hiring construction supervisors and other program costs.
There are four regional TA contractors, also known as Section
523 Contractors, for the grantees across the nation. As
noted, RCAC is the contractor for the western states and
territories.
The Section 502 Direct Loan Program provides mortgages to
self-help participants. A key aspect is that the construction
loan converts to a permanent loan when the home is completed.
The 502 program requires no down payment. Loans are typically
amortized for 33 years and some are extended to 38 years. The
payments are subsidized based on a 1% interest rate for the
lowest income borrowers. A portion of the subsidy must be repaid
if the house is sold, based on the length of time the borrower
lives there. Also, if a family’s income goes up, the interest
rate will be adjusted upward.
President Bush’s Five Star Commitment
Washington’s self-help developers are now experiencing the
long-term ramifications of President Bush’s enthusiastic support
of the program. Prioritizing the program has led to growth,
which has led to a current shortfall in funding.
One of the program’s many virtues is how well it has served
minorities. Well over 50% of the people served in the U.S. have
been Latinos and other minorities. President Bush was inspired
by these numbers back in 2002. As part of his goal of helping
5.5 million minority families attain homeownership by 2010, he
announced his “Five Star Commitment.” One of his five stars was
doubling the number of participants in the USDA rural
self-help housing program by 2010.
Of course, doubling the capabilities of any large-scale federal
program is a huge undertaking. And this year, halfway to 2010,
the stresses, particularly on the funding side, are starting to
grow. Encouraged by USDA in 2002, RCAC stepped up its
recruitment of Section 523 grantees here and elsewhere. The
demand for larger appropriations to the program have followed
suit. “This is the first year,” Bill reports, “where USDA was
unable to fund all the self-help 523 applications. Even though
we’re expecting to get a $2 million increase in the 523
allocation up to $38 million, it’s not enough. To fund everyone
who wants to get funded across the country, we’re going to be $8
to $10 million short.”
“We’re going to be looking
at the same or slightly lower numbers of loans
unless we get drastic funding increases.” Jon DeVaney, Washington State Director, USDA Rural
Development
Jon DeVaney is Washington State Director, USDA Rural
Development. He points out that funding has continued to be
increased by Congress, “it’s just that housing costs have been
increasing faster. In Washington State, we’ve seen consistent
increases in spending.” Average loan amounts for the program
between 2004 and 2005 were up 14%; they were up 17% from 2005 to
2006. “You have to have fairly significant increases in funding
at the federal level just to keep up with housing costs,” Jon
stresses. “We’re going to be looking at the same or slightly
lower numbers of loans unless we get drastic funding increases.”
“Self-help homeowners hold
onto homes more tenaciously. They work very hard—a
significant number of hours. These families are well
counseled by the program: they know what they need
to do to achieve their goals.” Art Seavey, Rural Development Specialist-Housing,
Rural Community Assistance Corporation (RCAC)
Art Seavey heads up RCAC’s Washington efforts as Rural
Development Specialist–Housing. “We were directed to launch
additional outreach efforts, to help see if we could meet the
President’s goal. We have several potential grantees on the
backburner. But,” Art says, “they got caught with the door
swinging closed. This fiscal year is the first time the funding
wasn’t there.” Right now, with the current funding shortfall,
existing 523 grantees are being given priority for funding over
the new recruits.
Everyone I spoke with about this issue were optimistic about
current commitments ultimately coming through—even those
grantees currently on hold. “The Congress has always supported
this program,” Bill says. “We’re in an interesting period.
Success has bred problems. Self-help groups have been excellent
on advocacy from the very start. They’ll be beating up on
Congress to get more money, but that won’t happen for another
year. That’s a long-term process.”
The changing landscape in Washington
State
Each year about 140 new, affordable homes are constructed here
by families working to build a better life for themselves
through the self-help program. Art Seavey points to just a few
of the program’s compelling positives: “Self-help homeowners
hold onto homes more tenaciously. They work very hard—a
significant number of hours. The delinquency rate is low. In
Washington it typically runs in the single digits: 5 to 8%.
These families are well counseled by the program: they know what
they need to do to achieve their goals.”
