| Name | Martina |
|---|---|
| Last Name | Guilfoil |
| Home Address | 1500 Chestnut St #102 Suite 102 Chattanooga, TENNESSEE 37408 United States |
| Organization Name | Chattanooga Neighborhood Enterprise |
| Describe Your Role In The Organization | I serve as the CEO. I am responsible for ensuring CNE's fiscal, operations, fundraising, marketing, human resource, technology, and programmatic strategies are effectively implemented across all segments of the organization. I also support the board of directors in setting the vision and policies of the organization. |
| Organization Address | 1500 Chestnut St #102 Suite 102 Chattanooga, TENNESSEE 37408 United States |
| Website | https://www.cneinc.org |
| Best Phone Number To Reach You | 4237566224 |
| Alternate Phone Number | |
| Email Address | mguilfoil@cneinc.org |
| Alternate Email Address | msguilfoil@yahoo.com |
| Please Describe Your Project In Detail | CNE is proposing that $5 million in recovery funds be allocated for the creation of a robust home buyer subsidy program. This will create a minimum of 100 new homebuyers over the next three years while increasing housing affordability and household stability. Much of Chattanooga’s workforce is being priced out of buying a home. People such as senior care givers, bus drivers, university office staff, childcare workers, nurses, servers, grocery clerks and bank tellers – all people who make our daily lives possible. The average salary for a would-be homebuyer in CNE’s pipeline is $36,214. These are the members of Chattanooga’s workforce seeking to become homeowners that need a mortgage subsidy to help them achieve their dream. Home ownership is critical to building the individual and community wealth that helps ensure the wellbeing of Chattanooga families and neighborhoods. Rents have increased 34.24% since 2014, but half of that price increase happened in the past two years. Projected rents are expected to increase another 23.9% over the next three years. Home ownership can offer a solution to rising housing costs and is often left out of the affordable housing discussion. Affordable home ownership provides the kind of affordability and stability low-income families need; the home gets more affordable over time, and the housing is more stable because there is no landlord to evict you. According to a study by the Urban Institute, Black and Latino homeowners pay less of their income on housing than all renters, including white renters. Owners with low incomes pay 10 percentage points less of their income on housing than do renters with low incomes. In addition, wealth inequality between homeowners and renters is striking. Homeowners' median net worth is 80 times larger than renters' median net worth. Increasing access to affordable homeownership can allow us to establish long-term solutions to Chattanooga’s affordability crisis while building generational prosperity for its residents. Key to the ARPA funding, a home buyer subsidy program would assist those most disproportionately impacted by the pandemic and is key to achieving housing equity for Black Americans. Homeownership is the biggest creator of wealth—more than income or access to higher education, and the Black-white homeownership gap is growing across the county. According to a study just released by the National Association of Realtors (NAR), the homeownership rate for Black Americans is 42% versus the white rate of 69.8%. Historical discriminatory practices such as redlining, and deed-restricted covenants made it impossible for Black families to own homes. These housing policies have deprived generations of Black households of wealth-building through home equity appreciation and passing that wealth onto their children to assist them to buy a first home. Down payment programs are critical to helping Black Americans overcome the lack of savings to become homeowners. Mayor Kelly has stated that he wants to invest recovery dollars “into lasting solutions that will spark generational change in our community”. A homeownership subsidy program meets that criterion. Chattanooga housing prices have risen dramatically over the past few years, increasing both the level of income needed to purchase as well as the amount of money needed for a down payment. The median housing value for Chattanooga has increased 69.8% in the past six years, 50% of that occurring in the past two years to $270,000 (per GCAR 2021 Annual Report). This requires an income of $63,000 to qualify and savings of $22,950 for the down payment and closing costs. This is out of reach for almost half of Chattanooga households. A mortgage subsidy program is needed to assist families enter the homeownership market. It would provide funding to cover the closing costs (5% of purchase price) and to boost purchasing power. The subsidy lowers the price of a home to the borrower by filling the gap between what the borrower can afford and the price of the home. CNE believes an initial subsidy of $50,000 per unit is needed to widen the opportunity to become a first-time homebuyer. However, this amount is subject to change if home prices continue to escalate and /or interest rates rise. The subsidy would help low and moderate income Chattanoogan’s overcome price and closing cost barriers. The following example shows how the subsidy can increase purchase power. Family Size 80% of Qualifies for Subsidy of $50,000 60% of Qualifies for Subsidy of $50,000 Median Income Purchase Price (max $10,000 used Median Income Purchase Price (max $10,000 used towards closing costs) towards closing costs) 1 Person $39,950 $145,000 $185,000 $30,000 $110,000 $150,000 2 Person $45,650 $175,000 $215,000 $34,260 $130,000 $170,000 3 Person $51,350 $197,500 $237,000 $38,520 $150,000 $190,000 4 