Portland’s 0% foreclosure rate affordable home ownership model
Portland, OR–This city has long demonstrated a sensitivity toward the role housing plays in peoples’ lives. From its progressive and compassionate attitude toward the homeless to its innovative affordable housing community, Portland is the nation’s test kitchen for properly and humanely housing low income individuals and families.
Despite the collapse of the international housing market in 2008, the city scored two major recent coups: the 2009 rehabilitation and preservation of the historic Nuevo Amanecer housing project in nearby Woodburn; and the completion this year of the renovation of an aging motel into the chic yet affordable Madrona Studios. (Both projects benefited from the expertise of the Housing Development Center.)
But affordable rental properties are one thing. Affordable home ownership is quite another matter. Yet here again, Portland has produced an organization that has demonstrated how to successfully transition low-income families from a rental to an ownership situation.
Since 1999, Proud Ground has provided affordable home ownership opportunities for people who live and work in the community. And to date, after placing 130 low-income families into homes that they own, Proud Ground has never suffered a single foreclosure.
Working with community partners, lenders, builders and others, Proud Ground:
- prepares families and individuals for homeownership;
- helps them purchase existing homes;
- builds new affordable homes;
- offers homeowners tools to be successful;
- ensures the permanent affordability of the homes in its portfolio.
Proud Ground, formerly Portland Community Land Trust, was founded in 1999 by a coalition of community housing advocates and the City of Portland to fulfill a role that the market could not – providing low and moderate-income households with opportunities to buy homes at affordable prices. The founders recognized that Portland wouldn’t be so livable if only the well-off were homeowners.
Since then, Proud Ground has helped more than 130 families realize the dream of home ownership, at a median home price over the years of $119,900. Today, the median price of a Proud Ground home is around $135,000, versus about $230,000 for a market-rate home in Portland.
Proud Ground has more than 115 permanently affordable homes in Portland, and has distributed $7.6 million in grants to make those homes affordable. To make those same homes affordable today would require approximately $10.3 million – more than $2.7 million in additional investment.
Proud Ground is governed by a volunteer board of directors, one-third of whom are Proud Ground homeowners.
Proud Ground is the largest organization using the community land trust model in the Northwest. As such, it helps low and moderate-income families buy their first home.
Jesse Beason, its executive director, joined me for some repartee about the unique and successful mission of Proud Ground. Before taking the helm at Proud Ground, Jesse served as Senior Policy Director for Housing & Planning for Sam Adams, then a Portland Commissioner. Today, Adams is Mayor of Portland.
Q: What differentiates Proud Ground and other community land trusts from other affordable housing organizations?
We use homeownership as an opportunity to empower families to build a better life, while also helping build strong, divers communities. But we also ensure that the opportunity to own a home affordably will exist for future generations.
With prices out of reach for many families, we operate from the premise that the best way to ensure that our children – and their children’s children – have the chance to buy a home, is to keep homes affordable. So, a home bought through Proud Ground is affordable today and it will be affordable tomorrow.
In exchange for a reasonable purchase price (about $60,000 to $100,000 less than a market-rate home), homeowners ensure that future buyers also have a chance to own an affordable home by limiting the home’s appreciation. This way, owners enjoy increasing property values and the other rewards of homeownership – and they gain equity – while passing the affordability on to the next owner. It’s a win for them and a win for our community.
Q: What other affordable home ownership models are similar to Proud Ground’s?
In Portland, we’re pretty unique. But there are over 240 organizations like ours across the country doing similar work. They are often separate nonprofit organizations like ours, but some are part of larger housing or community work. In fact, some chapters of Habitat for Humanity use our model.
Often, housing agencies or nonprofit organizations have second mortgage programs which reduce the price of a homeowner’s primary mortgage. But they often don’t do anything to help with the long term affordability of the home.
Q: How do you define success in this field?
Ever-increasing opportunities for families to own their home at a price they can sustainably afford.
Q: Given that your homeowners would probably not get a traditional mortgage in today’s housing environment, do many of them have to be foreclosed on at some point?
Not a single one of our homeowners has experienced foreclosure. Zero. Our families get traditional, 30 year fixed-rate mortgages at great rates. No sub-prime, adjustable-rate, interest-only hocus pocus. They know they’ll have a stable payment for the next 30 years.
Q: That’s a pretty stunning statistic: 0%. What is Proud Ground’s role in helping its homeowners meet their mortgage obligations?
Well, we make it affordable. That’s the biggest role we play. Other than that, families take full responsibility for paying their mortgage – but we remain their partner in homeownership after closing. We serve as a resource for our homeowners, whether it’s questions about selling their home or the name of a good plumber. If folks are facing hard times we can discuss their options and connect them with other resources in our community.
Q: 50 years ago, could families like the ones that are your homeowners have been able to buy a home in the traditional way? In other words, is it more difficult today for a family to own a home than it was for their parents or grandparents?
Absolutely it’s more difficult. In fact, when you adjust for inflation and interest rates, the cost of the average home in America was the same for our grandparents as it was our for our parents. Can you imagine? For fifty years we had steady prices. It is only in the last fifteen years that homeownership has moved beyond the grasp of many working families. And despite the downturn, I can assure you it’s no more affordable for a large number of Americans.
Q: Is the current post-meltdown climate making it more difficult for Proud Ground to help families enjoy home ownership?
Thankfully, no. While we are somewhat affected by the lack of access to credit to build new homes, our families are accessing mortgages without a problem.
Q: What does home ownership do for your families besides provide them with safe, well-built shelter?
The benefits are incredible. There are of course the tangible benefits. Our families avoid private mortgage insurance and pay reduced property taxes. They build equity and have stable payments.
But there are a large number of intangible benefits that history shows us make all the difference in a family’s prosperity. Children of homeowners are more likely to own homes and attain higher levels of education than children of renters. Just think of what it means to send your kid to the same elementary school year after year. A renter doesn’t have that security.
The community also benefits. Owning a home gives residents a stake in the community and a sense of rootedness in their neighborhoods. A large presence of homeowners in a neighborhood increases the number and diversity of businesses in the neighborhood and stimulates economic investment.
Q: Talk about a couple of your clients: a typical one and a real all-star.
All of the families we serve are all-stars! Our 100th homeowners, Kara and David, bought their home two years ago. Since then, they’ve had their first child, added chickens, planted a garden. Anita and her children moved eight times in about as many years. That kept her focused on planning for the next few months. And now, as she says, she finds herself laying in bed thinking of what it’ll be like in ten, twenty years. That’s what ownership can do: make you dream big.
Q: Is the Proud Ground model replicable in other cities and towns, or is Portland a unique housing environment? What conditions allow a community land trust to flourish?
The model can serve communities large and small. And it does. There are organizations serving island communities in Washington, the rural south of Kentucky and urban Chicago. All you need is the will of your residents and the capacity and resources to invest in the families and homes you’ll serve. Certainly easier said than done, but incredibly possible.
Q: Are there any obstacles—government regulations, bank policies, lack of understanding of your mission—to continued growth for organizations like yours?
Organizations like ours have been operating under the radar for some time, so there’s certainly a lack of awareness. But our biggest hurdle is how resources are allocated here. On a national level, we give folks with vacation homes a tax break, but can’t make a first home affordable for today’s average working family. We have great programs with great track records to ensure that affordable rental opportunities exist, but we haven’t yet focused those efforts on the next step—ownership.
The good news is that our current crisis offers the chance to put sustainable and responsible homeownership at the center of the conversation.