Habitat for Humanity-Spokane has had to get creative to continue pursuing its mission of providing affordable housing to low-income families here, as the poor economy has dampened donations, some of its homeowners have struggled to make mortgage payments, and affordable building sites have become more scarce.

The longtime nonprofit completed just nine homes in Spokane County last year, compared with its average of 16 homes a year, says Executive Director Michone Preston. That, Preston says, is because the local organization had less money available to start projects, and has had trouble finding urban lots on which to build homes.

Meanwhile, she says, demand for Habitat housing, which is sold at cost to low-income homeowners, remains high and has increased during the recession.

One way the nonprofit is battling those challenges is by increasingly developing multifamily units, rather than single-family homes, to drive down the per-unit cost. Also, it has looked outside of the cities of Spokane and Spokane Valley for land where housing can be built more affordably.

That strategy, Preston says, was behind Habitat's decision in 2008 to buy about 20 acres of land in Deer Park, where it plans to construct a community of 58 duplexes in phases, starting this spring. The project ultimately will be worth about $13.5 million, including $1 million just for the needed infrastructure, she says.

"Each community faces different challenges," especially with the current economy, Preston says. "We've been affected because the need has increased," but at the same time, charitable dollars here have tightened up, she adds. In 2009, Habitat's funding was down by about $240,000 from the previous year, largely because of fewer donations, she says.

Preston says the Deer Park property fits well with Habitat for Humanity's mission. The nonprofit did a market study of Deer Park, which has 3,500 residents, and determined that more than enough families living within a mile of the planned community would qualify for the housing there, though it's not limiting participation to current Deer Park residents, she says.

"There's a terrific amount of people renting mobile homes on five or 10 acres, where their heat bill is higher than their rent," Preston says. In truth, there's a great deal of poverty in some of the rural communities in Spokane County, she says.

Habitat for Humanity-Spokane has built about 200 homes since the affiliate of Habitat for Humanity International opened here in 1987, and currently it carries active mortgages for 165 of those homes, she says.

Because it carries the zero-percent mortgages on the homes it builds, its cash flows are hurt during economic downturns, when the families it serves fall behind on their payments. Preston says, however, that one of the reasons Habitat carries its own mortgages is so it's in a position to help homeowners when they struggle. She says the nonprofit has had to foreclose on a Habitat home here only one time over the years, although a few homes have been deeded back to Habitat in lieu of foreclosure when the owners couldn't pay the mortgage.

Habitat for Humanity launches projects only as it has money available. Its funds come from a variety of sources, including the roughly $350,000 it collects each year in mortgage payments from the residents it serves, plus state and federal grants and donations from local individuals and organizations.

It can get up to $15,000 per housing unit from the federal Housing and Urban Development (HUD) department, and those funds typically are used to help pay for site acquisition and development, Preston says.

The organization depends mostly on volunteer labor to build the homes. It holds an annual fundraising breakfast in the spring, and Habitat promotes a planned giving program to encourage people to consider donations to it as a possible tool in their estate planning, Preston says. In addition, Habitat for Humanity-Spokane sells new and used building supplies at its two Habitat building-supply stores here, at 850 E. Trent and 11410 E. Sprague.

Breaking patterns of poverty

Habitat for Humanity aims to get people out of what Preston calls "poverty housing." The idea is to help families buy homes that will appreciate over time, helping them to build equity—a form of personal wealth—so they can break the cycle of poverty. That, she says, isn't possible for people living in apartments or even in mobile homes.

Founded in 1976 in Americus, Ga., by Millard and Linda Fuller, Habitat for Humanity International is a faith-based organization that finances its operations with a revolving fund it calls a "Fund for Humanity," building houses then using the mortgage payments, donations, and grants it receives to pay for the construction of more houses.

Each affiliate organization has a local board that decides how best to accomplish that mission in their community, she says, but primarily, the organization addresses the issue by building "simple, decent, and affordable homes" and selling them to homeowners at cost, which is far less than normal due to the volunteer labor that goes into them.

To qualify for the program, home buyers must show that they have enough regular monthly income to make the mortgage payments, and must have income of within 25 percent to 50 percent of the average median income of the area in which they live. For the Spokane area, the average median income is about $60,000 for a family of four, Preston says, so a qualifying income would be between $15,000 and $30,000 a year.

Preston says in Spokane, a lot of refugee and immigrant families meet those criteria and participate in the program, and about half of the families served through the program are two-parent families.

Once accepted into the program, families who participate must promise to put in at least 500 hours of work on Habitat houses or at the Habitat office, with at least 100 of those hours donated within the first six months, and another 100 used to help build their own habitat homes. In addition, by the time their house is completed, each family must save $2,000 to pay for the closing costs involved in the purchase of their home.

The organization provides individual case management help to its clients, helping them connect with a program through Spokane Neighborhood Action Partners (SNAP) that will match some of their savings, for example.

Habitat for Humanity then carries the home loan. Once a home is built, the organization has it appraised, and if the appraised amount is higher than the mortgage, the difference is added as a "silent second mortgage," which the homeowners must pay off in cash to Habitat for Humanity if they sell the house before the loan's 20-year term is up. If the owners keep the house for 20 years, they get to keep that equity, which Preston says roughly monetizes the value of the labor that was put into the construction.

Preston says the program ensures that people don't just "flip" Habitat homes, selling them immediately for more money than the dollar value of the mortgage, and walk away with the difference. The homes are, however, considered starter homes, so they are sometimes sold as people's economic situation changes, and especially if the housing market spikes, she says.

Economic strain

Although land costs have ebbed some as the poor economy has caused developers to sell off some of their land rather than develop it, such property still, typically, is too expensive for Habitat for Humanity to buy and develop itself, Preston says.

Lot prices remain in the range of about $45,000, and Habitat's target for land purchases is more in the range of $20,000 per lot, including any costs for legal and engineering services, excavation, and installation of sidewalks and water lines, she says.

Sometimes, she says, a lot price might look great, but the lot has many development challenges, such as lots on the lower South Hill that often are located on heavy basalt, making them costly to develop.

"We've moved away from buying spot lots" for those reasons, Preston says. When Habitat can buy a larger plot and put multifamily units on it, that helps keep the housing affordable for families, she says. The nine-family development the organization is completing this spring at 1601 E. Boone, in Spokane, is a good example of that, she says. It will include a single five-unit building and two duplexes, and each unit will be owned by the occupant, who also will become a member of a homeowner's association that will own the common areas in the development and the land beneath it.

Habitat for Humanity's founder had a philosophy of calling for the nonprofit to build homes using the revolving fund, so it doesn't have reserves or endowment money to use when donations and mortgage revenues dip. Preston says that now, because of changes in giving patterns since the terrorist attacks of 2001, the organization is beginning to see more of a need for a safety net.

As time goes on, Habitat for Humanity-Spokane will have to get more creative to keep providing housing in Spokane, Preston says. It might consider things like buying buildings to convert to condominiums, though it will continue to keep an eye out for land to purchase, she says.

For now, she says, the board is being careful.

"Our board has been cautious, scaling back, but when the economy is down, there's more need for affordable housing," she says.