Nā Hale O Maui Executive Director Cassandra Abdul and President Michael Trotto beam as they hold a check for $8,000 from the Kerr Labbe Lowe Family Fund of the Oregon Community Foundation.
Cassandra Abdul, the executive director of the Nā Hale O Maui (NHOM) Community Land Trust called it a “Wow!” moment when the mail arrived a few weeks ago and they received two donations totaling $9,500 in as many days.
“We were thrilled to receive $8,000 from the Kerr Labbe Lowe Family Fund of the Oregon Community Foundation, and received even more good news about $1,500 to be granted by the Kihei Lutheran Church Endowment Fund”.
The awards came on the heels of NHOM’s launch of their new brand-new website (www.nahaleomaui.org) designed to expand the reach of NHOM and its program of developing truly affordable homes that remain affordable in perpetuity. The group’s efforts have placed 35 families in affordable homes—including the resale of two homes to income-qualified families—and is now planning to build 12-affordable homes in Lahaina. The mission of NHOM is “To secure and preserve a permanent supply of affordable housing alternatives for low and moderate income households in Maui County.”
“Affordable housing is a serious concern for everyone on Maui. Happily, we can do something about it. Our Mayor, his Administration, the Maui County Council, and Maui residents are deeply concerned about housing in Maui County. Many of our visitors share our concern about the lack of affordable housing both on Maui and where they may also live. Our ‘new and improved’ website provides an opportunity for malahini and kama’āina to learn about Nā Hale O Maui’s unique program, providing affordable housing in perpetuity. The website makes it easy to become a member and provide financial support with a one-time or recurring donation. It is also an excellent opportunity for local families to learn more about our mission and how we might be able to help them.
Our Oregon donor found us through the website where it was easy to review our mission, programs and progress. We hope to expand our efforts in social media fund-raising to increase affordable housing in perpetuity for the benefit of the Maui community,” Abdul said.
Dec 2, 2016 Community
If you spend enough time attending Maui County council meetings on planning and housing issues you may pick up something you don’t know. Recently, one of those things was an affordable housing concept called “Shared Equity.” When did start? Where has it been successful? What did it mean, exactly? Who defines “equity” and who decides how to share it? What about improvements a family may have made in their home since they acquired it?
Where did shared-equity start and where has it been successful? First of all “shared-equity” is really short hand for “shared-equity homeownership.” In an article written by John Emmeus Davis for the Encyclopedia of Housing (second edition) shared-equity homeownership is described as “…a generic term for various forms of resale-restricted, owner-occupied housing in which the rights, responsibilities, risks, and rewards of ownership are shared between an income-eligible household who buys a home at a below-market price and an organizational steward who protects the affordability, quality, and security of that home long after it is purchased.” That organization is generally a community land trust (CLT).
The term shared-equity homeownership grew out of a movement led by the National Housing Institute (NHI) that argued that too much time was being spent on trying to increase homeownership by trying to lower mortgage payments and or by gaining access to credit. The NHI pointed to non-market models of homeownership. According to the NHI, these models restricted the price of publicly assisted, privately owned homes and did so across multiple re-sales while maintaining their affordability for many years. The NIH adopted the term: “shared-equity homeownership” in 2006 to describe this model of homeownership. The term has now gained general acceptance.
Boy and Father
Kaulana Noa works on improving the entry sidewalk to his new home as his young son gives advice. Making improvements to their home is one strategy the Noa family used to build shared homeownership equity in their journey from a Nā Hale O Maui Community Land Trust home to a market-priced home in Kahului.
There are four elements that define shared-equity homeownership: (1) the occupants are owners, (2) equity is shared, (3) affordability is preserved (4) and there is a stewardship organization in place to ensure the terms of any agreement are met.
Davis’s article describes how…“the NIH was attracted to the term by its emphasis on how the appreciating value of residential property is routinely created and to whom it rightfully belongs. Only part of a property’s unencumbered value is a product of an owner’s personal investment in purchasing and improving the property. The rest is a product of the community’s investment: equity contributed at the time of purchase in the form of a public grant, charitable donation, or municipally mandated concession from a private developer; and equity accruing to the property over time because of the public’s investment in necessary infrastructure and society’s overall growth and development.
