ANDP’s Underwater Neighborhood Recovery Initiative is a strategic effort to expand quality, affordable homeownership options and stabilize underserved metro Atlanta neighborhoods that are experiencing high rates of homeowner negative equity. Through this initiative, ANDP has been working to strategically lift home values, reduce underwater rates, and empower residents in neighborhoods mired by negative equity. Our goal is to expand homeownership options and restore equity in largely minority, low-income neighborhoods that are still recovering from metro Atlanta’s devastating foreclosure crisis.
ANDP’S HOMEOWNERSHIP PRODUCTION
Since 2008, ANDP has acquired, rehabilitated, and repopulated over 523 previously foreclosed single family homes, making us one of nation’s most impactful nonprofits doing this work. As NSP funds and REO property donations have dwindled in recent years, we have sustained this work by expanding our capital sources and by launching innovative partnerships with private developers to rehab homes without relying on government subsidies.
Currently, ANDP maintains a goal of rehabbing 50 homes per year. All of ANDP’s home rehabs incorporate “green” standards such as the installation of energy-efficient appliances and low-flow water fixtures, resulting in long-term cost savings for our homebuyers. We partner with HUD-certified housing counseling agencies that provide comprehensive homebuyer education courses in person and on-line, providing a sustainable path to homeownership.
ANDP’s target area includes largely minority LMI tracts in and around metro Atlanta’s south side, where the market has been constrained due to a combination of deflated home prices, high negative equity rates, disinvestment, and a limited availability of quality housing stock. As depicted in a recent front page Washington Post article which ANDP contributed to, this has effectively created a “tale of two cities” in Atlanta, with majority white communities in north Atlanta separated from lower-income majority black communities in the south (see attached article, “This can’t happen by accident,” available online at https://www.washingtonpost.com/graphics/business/wonk/housing/atlanta/?hpid=hp_hp-top-table-main_housing-atlanta%3Ahomepage%2Fstory).
NEED TO EXPAND QUALITY HOMEOWNERSHIP OPTIONS
ANDP’s home rehabs fill a market gap for quality, affordable homes in our target area, where current conditions include near zero new home construction; limited rehabs-in-place; and a significant low-value appraisal risk. Sidelined owners of quality homes, who would have to sell at a loss or through short-sale, are choosing not to list their homes, and a high percentage of qualified sales are being made to investors for rental conversion. In short, the market is not performing.
The pinch on available housing stock has hit the affordable buyers the hardest. This short supply for housing means a very competitive market – even for homes considered to be starter homes for first-time homebuyers. In addition, affordable buyers must compete with cash-laden investors, foreign and domestic, who are purchasing 11% of all single-family homes in Atlanta (RealtyTrac, 2015). ANDP is one of the few strong nonprofits equipped to level the playing field for lower-income families and expand the availability of quality, affordable rehabbed homes for purchase.
REBUILDING WEALTH IN UNDERWATER MINORITY NEIGHBORHOODS
In addition to expanding homeownership options, ANDP’s home sales have a secondary effect of building market comps and restoring home values in underwater neighborhoods. A recent study conducted by Epic Intentions, a student consulting group from the Georgia Institute of Technology, shows that every dollar invested by ANDP to rehab single-family homes has a six-fold potential to lift surrounding home values. From 2010 to 2013, ANDP’s investment of $2.3 MM to rehab 53 homes in Douglas County created $14.6 MM in value for surrounding homeowners. (See attached report or visit http://www.andpi.org/douglasimpact/index.html). Our theory of change is that when values rise, underwater homeowners climb out of negative equity, positioning them to rebuild family wealth while generating higher property taxes to fund schools and other local services.
This work is especially critical in lower-income communities of color, where residents have lost an astounding amount of wealth. African Americans —for whom home equity typically accounts for 92% of net worth — lost nearly half of their net worth following the recession and are 86% more likely than whites to be underwater today (Center for Global Policy Solutions, “Beyond Broke,” May 2014). The restoration of equity is of utmost importance in metro Atlanta, which currently leads the nation in income inequality and ranks dead last for upward mobility (Brookings Institution, 2015; Equality of Opportunity Project, 2013).
EXPANDING COVERAGE IN UNDERSERVED SUBURBAN NEIGHBORHOODS
Another crucial need in Atlanta is the need to expand nonprofit services in suburban neighborhoods. Metro Atlanta’s suburban poverty rate has risen 159% in the past decade, to the extent that 88% of our region’s poor now lives in the suburbs (Brookings Institution, 2013). Areas like Clayton County in south metro Atlanta are now ground zero for negative equity but are often disconnected from nonprofits and other social services more readily available in the city.
As a regionally-focused housing nonprofit, ANDP is one of the few organizations able to serve these communities. We are a certified CHDO in the City of Atlanta and DeKalb County and have actively grown our footprint in the suburbs by rehabbing homes in partnership with mission-aligned private developers. In addition, we are working through the Piece by Piece Initiative to train suburban resident leaders on neighborhood stabilization strategies.
