Chapter 2: Historical Housing Programs in Indian Country

Let’s look at historical housing programs in Indian Country to see the shifts and changes in homeownership and what they mean for these communities.

Low-Rent and Mutual Help Housing

Since 1962, the Office of Native American Programs (ONAP) at HUD has provided funding to Indian Housing Authorities (IHAs) in American Indian and Alaskan Native communities. Before the passage of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA), this funding constituted the majority of all federal resources for housing in tribal communities.

These early HUD programs had many problems.

• Funding assistance was restricted to low-income tribal members, with no opportunity for participation from moderate-income tribal members. The Low Rent and Mutual Help programs created a proscribed development process with limited vision for creative, culturally appropriate siting and housing design. Finally, the amount of funding available was wholly inadequate.
• As a consequence, IHAs could not build enough homes to meet the housing needs of their communities, could not maintain the homes they did build, and had to disregard sustainable and traditional designs and layouts.
• In too many instances, the only homes available to tribal members were small box-shaped houses often located on scattered sites or in unattractive subdivisions. It was housing that could be immediately identified as “government” housing, and its residents tended to treat it as such—compounding problems with poor maintenance.
  • For tribal members who desired and could afford to buy a home, there was virtually no homeownership market, private development, or mortgage lending on trust land on reservations.
  • In this environment, households wanting to purchase a home of their own faced difficult choices: They could buy a mobile home, try to build or buy their home without mortgage financing (usually with exorbitant interest), or move off the reservation.

Both of these problems—insufficient funds for low-income members and little or no available mortgage credit for moderate-income members—have led to severe overcrowding and a critical shortage of adequate housing on many Indian reservations across the country. In some cases, Mutual Help programs have created communities in which families “own” their homes but enjoy little if any of the benefits of homeownership.  This is because they have no financial investment in the home. Nor did they have any say about its design or location. As a result, there was very little pride in homeownership.   

Earlier homeownership efforts in tribal communities, like the Mutual Help program, usually were federally funded, heavily burdened by bureaucracy, and involved no private sector financing. Mutual Help was subject to federal funding allocations and design guidelines, among many other regulations and restrictions. Monthly payments were calculated as a percentage of income, without regard to an ability to repay a loan.

True homeownership almost always has an element of personal financial contribution. Home loan financing is available primarily to households with adequate, reasonably reliable income and takes into consideration the borrowers’ debts and other financial obligations.

Whether funded by government or private sources, homeownership is commonly financed with a mortgage. On trust land, a mortgage is a pledge of the borrower’s leasehold interest against the loan used to buy or construct the home. If the borrower cannot make the payments, the lender can take title to or repossess the leasehold interest in the land—including the home—through a foreclosure process. Before any tribal community or tribal member embarks on a path toward homeownership, a full understanding of the mortgage and foreclosure process is essential.

NAHASDA: Exercising Sovereignty and Leveraging Resources for Homeownership

Since 1996, NAHASDA has offered tribal governments more options to expand their housing programs and create community-based homeownership opportunities.  Although NAHASDA funding levels are still too low for tribes to fully address housing shortages, they allow tribal governments to:

• Design housing programs better suited for their members.
• Leverage federal block grants with private funding.
• Set aside a portion of funding for families with higher incomes in need of housing.

The ability to leverage government subsidies with a bank and other private investment is the key to building more and better homes for tribal members. While NAHASDA is still focused on low-income households, tribes can use NAHASDA funds to leverage government-guaranteed and conventional loans for homeownership, thereby providing more housing options to members of all income levels.

For instance, in using more bank funding for moderate-income homeownership, tribes are able to preserve block grant funds to build more rental housing for poorer households—the definition of leverage. Rather than building four homeownership units, the TDHE could use $150,000 in bank financing to build two homeownership units and the $150,000 in NAHASDA funding to assist in the construction of low-income rental housing.

Moreover, by leveraging NAHASDA funding, tribes can create mortgage programs that allow households to enlarge existing homes, renovate deteriorated houses, or refinance mobile homes at reduced interest rates or for longer terms. 

While NAHASDA can be used to support homeownership and mortgage programs, to develop and implement these programs successfully often means a shift in a tribe’s approach to housing and property management.

The Shift to a Homeownership Approach

Providing homeownership opportunities for tribal members means a true shift in approach from the “old” way to a new way.  While programmatic shifts may be difficult, a new approach can mean serving more tribal members more effectively in the long run. This shift includes a careful examination of collection efforts for monthly payments and market-rate rentals:

Reducing TARs

The new approach means an emphasis on timely, current rental payments and building a stronger balance sheet for a Housing Authority or TDHE to take on homeownership development projects. This program approach also promotes an important “culture of payment” that is critical to establishing consistent repayment practices for individual mortgage loans.

Charging Market-Rate Rents

The new approach also emphasizes charging market-rate rents as a true reflection of what families can afford.  It can lead them to consider homeownership options.  If the difference between a monthly mortgage payment and a market-rate rental payment is insignificant, potential homebuyers may look more favorably at homeownership options.  Charging below market-rate rents is a disincentive for homeownership—why pay more for a mortgage if the current rental rates are so low? A more targeted approach to housing assistance can be accomplished without squeezing lower-income families out by using rental vouchers where most needed. 

By making these shifts and providing homeownership options, tribes can develop a strong continuum of housing options that meet the needs, payment abilities, and dreams of tribal members.  Providing homeownership options for those who can afford to pay can relieve overcrowding in rental units and address long waiting lists.