CLTs, LECs, and other forms of resale-restricted, owner-occupied housing endeavor to lock this socially created value in place. In shared-equity housing, homeowners claim only the equity they created through their own dollars or labors. The rest of it, including the entirety of any public subsidies put into the property and a majority of any market gains in value, remains in the home at resale, reducing its price for the next income-eligible buyer. There is, in effect, an intergenerational sharing of equity across successive owners of the same home; hence the name shared-equity homeownership for models of housing designed to achieve this fair allocation of property-based wealth.”
But where has it worked? To get that answer we first must go to the state of Vermont and the city of Burlington. There, the Champlain Housing Trust (CHT), formerly the Burlington Land Trust, between 1984 and 2008 with the support of the local government developed and marketed 424 single-family homes and condominiums. Their first resale was in 1998 and by June of 2008 they had completed the resale of 205 houses and condominiums.
A study completed by the New American Foundation demonstrated that “Public subsidies invested in CHT’s houses and condominiums remained in the homes at resale, underwriting their affordability for subsequent generations of lower-income homebuyers. An initial public investment of $2,172,207 in homes that resold one or more times allowed CHT to bring homeownership within the reach of 357 lower-income households.” The study reported that occupancy, use, and resale controls remained in place for 96.7 percent of the 424 units of owner-occupied housing developed by CHT between 1984 and 2008.
There have been concerns expressed since the development of shared-equity homeownership that the restrictions on reselling properties would create a form of second-class homeownership. If middle-and upper-class people could build wealth off their houses, why should the working class be limited to shared- equity? The counter argument has been households would only be able to stop paying rent and begin building equity and wealth through homeownership if initially they could afford to buy a home. Advocates argued that the CLT model, based on shared-equity, was a concept that worked and built wealth for low-income families in the process.
The New America Foundation study addressed the wealth building impact of shared-equity homeownership and found that, “The lower-income households who initially bought CHT’s homes generally made a personal investment of no more than 3 percent of the below-market price of their homes. Because these homes sold at less than their appraised value, the average buyer’s initial investment represented only 2.3 percent of the appraised value at the time of sale. At the time of resale, the average homeowner’s outgoing home equity was equal to 9 percent of the (appreciated) appraised value of their home. In other words, homebuyers who started with only 2 percent of the market value of their house or condominium ended up less than six years later with cash equal to 9 percent of its value. The average CHT seller, over the entire period of 1988 to 2008, left with $13,503 in equity. Homeowners selling in 2004 to 2008 received an average of $21,192.”
But, what about the shared-equity deed restriction homeownership concept as it applies to Maui Nui? Is it right for all affordable housing projects and organizations? To get the answer to that question and more I turned to two experts in the field of workforce housing, Cassandra Abdul, Executive Director of Nā Hale O Maui, a Community Land Trust and Sheri Dodson, Executive Director of Habitat for Humanity, an international organization building homes for low income households, using the families “sweat equity” contribution of time and labor to help keep the home building cost low.
Testifying before the Maui County Council on October 27, 2016, Dodson described the current Habitat deed restriction policy as a 30-year restriction with no appreciation for the first 10 years and then a 5% shared appreciation starting on the 11th year. There is an owner occupied restriction as well as a Right of First Refusal clause.
She went on to testify, “It is Habitat’s theory that with all the sweat equity put in by the family and with a 30 year deed restriction, this is adequate to assure that the home will not be ‘flipped.’ The Owner occupied and Right of First Refusal clauses are additional assurances that the families will remain in the home. The restriction also includes any refinance of the house. Even to pull money out of the house, the family must consult with Habitat and Habitat has the ultimate say if they can refinance.”
Dodson told the Council that any change in Habitat’s deed restriction policy is an additional burden being placed on low-income families, “With this as their only source of wealth, it is the only thing that they can pass onto their children. To restrict what that asset is worth after all the sweat equity they put into it just because they are low income seems over burdensome. Habitat for Humanity Maui has never had a family try to sell their home.”
Abdul’s community land trust has shared equity homeownership at the core of their efforts to acquire and build truly affordable workforce housing. “Shared equity is the means by which our Homeowners may share in the appreciation of the property. It is also the means by which affordability is maintained in perpetuity, buyer after buyer, and generation after generation,” Abdul said when interviewed for this story.
A Community Land Trust is an independent non-profit 501(c)(3) tax-exempt membership organization run by an elected Board of Directors. The mission of the organization is to provide a permanent supply of affordable housing alternatives for low and moderate-income residents of Maui. The CLT acquires and retains ownership of the land and sells the home to individual homeowners through long-term 99-year renewable ground leases that can be passed down to their heirs or income qualified buyers.