And the program truly serves those most in need of a break to
secure an affordable home: In any given project, a minimum of
40% of the families that 523 grantees serve must earn less than
50% of the median income of the community in which they live.
The remaining 60% must earn less than 80% of the median income.
“Those of us who do this work, we see it as changing lives,” Art
says.
Billie Heath, Self-Help Housing Coordinator
Rural
Community Assistance Corporation (RCAC)
But each year, securing affordable lots and getting these homes
built is getting tougher. Billie Heath has seen a lot of
changes over the past 25-plus years. Currently RCAC’s
Self-Help Housing Coordinator for the entire Western region,
she started with RCAC in 1979, traveling up from Sacramento to
work with self-help housing programs in our state.
In 1987, she opened the RCAC field office in Lacey and managed
it until 2002, when she handed over the reins to Art Seavey.
Both Art and Billie stress the successes over the challenges—but
the challenges are many. Billie pointed to a number of changes
that have impacted the program:
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“We’ve gone from being able to
purchase lots in many communities to having to be site
developers of land,” she says. “We’ve also had to add to our
expertise in land development and financing, which has
complicated the program considerably.”
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Sustaining the numbers of homes
produced “is much more complicated nowadays. Organizations
that sponsor programs have to start out three years ahead to
secure financing. They’re at risk as far as real estate
development is concerned.”
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Lot costs are getting out of reach.
“We’ve been fortunate that we’ve been able to use some of
the Washington State Housing Trust Fund money towards land
development,” Billie points out.
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One of the biggest challenges for the
program, says Billie, is the state’s Growth Management Act (GMA).
“It limits rural lots in most areas to five acres or more.
Finding new property and being able to get through land use
planning is a real challenge. We can’t subdivide. Often, we
can’t make it work.”
What this all adds up to, Billie sums up, is that “the per unit
cost for a home has at least doubled over the past 10 years.”
Finding ways to get homes built in Northwest
Washington State
The newest group of self-help homes, Leeward Cove, held its
grand opening celebration in late September on San Juan Island.
Eight homes were completed there, the first affordable homes
ever for Section 523 grantee Homes for Islanders.
This month, a second group of eight families is breaking ground.
San Juan County, which has the highest median home price of any
county in the state --$640,000, up 42.4% from 2005-- is clearly
in need of heroic efforts to provide affordable housing for its
lower-income residents.
Roy Clausen is Director of Homes for Islanders.
Because lot costs are so high in the San Juans, he says, his
board had to be very creative in getting these 16 homes off the
ground. The funding sources were wide ranging, and included the
Self-Help Homeownership Opportunity Program (SHOP) Loan Fund,
through HUD. The group was able to take advantage of an
affordable housing density bonus ordinance, which enabled them
to build on a five-acre parcel.
“We’re working right now with low income people,” Roy says. “But
there’s also a real need on the islands for affordable housing
for people of moderate income.” Roy and his board are studying
alternatives, looking to potentially rework a similar model for
these people, also caught in the gap between slow income growth
and rapidly rising home prices. “It’s going to take some
creativity,” he admits. “Median home prices are escalating every
month.”
Jon DeVaney says that currently, high-cost areas have been
prioritized by USDA Rural Development—areas “where self-help is
one of the only ways to get into homes.” Homes for Islanders, he
says, is grappling with the eligibility limits, the upper loan
limits for USDA funding: “It’s very important that we get some
other ways to leverage funds in there.”
Nancy Larsen, Executive Director, Whatcom-Skagit
Housing
Nancy Larsen is Executive Director of Whatcom-Skagit
Housing. Formerly Whatcom Self-Help, this organization is an
experienced producer of self-help homes near Bellingham. At the
USDA’s request, Skagit County was added to their service area in
2003.
Nancy and her team are currently managing two mutual self-help
groups: 15 homes in Ferndale, and eight homes in Sedro-Woolley.
Like many other grantees, Whatcom-Skagit is constantly grappling
with the challenge of finding developable land that fits the
USDA’s criteria—and participants’ budgets.
