Delta Housing Development Corporation

Indianola, MS, United States
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  • Housing and Homelessness

  • Mississippi

  • Economically disadvantaged people

  • Public charity

  • $2,193,440 (2015)

  • 11

Executive Summary

Delta Housing Development Corporation (DHDC) has dedicated it entire existence to providing safe decent affordable housing and related housing services to families in the Mississippi Delta. DHDC greatest success has come in delivering home ownership opportunities to families that, at one point, felt home ownership was a dream beyond reality. Today, with credit issues, lack of down payment assistance for potential homeowners to make mortgages affordable or attainable and an ongoing delivery system that is geared toward these vulnerable delta families, home ownership is once again out of reach for the vast majority of them. DHDC is proposing to target small communities across the Delta through a lease purchase program that would leverage the MacArthur Foundation grant funds with 4% low income housing tax credits (LIHTCs) that will create instant affordable housing, while providing a path that will enable them to take title to their homes in a fifteen year period

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The Problem

The housing situation in the Delta is the result of lack of investment in low income communities, resulting in too many residents still living in dilapidated, over crowded, shot gun structures built in the first half of the 20th century. The is a great number of families that now have the financial ability to maintain home ownership status but are denied the opportunity because of the following factors: (1) Credit - It is safe to say that at least 60% of the family that apply affordable mortgage with Rural Development are turned down because of credit issues; (2) Adequate Down Payment - Many families that request mortgage financing from traditional lenders find it difficult to meet their down payment requirements or loan to debt ratios; and (3) Affordable New Homes - Many families are approved for affordable mortgages, especially thru Rural Development, but based on their income to debt ratios, they do not qualify for enough mortgage financing to build new homes. Almost one quarter (23 percent) of all LMD households are cost burdened - paying 30 percent or more of their earnings for housing. Home ownership, housing value, and asset retention are heavily dependent on access to mortgage financing. Rural areas generally have fewer conventional banks and financial institutions than urban centers. This is a major factor in the proliferation of subprime lending, particularly in rural areas with high minority populations; these lenders are more active in low income and minority communities.

Proposed Solution

The MacArthur grant funding can be used to directly impact all three areas mentioned in the Problem Statement. With the use of these funds, DHDC proposed to build affordable housing through out the small communities of the Delta, especially those in dire need of affordable housing and home ownership opportunities. We will build subdivisions of 30 to 40 units utilizing 4% low income housing tax credits (LIHTCs) under a lease purchase program. There is a large pool of these credits and unlike the highly competitive 9% credits, the 4% credits creates a development funding shortfall of more than 57%. These grant funds will be used to provide a first mortgage loan to the project with no principal or interest payment for approximately 16 years. This will enable the project to meet the required restricted period during the fifteen year tax credits compliance period prior to the residents acquiring the unit as home ownership. This development process will enable residents of the units to become home owners regardless of their credit scores; without down payment funding because of the mortgage payment investment over the 15 years compliance period, and DHDC will provide financial and credit counseling to all resident during the compliance period so that that will be able to secure a permanent mortgage at the end of the compliance period.

Evidence of Effectiveness

The Center for American Progress published the following article April 29, 2015 The Cleveland Housing Network, or CHN, a community development corporation operates the nation's longest running lease purchase program. CHN uses LIHTC, to attract equity investors who, in exchange for the 15 year tax credits, help CHN to buy single family rental properties. CHN then offers these homes for rent at an affordable price of about $550 per month. At the end of the 15 year period, the value of the home is usually between $30,000 and $80,000. Renters who have successfully made it through the program are then able to purchase the home below the market value, usually for less than $20,000. CHN also uses dollars designated for the city of Cleveland through the U.S. Department of Housing and Urban Development's, or HUD's, HOME program to offer lease purchase participants an interest free second mortgage, which only needs to be repaid upon resale or refinancing. This model makes it possible for a household to lock into a long term affordable rental home while also creating an affordable and sustainable home ownership opportunity. When the tenants convert to home ownership, they often have significant equity in the home. The rate of foreclosure among program participants is low. Out of 539 homes purchased through the program since 2010, only one homeowner has lost a home to foreclosure, according to CHN. CHN reports that about 85 percent of participants are able to convert to home ownership through its lease purchase program.

Previous Performance

Delta Housing has been development affordable housing and performing housing related services for over 45 years. The agency currently owns and manages 10 rental housing complexes; of which, it constructed 8 of them, acquired and rehabilitated one, and purchased one from a community development corporation (CDC) that was going out of business. DHDC has built approximately 700 single family during its existing utilizing the Rural Development Self Help housing method of construction. DHDC has provided over 4,000 families with homeowners with housing preservation and weatherization through it various weatherization and preservation programs. DHDC entire history has been centered on affordable housing delivery.

The Team

Team Purpose

DHDC is a private non profit corporation with the specific intent and purpose of providing a long range housing delivery system to economically disadvantaged communities and people of Mississippi, particularly in the Mississippi Delta. DHDC has been true to this mission since its inception in 1971. Although the organization currently owns and manages 10 multi family affordable rental housing complexes, it has not produce units for home ownership over the past 10 years. The Board of Directors have made it clear that DHDC need to regain its status as a home ownership producer if it truly expecting to impact the housing conditions and the economics of the Delta

Team Structure

Delta Housing Development Corporation is a private non orifit that is governed by a board of directors. The Board currently consists of twelve members with a limit of seventeen. The day to day operations are managed by the Executive Director, who reports directly to the Board. Currently, there are three department heads: (a) The Director of Rental Housing Management, (b) The Director of Rental Housing Maintenance, and (c) The Farm worker Housing Specialist. The Fiscal Officer reports jointly to the Board and the Executive Director. This funding will require additional staff: (a) Program Director, who will report to the Executive Director, (b) Program Assistant, who will report to the Program Director, and (c) Program Analysis, who will also report to the Program Director. All other persons involved in the implementation of this program will be part of the development team and contractual; such as, architect, engineers, contractors and attorneys.