Abdul notes that the NHOM resale formula is calculated in two steps and thoroughly explained and vetted with the NHOM owner:
The home pictured is the latest NHOM sale in Kahului. The home was appraised at $495,000 and the NHOM price was at $260,000. The 3-bedroom, 2-bath home has 1,080 sq. ft. of living area on a 7,501 sq. ft. lot. Back and side yards are fenced. The interior was freshly painted, new dual glazed windows were installed, and a new range and refrigerator were purchased along with wooden window blinds and a solar hot water heater.
The first step is calculated the sale ratio by dividing the NHOM sale price by the appraised value.
Say the home sells for $300,000 and the appraisal opines a value of $400.000 (just for ease of calculations.) This creates a ratio of 75 percent (300,000/400,000 = 75 percent)
NHOM obtains a new appraisal when the family is ready to sell. In this example, the new appraisal opines a value of $500,000. Thus, the property has increased in appraised value by $100,000 (500,000 – 400,000 = 100,000.) They next apply the ratio of 75 percent to the $100,000 appreciation that equates to $75,000.
The second step multiples the $75,000 by the shared appreciation (SA) factor of 25 percent up to 50 percent in the 15th year of ownership. For this example, let’s say the family wants to sell in the 4th year. We apply the 25 percent SA factor to the 75,000 that equals $18,750. This is the first family's share of the equity. The family would have to repay any down-payment assistance grant (repayment eliminated at the end of the15th year) and would receive any remaining Eligible Capital Improvement credit.
This example assumes no grant, no excessive damage and no ECI credit, allowing the first family to close the sale with their portion of the shared appreciation, original down payment and principal paid over the life of the loan, (realized when the mortgage is paid off.)
NHOM has now successfully repurchased two CLT homes using the shared equity formula described above. In each case the family, using the NHOM shared-equity formula was able to meet the realities of marriage, a growing family, job relocation and the need for a larger home as the family grew. The latest NHOM repurchase in Kahului allowed the family to buy a larger market-priced home. This was possible because the family could save for a down payment due to their reasonable CLT mortgage payments and the shared equity realized in the resale formula. CLT household expenses may not exceed 35 % of gross income
That CLT home was appraised for resale to an income qualified buyer at $495,000 with the NHOM affordable sale price of $260,000. The 3-bedroom, 2-bath home has 1,080 sq. ft. of living area on a 7,501 sq. ft. lot. Back and side yards are fenced. The interior was freshly painted, new counter tops, sinks and faucets, new dual glazed windows were installed, and a new range and refrigerator were purchased along with wooden window blinds. The sale includes an existing solar hot water heater.
Based on the evidence so far, shared-equity homeownership is working well on Maui and while not a deed restriction policy choice for every organization or affordable housing project; the evidence shows that shared-equity homeownership builds wealth for low- and median-income households while preserving home affordability across generations and many repeated sales. The public subsidy required to acquire and build NHOM homes is a one-time investment that does not have to be made over and over again.
Kaulana and Vonne “Hana” Noa enjoy playing with their children in the backyard of their new home in Kahului. “This is where our kids will grow up, said Kaulana. It feels good to know that.”
Kaulana Noa is a recruit with the Maui Police Department. His wife Vonne, also called “Hana” by her friends, helps people get medical insurance through the QUEST program at Kaiser. They have 4 children, ages 11 years to 5 months, and seven years ago they dreamed big and embarked on an ambitious plan to move from renting, to owning at Hawaiian Homes, to owning a Nā Hale O Maui (NHOM) house, and then moving to a market priced home.
Today, they are the first NHOM family to live that dream by moving from a NHOM home to a market price home. This was a key goal of the community land trust (CLT) since it began.
“This is where our kids will grow up,” said Kaulana. “It feels good to know that.”
The Community Land Trust movement began with what has been described as “a big idea in a small city.” That city was Burlington, Vermont, and the year was 1984. A young Burlington city council member named Bernie Sanders made a motion to fund this new land trust organization with a $200,000 grant to get the group on it’s feet. He supported their idea of homes being made affordable through a long-term lease that removed the cost of land from the price of the home. The ownership of the land stayed with the trust, while the home itself was leased to the “home owners” who developed equity in the home over time.