“We’re buying bare land and putting in the infrastructure,”
Nancy says. “We can’t afford to buy market-rate lots. We’ve been
lucky to put together a small inventory of land. It just seems
like we buy land and it’s gone. And if you don’t have the land,
you don’t have the program.”
The last USDA mutual self-help homes in King
County?
Barry Brodniak, Executive Director, Northwest Housing
Development
Barry Brodniak, Executive Director of Sumner-based Northwest
Housing Development (NHD), has been helping people build
rural self-help homes since 1976. I first met Barry when we were
both working for Rural America in the late 1970s.
Over the years, NHD’s sweat equity participants have built more
than 725 homes. The organization has covered King and Pierce
Counties since 1970 and added Thurston County in the 1990s.
From Barry’s perspective, the single biggest challenge right now
is “the availability and predictability of funding from the U.S.
Congress.” It’s difficult to run a program and meet your goals
when the funding is in question, he points out.
For Barry, running a close second in the hurdles category is the
cost of producing homes. Right now, NHD is in the process of
helping build homes on Vashon Island in King County. The project
is being carried out in partnership with the community land
trust Vashon Household—a CLT I recently talked about in
My View. The site, Roseballen, will have 19 homes on CLT
land, nine of which are currently in construction. “Without the
land trust portion, where we’re taking out the cost of the land
for the homeowner—which isn’t even the greatest cost—we wouldn’t
be able to do anything in King County,” Barry says. He
believes that next year’s grant from USDA, will represent “the
last houses we’ll be able to build in King County under the
program. I just don’t see any affordable, developable land.”
The good news is that Barry and NHD are still looking for places
they can build. Another site is going up right now in Grand
Mound, in Thurston County. And it’s not official, but NHD is
contemplating extending its expertise into an adjacent county
where there’s a clamoring need for affordable homes and rural
land costs, for now at least, are within reach of USDA’s
eligibility criteria.
The Growth Management Act: putting the squeeze
on affordability
Dave Finley, Single Family Home Director, Kitsap County
Consolidated Housing Authority (KCCHA) at Poulsbo site.
“Land costs are a serious problem—but I think the Growth
Management Act (GMA) is worse,” says Dave Finley, Single
Family Home Director for Kitsap County Consolidated Housing
Authority (KCCHA). “We can’t find lots in the rural areas
anymore. They’re zoned one house for 20, for 10, and for 5
acres.” I spoke with Dave, who is relatively new to KCCHA, and
Norm McLaughlin, who is Executive Director of KCCHA,
an organization he helped found in 1982.
Over the years, KCCHA has sponsored the construction of more
than 1,000 mutual self-help homes with USDA funding. KCCHA’s
program currently builds in Kitsap, Jefferson and Mason
Counties, completing about 40 homes each year. They could double
that number, Norm says, if they had the land and the funding.
The applicants are ready and willing. Norm explains that of the
three counties, Kitsap is the most impacted by GMA. “We haven’t
done a group in the south end of Kitsap, where the greatest
demand is—where there’s a huge amount of rural area—in probably
10 years,” he says.
Norm McLaughlin, Executive Director
Kitsap County
Consolidated Housing Authority (KCCHA)
Norm and Dave have nothing but kudos for the Housing Trust Fund,
which has expanded their reach with down payment assistance.
“Land may cost $75,000 a lot,” explains Norm. “There’s always a
top number that you can’t surpass. When you’re within those
parameters, sometimes you need a silent second mortgage to make
it work. That’s where the Housing Trust Fund comes in. With down
payment assistance, we can help people with somewhat higher
incomes, though they’re still below 80% of the median income.”
And they have nothing but kudos for the program itself. “This is
the very best housing program that the government has,” says
Dave. “There’s no doubt about it. It’s not just a home: The
participants get skills, self-confidence, and good neighbors.
They build a community.” KCCHA currently has mutual self-help
homes going up in Poulsbo [see the following article] and in
Hamilton Heights, in Jefferson County.
