Tribal members with moderate to low incomes often wonder whether they can afford homeownership. While homeownership and securing a mortgage may not be for everyone, making ownership affordable requires looking carefully at what potential homeowners can afford to pay consistently each month. A number of strategies can be used to make homeownership more affordable and more of a reality for tribal members:
- Principal reduction subsidies.
- Down payment and closing cost assistance.
- Subsidized infrastructure costs.
- Subdivision development.
- Affordable home design.
Principal-reduction subsidies can reduce the overall mortgage amount, leading to lower monthly payments. Sources of principal-reduction subsidies include:
Tribal members want options – and we made a conscious decision to provide asset building options for housing for tribal members and many have responded.
—Bristol Bay Housing Authority leader
Federal Home Loan Banks Affordable Housing Program (AHP)
The Federal Home Loan Bank System is organized by districts, and community organizations need to partner with a local FHLB member bank, credit union, or life insurer to apply. The application process is quite detailed.
Housing Improvement Program (HIP) funds
The BIA provides housing assistance through its HIP program. While the program has traditionally assisted elderly and disabled tribal members, HIP funds may also be used for principal-reduction subsidies.
Some tribes have funds available to provide as principal-subsidy grants for their tribal members, while some tribes with significant resources can provide principal- subsidy grants for homebuyers from other tribes.
Down payment and closing cost assistance
Many mortgages require borrowers to make a down payment or pay closing costs. Various resources may be available to cover these costs, and like the principal-subsidy reduction sources, accessing down payment and closing cost assistance can also make homeownership more affordable for tribal members. Some sources of down payment and closing cost assistance include:
- FHLB Affordable Housing Program Fund (See above.)
- FHLB – Native American Homeownership Initiative (NAHI)
Like the AHP, community organizations need to partner with a local FHLB member to apply for NAHI down payment funds. This program is available only in the Des Moines region of the FHLB.
BIA HIP funds may be used for down payment and closing cost assistance.
Many tribes have funds available to provide as down payment assistance/closing cost assistance for their members.
State housing agency funds
Some states have funds available through their state housing agencies for down payment and closing cost assistance. In South Dakota, for example, organizations may apply to the South Dakota Housing Development Authority Housing Opportunity Fund for support.
Subsidizing infrastructure costs and exploring subdivisions versus scattered sites
In many rural communities, developing housing stock also means installing new infrastructure, including water, sewer/septic, and roads. Since these costs can significantly increase the cost of developing the home, it is important to explore partnerships to assist in covering these costs. USDA/Rural Development and Indian Health Services, for example, fund this type of construction.
Related to infrastructure costs is the assessment of subdivision development versus scattered-site construction. Some families prefer to live “out in the country” or on allotted land that belongs to their families. However, scattered-site development often means higher costs to the homebuyer due to the extra expenses of transporting materials and working on a single house. With a subdivision, infrastructure is provided in bulk for the entire community. It may be possible to build a lagoon for waste for example, rather than individual septic tanks, or hook up to one main water line, rather than dig individual wells. Building this way saves overall costs, and often results in lower costs for each homebuyer.
Affordable home design
In working to ensure affordability for homeowners, design factors into both short-term planning and long-term community benefits. Affordable home design begins with selecting an architect who is committed to affordability in designing new homes, developing new floor plans, and selecting materials. Space should be maximized and the materials should reflect climate conditions.
Design also can impact long-term maintenance and utility costs. Replacing a roof every five years, for example, will result in significant costs for the homeowner. Another option is a passive solar design or other energy efficient system that reduces heating costs in the winter and decreases cooling costs in the summer.
In many rural communities, developing housing stock also means providing new infrastructure, including water, sewer/septic, and roads.