One goal of the Burlington Community Land Trust (now the Champlain Housing Trust) was to keep the cost of a CLT home to a level that allowed people to save money for a down payment in order to move up to a market priced home at a later date. A 2009 study commissioned by the trust has shown that since it was founded 67.4 percent of former CLT homeowners bought market-priced homes within 6 months of leaving the community land trust. This upwards movement also opened up CLT homes for new participants.
Fast forward to 2006, a group of housing advocates on Maui decide to replicate the Burlington model. With little more than the Vermont success story as their backdrop the group was able to receive a $50,000 grant from the County of Maui with the support of then Mayor Charmaine Tavares. Private funding was also raised, including $15,000 from the Realtors Association of Maui. NHOM began looking for public/private home building partnerships and was planning to build affordable land trust homes.
Their plan hit the 2008 recession. No one was lending and NHOM could not locate any private partners who wanted to build. To meet this unforeseen crisis NHOM changed its business plan and began to bring distressed abandoned homes out of foreclosure using funding they received from HUD’s Neighborhood Stabilization Program to purchase these homes, rehabilitate them and provide them to CLT home owners at a discounted price. To date NHOM has provided housing for 34 families.
With a planned 12-unit single-family home project in Lahaina, the building of their first NHOM home in Waikapu and their experience of working with CLT homeowners, NHOM expects to see more families like the Noa family be able to save for a down payment and move on to market price homes. Today, on Maui it is not uncommon to see people paying over 50 percent or more of their monthly income for housing costs. At NHOM that figure is no more than 35 percent.
For Hana and Kaulana it was all about starting small and building up. “Seven years ago we could never have afforded this home,” said Kaulana. They started small renting a two-bedroom, one bath Hawaiian Homes house from Hana’s uncle at $750-900 a month. When he passed, as his heirs they were able to acquire the home. Their mortgage was $1,100 per month.
Three years later they were introduced to NHOM by their lender at Home Street bank and were eventually selected and purchased a NHOM home. Today, the same size home would rent for more than the mortgage payment on the CLT home of just over $1,000 a month. They stayed four years as they gained job promotions and saved up enough money, along with a share of the appreciation to successfully purchase a 3-bedroom market price home with a mortgage payment of $3,000 a month.
Helping with the affordability of their NHOM home was the fact that the mortgage was less than 20% of the appraised value of the CLT home so the family did not have to pay private mortgage insurance. “That saved us $400 a month that could go into paying down bills and saving,” said Hana.
According to Kaulana moving into the NHOM home was easy, “They wanted you to succeed. Getting in and getting out, you never felt stuck.” Their family has grown and the house they now have is one they expect will last them for a long time.
Each time the Noa family has moved they were helped by the equity built in the home they had lived in. For example, the Resale Formula applied to their NHOM home provided shared equity when they sold that home back to NHOM. The CLT's repurchase of the home helped the family to close escrow for their new home on time. NHOM also agreed to have the family remain in the home, at below market rent, until they were ready to move into their new market rate home. NHOM plans to renovate their old home before selling to another income- qualified household earning not more than 120 percent of the area median income, as determined by the County of Maui. That NHOM shared equity helped with their move up to a market price home.
“We wanted to help others as we moved to another home,” said Kaulana. When we moved out of Hawaiian Homes we were able to help another family and whenever they see us they always say how grateful they are for their home. It’s the same thing with Nā Hale O Maui. We are opening up the opportunity for another family to get a community land trust home just like we did. We like to think we are helping others.”
A Supplement of the Maui News, Real Estate Guide, Nā Hale O Maui SuccessStory – Friday, July 29, 2016 – Page T8
The Solomon family is all smiles with the Nā Hale O Maui affordable home they have lived in since October of 2014. The home was appraised at $530,000 and purchased by the Solomon’s for $325,000. In the front row (left to right) are3 of their 4 children: Kahinau Solomon, Ramsey Hillen and Kala Hillen. In the second row are Jason Solomon and his wife Sheena Solomon. Not shown is their daughter Shania Duarte-Solomon.
Jason and Sheena Solomon had a dream of owning their own home. Both have good jobs and one day, Sheena, who works in insurance saw the name “Nā Hale O Maui” as an additional insured on a home that a client was buying. Asking about the organization, and after attending a NHOM sponsored Homebuyer Seminar she and he husband decided that they were going to qualify for a NHOM affordable home no matter what it took.