Building sweat equity in Poulsbo
  
Self-help participants at Vetter Place,
KCCHA's Poulsbo housing site:
Jami Graves (left),
Mary Dhatt, her daughter Jaimi Graves, and Lisa Pickens
(center),
Bob Kirchman (right)
It’s a hot Indian summer afternoon as we drive through a
forested area just outside Poulsbo. Through the trees, we catch
glimpses of the lofty Olympic Mountains. The peaks look like
they’ve been pasted onto a perfect blue sky.
As we turn into a clearing, the sound of construction breaks
the stillness. Stretching up the hillside, 30 homes are in
different phases of construction—each one with the owner’s name
proudly displayed on a hand-painted sign.
The development is called Vetter Place. It’s the newest
self-help housing project in Kitsap County, and Norm McLaughlin
and Dave Finley are showing us the real meaning of sweat equity.
Jamie Graves is working with a chop saw, cutting precise
lengths from a 2x10 that will support the floor. Then, along
with her mother, Marian, and Lisa Pickens, she nails these short
joists to the sill plate. It’s rough going. They’re using big
framing hammers and galvanized nails. As Marian notes, “It’s
really dry. The lumber is as hard as a rock. The nails will bend
before the lumber gives.”
The women laugh. They’re sweating profusely in the hot sun.
“I like this program,” Marian says. She describes her
frustration with an affordable housing program on Bainbridge
Island years ago when she was a single parent with three kids.
“The city would put a lien on the property, so when you sold it,
you’d have to give the money back to the city.”
When Jamie came to her with details of the KCCHA self-help
housing program, Marian liked it right away. “It’s a lot
better—more straightforward. Jamie actually is able to keep the
equity. If you can’t keep the equity, what’s the point?”
Creative approaches in Clallam County
KCCHA used to include Clallam County in its program, building
homes for groups in Port Angeles and Sequim, but about 2 1/2
years ago, the Housing Authority of the County of Clallam (HACC)
built the capacity to become a Section 523 grantee. Since that
time, HACC has completed Madrona Wood, a self-help subdivision
of 20 homes in Port Angeles. Pam Tietz is Executive
Director of HACC. In 2 1/2 years, Pam has seen lot prices
rise from $30,000 to more than $70,000.
She agrees that growth management throughout the state is having
a long-term impact on the affordability of housing. “We’ve had
good success working with our local jurisdictions to make
changes to those plans to make it easier,” she says. “In order
to make changes, you need comprehensive plans, and to get the
land use decisions or building ordinances that are friendly, you
have to have that political will.” In a smaller county, “it’s
probably easier to do just because it’s a smaller conversation.”
Pam points to a recent success in getting revisions made to the
Planned Unit Development ordinance in the City of Sequim, the
fastest-growing area of Clallam County. “For a small area,
they’re pretty darn progressive,” she says. Now, if developers
want approval for a parcel of less than five acres, 20% of the
units must be affordable housing; if they develop more than five
acres they are encouraged to set aside up to 20% of the units as
affordable. In both cases, the developer gets a density bonus of
one extra unit for every affordable unit they provide. Pam is
hoping this will be incentive enough to open up some affordable,
developable land for HACC’s self-help program in Sequim.
A few years back, Pam spearheaded the creative use of Section 8
Housing Choice vouchers to put the USDA self-help program within
reach of more people in Clallam County. “We now have families
who use these vouchers in calculating their repayment ability to
qualify for a 502 loan.” On the first trial, she says, the USDA
had never considered how to use these as a loan qualifier, and
HACC had to finance the loans during construction. Now HACC has
the USDA on board. “It’s very difficult to qualify low-income
people for any type of mortgage,” Pam says. “This helps bridge
that gap.”
New opportunities in Eastern Washington
The two newest 523 grantees are expanding the program’s reach
into Eastern Washington. These are organizations I’ve talked
about in previous issues of My View. Both Community
Frameworks and the Diocese of Yakima Housing Services
run highly effective affordable housing programs that meet a
spectrum of needs in their communities.
“When
you actually think it’s impossible it somehow works
out.” Alan Trunnell, Senior Housing and Community Developer,
Community Frameworks
Alan Trunnell, Senior Housing and Community Developer is
managing Community Frameworks’ nascent rural self-help
program in Takoda Park, near Cheney; he’s also currently serving
as President of the National Rural Self Help Housing
Association.