PUBLIC SECTOR PARTNERS
ANDP has active NSP contracts with Rockdale, Douglas, and Gwinnett Counties and is a certified CHDO in the City of Atlanta, DeKalb County, and Gwinnett. In recent years, we have significantly grown our volume of HOME-funded properties by securing CHDO set-aside HOME awards and by rotating proceeds from the sale of HOME-funded properties, which return to us at a 60% rate. All of our NSP homes are restricted to families earning no more than 120% of AMI, and all of our HOME-funded properties are affordable at 80% of AMI or less. Each jurisdiction we work with has different payment mechanisms and program requirements, demanding great sophistication in our internal controls. ANDP is one of the few certified CHDOs in metro Atlanta, making us very competitive for future HOME awards.
ANDP also partners with the National Community Stabilization Trust (NCST) to get a First Look at discounted REO properties. We are currently facing two unique acquisition opportunities, including: 1) the Reclaim Project, a joint effort by Housing Partnership Network and NCST to purchase low value distressed notes (at an approximate 20% discount) where there is little expectation of any further owner contact or financial recovery; and 2) the recently expanded Neighborhood Stabilization Initiative (NSI), which provides nonprofits like ANDP a First Look at discounted Freddie Mac/Fannie Mae homes through NCST and the Federal Housing Financing Agency. ANDP has been working with our private developer partners to perform due diligence on available ReClaim and NSI properties and has received over a dozen properties through these channels since the start of 2016. We anticipate a flow of 3 to 8 ReClaim homes and 35 to 40 NSI homes over the next 18 months and have been gearing up new capital to support this production.
In order to build our capacity while decreasing our reliance on government funds, ANDP has initiated innovative partnerships with mission-aligned private developers. We have four active private partners including two large-scale equity operators, Sylvan Road Capital and Key Property Services, and two smaller general contractors, Lifelong Inc. and Rock River Advisors LLC. We are currently in negotiations to develop two additional private developer partnerships.
Partnering with private developers enables ANDP to increase its production capacity in a post-NSP environment. In addition, these partnerships are enabling us to learn from the efficiencies of the private sector while promoting positive community outcomes. For instance, Sylvan Road Capital and Key Property Services both have sophisticated property assessment software capabilities that enable us to determine how a property will perform with great specificity. By working together to assess potential properties for purchase, we are able to maximize our First Look opportunities and quickly determine a plan of action.
TARGET GEOGRAPHY: UNDERWATER NEIGHBORHOODS IN METRO ATLANTA
Although ANDP serves the entire ten-county metro region, we are currently prioritizing a sub-geography target area of LMI neighborhoods mostly on metro Atlanta’s south side, including portions of the City of Atlanta and Clayton, DeKalb, Fulton, and Douglas, Counties. This area encompasses a ring of in-town and suburban neighborhoods that were devastated by the foreclosure crisis and have struggled to recover in its wake. Whereas home value have risen as much as 71% since January 2001 in parts of north Atlanta, prices are still 47% below peak values in the south metro (SaportaReport, March 2015). In this target area, 35% of residents are underwater on their mortgages (Zillow, December 2015).
In our target area, 62% of the population is African American; and 22% of residents are living in poverty. By comparison, in the remainder of metro Atlanta, 19% of the population is African American; and 13% of residents are living in poverty (PolicyMap/Zillow, 2015). Some of the most distressed areas include Clayton County, where nearly 50% of all homeowners are underwater on their mortgages – the highest rate nationwide (Zillow, December 2015).
Our clients not only obtain quality, energy efficient homes for their families, but also gain greater financial stability due to the affordable cost of the housing. All of ANDP’s home sales are targeted to families earning no more than 120% of AMI, and the majority of units are targeted to families earning below 80% of AMI. Approximately 85% of our clients are first-time homebuyers, and their average income is $37,863. Their average monthly mortgage payment is $529, which often makes buying a home from us more affordable than renting. ANDP’s homebuyers further benefit from long-term savings in reduced utility costs resulting from our “Green” scope of work. Our clients are also able to access financial literacy training included in homebuyer education courses offered by partnering housing counseling agencies.
IMPACT ON NEIGHBORING HOMEOWNERS
In addition to directly benefiting LMI homebuyers, ANDP’s single-family rehab work has a secondary effect of lifting home values and rebuilding wealth in hard-hit, largely minority communities. As indicated by ANDP’s study of home value increases in Douglas County, every dollar we invest in single-family foreclosure redevelopment has the potential to lift overall neighborhood values by a ratio of 1:6. Considering that home equity accounts for 92% of net worth for the typical African American household (Global Policy Solutions, 2014), lifting depressed home values is critically important to rebuilding minority wealth and bridging the racial wealth gap in our region.