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Study Session on Homeownership Programs
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Introduction
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Staff and outside presenters will discuss elements of homeownership programs that will address the racial and ethnic gap in homeownership rates in Oak Park. Staff are seeking direction from the Board on these elements in developing the right program for Oak Park.
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Recommended Action
Staff requests that the Board provide direction on the homeownership program elements identified in the presentation. Staff recommends the following elements as program development continues.
• Any program must provide homeownership counseling.
• Whether for shared equity or down payment assistance, a future program should focus on “first-generation” or “first-time” homebuyers.
• Down payment assistance can be valuable for households earning 120% of the area median income and for households looking to purchase a condominium.
• The Village would need to prioritize the development of a shared equity program to address the affordability of single-family homes since this program provides a deeper subsidy.
Prior Board Action
The Board has taken the following prior action(s):
• RES 24-167: A Resolution Adopting the Strategic Vision for Housing Plan Prepared by the Metropolitan Mayors Caucus
• RES 24-115: A Resolution Adopting the 2024-2025 Village Board Goals as Reviewed at the July 10, 2023, July 11, 2023, July 17, 2023 and September 14, 2023 Board Meetings
Background
The 2024-25 Board Goals include multiple priorities and goals related to homeownership.
• Racial Equity
- Explore paths to homeownership with the creation of a Renter to Homeowner Program and utilizing a non-profit organization to develop the means to address the lack of equity in homeownership, including first-time home-buying counseling and potential downpayment assistance.
• Vibrant, Diverse, Connected Neighborhoods
- Implement single-family homeownership strategies to increase affordable options through the use of resources from the Village’s Housing Trust Fund.
- Provide various Village educational workshops and forums (Examples: “Renting in Oak Park”, “Parking in Oak Park”, “Aging in Oak Park”, “Affordable Homeownership in Oak Park”, etc.) and various other topics relating to Village operations and key initiatives.
The Strategic Vision for Housing sets out two goals related to homeownership.
• Expand the variety of homeownership opportunities
• Respond to racial disparities in homeownership
To address these goals the Strategic Vision recommends the following actions.
• If any homeownership assistance is pursued, design any program to address racial homeownership disparities.
- Explore whether Housing Trust Fund changes are needed to support homeownership.
- Explicitly address historical barriers to homeownership that continue to impact Black households.
In keeping with the 2024-25 Board Goals and the Strategic Vision for Housing, staff have explored multiple program elements for future work by the Village in the homeownership space. The four primary ones are as follows.
• Homeownership counseling - this is intentional counseling for anyone interested in buying a home to help them understand and prepare for purchasing a home.
• Downpayment assistance - this is monetary support given to a household looking to buy that could be used to cover the down payment or closing costs needed to purchase a home.
• Mortgage Credit Certificates - this is a federal income tax credit that allows a homebuyer to receive a credit equal to a percentage of the interest paid on their home loan each year, up to a max of $2,000.
• Shared equity housing - this is funding to purchase a housing unit and then resell a portion of it to a household at a more affordable price point, maintaining the home as affordable in perpetuity.
To support the Board’s understanding of each of these elements, the following organizations will provide critical information about the operation of such programs or the wider housing market.
• Homeownership market context - The Oak Park Area Association of Realtors will present current trends in the Oak Park ownership market.
• Downpayment assistance - The Illinois Housing Development Authority (IHDA) will present their current downpayment offerings and their use in Oak Park.
• Homeownership counseling - Community Partners for Affordable Housing (CPAH) will present their program and the importance of homebuyer counseling.
• Shared equity housing - CPAH will also present their long-running community land trust and how it supports durable affordability.
Timing Considerations
There are no specific timing considerations associated with this item.
Budget Impact
A homeownership program would have a long-term fiscal impact, the magnitude of which would depend on the program elements and funding used. Shared equity and downpayment programs in other communities have been funded by Community Development Block Grant (CDBG), HOME, and the state affordable housing trust fund. Homebuyer counseling has been supported by a mix of federal, county, and state funds. These funding sources commonly restrict support to households earning less than 80% of the area median income (AMI).
The Board has expressed some interest in supporting homeownership efforts with the Housing Trust Fund. It too currently restricts ownership support to households earning less than 80% of AMI. There are potential benefits to supporting owners earning higher incomes. To do so would require adjustments to the Housing Trust Fund ordinance.
Staffing Impact
The magnitude of the staff impacts from operating a homeownership program would vary depending on the program elements and how those elements are executed. Many of the program elements would be best accomplished through the use of contractors or external partners.
DEI Impact
The homeownership program options discussed specifically focus on how these programs can narrow the racial and ethnic gap in homeownership rates, as well as how they can support homeownership opportunities for households earning less than 100% of the area median income.
Community Input
Any community input on this topic has occurred through the development of the Strategic Vision for Housing. Discussion of the elements presented tonight is the beginning of a new round of input. Staff will bring this item to the Housing Programs Advisory Committee in the coming months to fully flesh out a program proposal for Board consideration.
Staff Recommendation
Through staff’s research, we have developed the following recommendations.
• Any program should provide homeownership counseling since there are many non-monetary barriers to homeownership.
• Future programs should try and focus on “first-generation” or “first-time” homebuyers.
• Downpayment assistance can be valuable for households earning up to 120% of the area median income and for households looking to purchase a condominium.
• The Village would need to prioritize the development of a shared equity program to address the affordability of single-family homes since this program provides a deeper subsidy and creates permanently affordable units.
Advantages:
• The focus on homebuyer education would help create a ready pool of buyers, including current renters, recognizing that there are many non-monetary barriers to buying a home.
• The focus of any monetary resources on “first generation” or “first-time” homebuyers would follow national best practices on addressing racial/ethnic disparities in homeownership.
• The cost per unit for a downpayment program would be far lower.
• The development of a shared equity program would provide a deeper subsidy for permanent ownership affordability.
Disadvantages:
• Focusing on shared equity requires a much higher upfront financial investment from the Village to create that long-term affordability.
• There are few non-profits in the region that operate shared equity programs.
• There are several downpayment programs already serving the area.
Alternatives
Provide alternative direction to staff’s recommendations on homeownership program elements.
Advantages:
• Customizes next steps based on Board direction.
Disadvantages:
• May require additional research by staff prior to coming back with a recommended program.
Anticipated Future Actions
Staff will bring this item to the Housing Programs Advisory Committee in the coming months to fully flesh out a program proposal for Board consideration. Staff will return with a defined program for evaluation by the Board based on the feedback provided.
Prepared By: Jonathan Burch, Assistant Village Manager/ Neighborhood Services Director
Reviewed By: Ahmad M. Zayyad, Deputy Village Manager
Approved By: Kevin J. Jackson, Village Manager
Attachment(s):
1. Staff presentation
2. Oak Park Area Association of Realtors presentation
3. IHDA SmartBuy flyer
4. IHDA Access flyer
5. CPAH presentation