Down Payment Assistance Program Essential Element For Low-Moderate Income Families To Overcome National Homeownership Affordability Gap

Down Payment Assistance Programs (DAP) have become vital economic tools for helping low- to moderate-income families become homeowners, according to the nation′s first-ever study of the economic impact of privately funded down payment assistance programs.

Conducted by the Milken Institute and sponsored by the Nehemiah Corporation of America, the nation′s first privately funded down payment assistance provider, the study examined over 36,000 down payment assistance recipient families in six geographically diverse cities to quantify the impact of DAP on individuals, cities and communities.

Among the key findings are:

• Over the last 12 years, homes prices have risen 30 percent faster than wages and salaries for low- to-moderate income families, creating a growing "homeownership affordability gap." This gap is making it increasingly difficult for lower-income families to purchase a home without down payment assistance.
• DAP are proven to bridge the "homeownership affordability gap" and have put hundreds of thousands of hard-working families in homes.
• The Nehemiah Program(R) has added $287 million over the last six years to municipal and county property tax receipts in the six markets studied, proving that homeownership is a vital vehicle for building the tax base in cities and counties.
• Nationally, over 115,000 primarily low- to moderate-income families (approximately 70% of Nehemiah's total DAP portfolio) saw their home equity rise by an aggregate total of over $2.2 billion between 1997 and 2003 — an average of more than $18,000 per family over the past six years.
• Minority homeowners in the six markets examined have seen significant rises in equity; on average African-American families have seen equity rise $7,200, while Hispanic families have seen their equity rise approximately $12,000 on average.
• Anecdotally, DAP homeowners report much greater economic flexibility and stability that leads to more productive and happier lives, and rebuilt communities.

"Homeownership has been a receding dream for most low- to moderate-income families, and without programs like Nehemiah these families would never be able to buy a home and receive all the benefits that homeownership brings," said Scott Syphax, president and CEO of Nehemiah. "According to the Milken Institute study, our program has helped bridge the affordability gap, provided badly needed public funds and helped families generate real wealth through home equity appreciation, providing the families and communities with the economic stability they have always sought."

Bridging the Affordability Gap
Over the past decade in the six markets analyzed by the study, median sale prices of single-family homes increased an average of 68 percent, while wage growth for low- to moderate-paying occupations increased only 38 percent. This has left the typical low- to moderate-income homebuyer facing a 30 percent "affordability gap," as housing prices far exceeded the wage increases.

The study indicates that Nehemiah, through its DAP, has helped hundreds of thousands of low- to moderate-income families bridge this gap to buy a home. These were families that could afford monthly mortgage payments, but were unable to save the thousands of dollars necessary for a down payment. By bridging this gap, these families were able to leap ahead of other renting families and begin building home equity.

"Despite a low-interest-rate environment over the past several years, accelerating home prices are far ahead of the gains in wage income, and have thus created a growing affordability gap," said Ross DeVol Director of Regional Economics at the Milken Institute. "Privately funded down payment assistance programs have significantly increased homeownership rates of many low- to moderate-income households. From our examination of over 36,000 records, families that used The Nehemiah Program have become homeowners who otherwise would have been excluded."

The following is a breakdown of the wage, home sales and affordability gap increases found between 1992 and 2003 in the six regions studied.

Market	Income Growth	Home Price Growth	Affordability Gap
Atlanta	35%	71%	36%
Baltimore	46%	91%	45%
Columbus	48%	40%	17%
Philadelphia	40%	62%	22%
Sacramento	25%	88%	63%
St. Louis	36.5%	49%	12.5%
Average	38.25%	68%	29.75%

James Garner, Mayor of Hempstead, New York, and President of the US Conference of Mayors said, "Every mayor in the nation has to deal with the affordable housing crisis. Each of us knows that to help stabilize, revitalize and grow our cities, increasing the homeownership rates are vital. In my experience, and the experience of the USCM there has been no better advocate or tool available than The Nehemiah Program. The Nehemiah Program is adding real dollars to our cities and counties through increased homeownership, and I don′t know how we could ever replace or duplicate the impact this program has had across the nation."

Increasing the Tax Base
Beyond the growing affordability gap, the study examined the monetary impact that these new homeowners have had on their communities. Between fiscal year 1997-98 and fiscal year 2004-05, the 57 counties of the six metropolitan areas in the study gained 36,240 new homeowners. These homeowners, in turn, generated an increase in property tax revenues (including expected amount for fiscal year 2004-05) of more than $287 million.

The increased homeownership rates and neighborhood stability improved local demographic characteristics and counteracted neighborhood decline, the study found. Increased home sales contributed direct benefits to state and local governments by generating tax revenues, especially residential property taxes that are an important component of local revenues. The study also found homeownership to be a principal engine of economic growth for individuals as well as for local communities.

Equity Impact on Minority
As it has been well documented, average minority homeownership lags far behind the average for "white" America. Fewer than 50 percent of African-Americans or Hispanic Americans own a home, while the average rate of homeownership for "white" America is over 75 percent. Home equity is the greatest single source of family wealth particularly for low- and moderate-income Americans, a resource that has eluded most minority families. The Nehemiah Program has helped tens of thousands of minority families become homeowners since 1997.

The Milken Institute study revealed that the minority homeowners in the six markets studied saw solid increases in their home equity appreciation in a only a few years. The following are the rates of home equity appreciation for Nehemiah DAP homebuyers since 1998:

Market	African-American	Hispanic	White
Atlanta	5.0% increase	4.6% increase	5.4% increase
Baltimore	13.8% increase	13.3% increase	20.8% increase
Columbus	2.6% increase	3.8% increase	3.7% increase
Philadelphia	16.7% increase	9.8% increase	18.0% increase
Sacramento	65.2% increase	74.2% increase	66.4% increase
St. Louis	2.5% increase	9.7% increase	11.4% increase

Each of the communities studied saw a strong increase in home equity appreciation for minority homeowners. While minority homeowners′ equity still lags behind white owners in many communities, it is clear that the disparity shown nationally does not translate in these communities. In this study, minority homeowners′ homes appreciated at nearly an equivalent rate as other homebuyers in each region, and in some cases exceeded the other demographic homeowners′ appreciation.

"This study proves that investing in the lives of low- to moderate-income families pays off in the form of substantial financial, social and fiscal rewards," said Perry Wong, Senior Research Economist and principle author of the study, the Milken Institute.

View study.

About Nehemiah Corporation of America
Founded in 1994, Nehemiah Corporation of America, (www.nehemiahcorp.org), is a Sacramento-based nonprofit organization committed to empowering lives and enriching communities nationwide. Nehemiah transforms lives by increasing homeownership opportunities for diverse populations, while maintaining its commitment to successful, responsible homeownership. Nehemiah transforms communities by expanding its faith-based, charitable and community development initiatives into underserved neighborhoods across America. In 1997, Nehemiah launched its flagship program, The Nehemiah Program(R), to provide down payment assistance to homebuyers. To date, Nehemiah has provided more than $675 million in down payment assistance gifts, resulting in $23 billion in real estate transactions and has helped over 170,000 families and individuals achieve their dream of homeownership. Committed to comprehensive community reinvestment, Nehemiah has fostered partnerships with Habitat for Humanity, HomeAid America and the US Conference of Mayors. In addition to providing down payment gift assistance, Nehemiah has created other programs that work to enrich communities including: Nehemiah Community Reinvestment Fund, Nehemiah Community Foundation and Nehemiah Urban Ministry Initiative.

Nehemiah Corp. contact Information: Lewis Goldberg, Sloane & Company, 212) 446-1875, [email protected]