Before buying the NHOM home the Solomon family had lived in a two bedroom apartment with six people and were paying $1,200 a month in rent, utilities were not included and their total monthly housing cost rose to $1,700.
For over three years the family worked to save the money for the down payment. Jason caught Octopus and fish. “Sometimes we had to sell fish,” said Jason with a touch of an apology in his voice. Sheena made home specialties and sold them as well. Finally after 42 months of hard work they had saved $11,000 for their down payment.
With a positive decision by the NHOM selection committee that makes its decision based on specific criteria using the NHOM Homebuyer Selection Policies & Procedures, and a contribution from NHOM’s Down Payment Assistance Program of $5,000,the Solomon’s were able to move into their home that had been purchased at auction by NHOM for $425,250 and then renovated at a cost of $45,869. There were closing costs of $1,804.00. The total cost to NHOM was $472,923. NHOM contributed a subsidy of $154,099 to buy down the price of the home. The home was appraised at $530,000 and sold to the Solomon’s for $325,000.
Their NHOM home is a two story 3-bedroom, 3-bath home in the Legends at Maui Lani with the potential to add one more bedroom. Their monthly payment is $1,700.
Nā Hale O Maui Constructs First Affordable Home
As the Solomon’s were enjoying their home, NHOM was turning over a new leaf at the beginning of spring. Cassandra Abdul, Nā Hale O Maui’s new executive director, has announced that NHOM has constructed their very first new home that will be affordable in perpetuity and will never be sold at market price.
“This was always our goal—the building of new homes affordable in perpetuity through use of a sustainable lease agreement that can be passed on to one’s heirs and takes the cost of land out of the pricing and still provides all the benefits of traditional home ownership, including the development of home equity,” said former Executive Director John Andersen, in a press release announcing the home’s completion.
“But the same recession that led to mortgage credit drying up and high unemployment rates made us turn to rehabilitating foreclosed homes that had been abandoned and were becoming neighborhood eyesores,” he said.
“Now we are back to our original business model and our first affordable in perpetuity new home is located on Kama Street in Waikapu. It is a 4 bedroom 2 and 1/2 bath home that has 1,600 Square Feet. of living area with an additional 350+ Square Feet when the garage and lanai are included,” Abdul added.
The home, which on the open market would sell in the low $600,000’s, is already in escrow at $360,000and will remain affordable in perpetuity.
It is a pilot project for 12 NHOM land trust homes that are projected to be built in a residential project in Lahaina that is being developed by West Maui Land Company.NHOM plans to build affordable homes for families earning from80 percent to 120 percent of the area medium income.
Despite the worst recession since the Great Depression NHOM was able to place over 30 families in 3 and 4 bedroom affordable homes over the past few years. Most homes have sold for under $300,000 and many were sold in the mid to upper $200,000 price range.
Nā Hale O Maui is a Community Land Trust (CLT) and an independent 501 (c) (3) tax-exempt membership organization. The mission of the organization is to provide affordable housing for low and moderate-income residents of Maui one home at a time.The Institute for Community Economics developed the first CLT in the 1960’s.There are over 200 CLT’s operating in 38 states around the country.
Homes are kept affordable because the CLT acquires and retains ownership of the land and sells the homes to individual homeowners through long-term renewable ground leases. The terms of the ground lease give the CLT the right to repurchase the home located on its land with a resale price set by formula that is designed to give to give present homeowners a fair return on their investment, while giving future homebuyers fair access to housing at an affordable price.
“Our home has given us stability,” said Sheena Solomon. “It has been a blessing. We always strived to meet that goal of owning a home. To make it happen. The NHOM program made it happen.”
“The important thing to remember,” said Sheena, who is now a member of the NHOM Board of Directors, “is that we did not do this just for ourselves. We did it for our kids and our grandkids. This home will always be affordable for future generations as well.”
A Supplement of the Maui News, Real Estate Guide-March 25, 2016 - Page T7
Nā Hale O Maui’s first home built to be affordable in perpetuity as a Community Land Trust Home is located on Kama Street in Waikapu. It is a 4-bedroom 2 and 1/2 bath home that has 1,600 Square Feet of living area with an additional 350+ Square Feet. when the garage and lanai are included.The home, on the open market would sell in the low $600,000’s. Itis expected to be sold by NHOM in the high $300,000’s.