Since Community Frameworks also runs a four-state urban
self-help program with SHOP funding, Alan has a good perspective
on the USDA program’s advantages.
For one thing, he points out, rates as low as 1% are as good as
it gets. That means fewer funding gaps that the sponsoring
programs have to fill. And, he explains, the 502 is a one-step
loan: families are able to close on their mortgage before they
start construction—vs. urban self-help programs like SHOP, where
loans close after the home is completed. Alan gave the example
of a teacher in a SHOP program, who increased his income during
construction of a self-help home. After putting in his sweat
equity, he was ineligible to purchase the home he’d built. One
of Alan’s goals is to find a way to get a
construction-to-permanent loan product available for urban and
metro self-help programs as well. He points to a pilot project
in Utah in which Fannie Mae is doing just that.
Due to the hold placed on funding for new grantees, Community
Frameworks’ Cheney-area project is still waiting to get started.
“We had the application in—the state USDA office obligated loans
for eight families, with 502 mortgages set aside. But we didn’t
get funded as a 523 grantee,” Alan says.
The families are taking it in stride. Alan just had his second
monthly meeting with them. “We laid it out for them: Our grant
application is right near the top. The development will be done.
We are fortunate that the price paid for the lots is locked
in—it’s since gone up, so they’ve already got some equity as
long as they continue to qualify.” He also pointed out to the
families that with the wait, they’ll be able to start
construction in the spring, in April at the latest, while the
weather is warming.
“When you actually think it’s impossible it somehow works out,”
Alan says.
“ With
homeownership, you need to get people in and on board as early
in the process as you can.” Photo: Mario Villanueva, Director of Diocese of Yakima
Housing Services
Mario Villanueva, Director of Diocese of Yakima Housing
Services (DYHS), also has the long-term outlook that comes
with experience. He was approached by USDA to have DYHS become a
523 grantee for the seven central Washington counties that it
serves—and saw it as a good fit. DYHS has had their preliminary
application approved; they’re now putting together a final
application.
“We’ve always approached our work by connecting with local
communities,” Mario says. “In those discussions, we’ve heard
there is a need for rental housing for the poorest of the poor,
the working poor, but also, there is a strata of need between
that and someone who could buy their own home through
conventional sources.”
DYHS’s model helps local low-income families build towards
homeownership with resident services and education in existing
rental communities. They are choosing to concentrate their
rental housing and self-help housing in the same geographical
areas to take advantage of economies of scale—and to stay
connected with families throughout the cycle. “It’s a different
process than rental housing,” Mario says. “With homeownership,
you need to get people in and on board as early in the process
as you can.”
Sergio Garcia, a contractor for RJS Construction, at
work on a sweat equity home at a Diocese of Yakima Housing
Services site in Mabton. Some 35% of the work on USDA self-help
homes is subcontracted to skilled professionals.
Right now, Mario and his team have families waiting to get
started on lots in Mabton, near Sunnyside, adjacent to DYHS’s
New Life Villa.
New Life offers a spectrum of housing: seasonal
housing for agricultural workers and year round rental
apartments.
Now there are also homeownership lots set aside for rural
self-help housing, waiting for the final grant sign-off by
USDA—and Congressional funding.
Just as the character of every community in Washington State is
different, so are the challenges each faces. Just as the
complexities of financing and managing large-scale projects, the
escalating costs of lots and materials, the stringent demands of
GMA, and the unpredictability of funding from Congress are all
challenging self-help sponsors, their tough, passionate
commitment to home ownership—and the willingness of families to
build their own homes – are overcoming these challenges and
making the American Dream come true in rural Washington.
“This is the very best housing program that the government
has.”
Dave Finley, Single Family Home Director, Kitsap
County Consolidated Housing Authority (KCCHA)
The eight homes of Leeward Cove on San Juan Island were built by
a physical therapist, a mechanic, a Montessori teacher, a
bookkeeper, a fisherman, a Pilates instructor and a cement
company employee. They and their families provided 65 percent of
the labor.
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