“These homes change families’ lives,” said David Mullin, CEO of Green Mountain Habitat for Humanity.
Green Mountain Habitat for Humanity partners with low-income families to help them purchase their own homes with a 0% interest rate. Families, volunteers, and construction staff work together to build affordable homes, and then they are sold at cost to the partner families.
In 2022, 1 in 9 Vermonters were paying more than 30% of their income towards housing costs. According to the Department of Housing and Urban Development, housing is considered “affordable” individuals are paying under than 30% of their incomes towards monthly rent or mortgage payments and all associated costs, such as utilities.
Low-income households are more vulnerable to predatory lending that lowers home equity through fees, poor underwriting and high penalties. Interest rates for subprime loans can be more than 4 percentage points higher than traditional loans.
During the housing boom of the 2000s, subprime loans were disproportionately concentrated in communities of color, and Black and Hispanic/Latinx borrowers were more likely to receive subprime loans and adverse pricing.
The tightening of lending standards after the Great Recession was a key factor in declining homeownership rates, preventing potential homebuyers from obtaining mortgages, and these problems were exacerbated for people of color. For low to moderate-income homebuyers, the share of mortgage loan originations decreased by 25% in the years after the Great Recession.
Borrowers of color are still charged interest rates that are typically eight basis points higher than they charge white borrowers with similar financial characteristics.
Research has shown a correlation between homeownership and increased wealth, with each year of homeownership tending to be associated with an additional $9,500 in net wealth, on average.
Children of homeowners transition to homeownership earlier — lengthening the period over which they can accumulate wealth — and have homeownership rates 25 percentage points higher than the rate of children of renters.
Green Mountain Habitat for Humanity recognizes that building wealth is an important part of becoming invested in a community and allowing a family to break the cycle of poverty.
Through a partnership with Champlain Housing Trust, we help our partner families become educated on the homebuying process and financial planning. CHT requires several workshops on finances and other additional financial requirements for families to be prepared for a Green Mountain Habitat partnership.
Low interest rates reduce the cost of financing and enable homebuyers to contribute more of their monthly mortgage payments to principal — and equity building — than to interest payments.
One of the largest barriers to homeownership is adequate savings and being able to afford a down payment. 72% of renters do not have the income or savings needed to buy a home, according to the New America Foundation report.
Through the Shared Equity program, homeowners are growing equity, and they also receive down payment assistance to reduce the barriers to homeownership. If a family ever decided to sell, they would accumulate the cost of the appreciation for the home. However, there is a stipulation that the home remain perpetually affordable to maintain an affordable housing stock in the community.
Homeowners make monthly payments that increase their equity in their homes by paying down the principal balance of their mortgage. Home value appreciation also helps homeowners build wealth by enabling them to realize greater proceeds if they sell the home or borrow against the additional equity.
“I never thought that becoming a homeowner was a possibility and it still wouldn’t be, if it wasn’t for all the support and hard work from all the GMHFH and CHT staff, the remarkable volunteers and generous donations,” said Sara, head of a partner family.
Our partner families are given the opportunity to grow their wealth and end cycles of poverty. It is important that we help families build strength and stability, and also be able to give that opportunity to their children and future families as well.