Person $57,050 $220,000 $260,000 $42,780 $170,500 $210,000 This subsidy could be used in one of two ways- a shared appreciation mortgage or in a community land trust (CLT) model. The amount of subsidy would be the same in either model. The difference is in how it is used to help prospective homebuyers afford to purchase a home that would otherwise be outside of their reach. In both models, the price of a home is reduced to the borrower by filling the gap between what the borrower can afford and the price of the home. In the shared appreciation loan model, the gap is filled through a deferred loan (sometimes known as a silent second mortgage), on which no payments are due until the home is sold to the next buyer or, in some cases, the first mortgage is refinanced. At that time, the subsidy must be repaid, along with the agreed-upon share of appreciation. This is typically structured as the same percentage that the deferred loan represented into the purchase, is the amount of shared equity. For example, if the deferred loan is 25% of the purchase price, the investor receives 25% of the appreciated equity at sale or refinance. Through this approach, low- and moderate-income households benefit from the opportunity to become homeowners and build equity through the pay-down of the principal on their first mortgage and by keeping a portion of home price gains. Under the CLT model, purchasers own the building (or attached unit) and lease the land from the CLT. Since it is the land that appreciates, the CLT provides a mechanism for creating affordable homeownership in perpetuity by separating the land from the structure. The CLT uses the subsidy to bring down the initial purchase price of the house (or unit) to qualified buyers and then maintains long-term affordability for future buyers by restricting future resale prices. This is spelled out in the 99- year long-term ground lease that accompanies purchase of the structure. The ground lease generally includes a formula that is used to establish the price of the home at resale and provisions that limit resale to income-eligible families and give the CLT a purchase option when the home is put up for sale. Resale formulas vary from one CLT to another and typically reflect a balance between the goals of preserving long-term affordability of the CLT units and allowing the homeowner to build wealth. Homeowners build wealth in two ways: through the forced savings gained by paying down the principal balance of their mortgage and through the share of home price appreciation allocated to them under the resale formula. Both models have pros and cons. The shared appreciation model generally provides more equity back to the homeowner at sale and is easier to administer and understand. When the assisted homeowner sells his or her home at the market price, the next buyer is not subject to any special requirements. The subsidy principle plus a share of the home price appreciation is recycled to assist the next buyer. However, unlike the CLT model, shared appreciation loans are not guaranteed to create permanently affordable housing units as the recaptured funds may not be sufficient to assist a similarly situated subsequent homebuyer if housing prices have risen too much. In that case, additional subsidy may be needed to make the home affordable for the next buyer. As noted above, the CLT model creates permanently affordable housing through its ground lease that stipulates the resale formula that will be used at the time of sale. There are a variety of formulas that can be used and the decision as to which one to use is the most debated and important decision a CLT board can make. Common types of formulas are “indexed formulas” and “shared appreciation formulas.” Indexed formulas use economic indicators, such as the area median income, wages, or consumer prices, to determine the home’s resale price. For example, the sales price of a home would be capped to be affordable to a similar household earning 80% of the area median income. These indices typically provide a more accurate reflection of families’ purchasing power than changes in home values. Shared appreciation formulas calculate a sales price by adding some percentage of the home’s value appreciation to the original sales price. Consider, for example, a homeowner who purchases a CLT home for $200,000. If the market value of an equivalent home increased by $40,000 during the period of ownership, and the CLT utilizes a shared appreciation model that allows the owner to keep one-quarter of the home price appreciation, the sales price would be set at $210,000 (the initial $200,000 purchase prices plus one-quarter of the $40,000 appreciation). CNE can manage either model. CNE’s CEO managed a shared appreciation loan program in Inglewood, California and a CLT in both Inglewood and Sarasota Florida. If funded, CNE would meet with the mayor, his housing staff, Habitat for Humanity, and other key stakeholders to discuss and decide which model makes sense for Chattanooga and how we can partner together to operate the program. Regardless of the model used, homebuyer education is an essential component of a successful homebuyer program. CNE brings all the steps to buy and own a home under one roof. Our services and products empower our customers with knowledge and financial skills, provide them with lending products, and support them as partners both before and after the home purchase. CNE offers a better way to buy a home with low-cost financing, equipped with knowledge and solid financial habits. CNE has offered homebuyer education and counseling services for over 35 years. Homebuyer counseling helps buyers identify and overcome any barriers that might be keeping them from purchasing a home and helps the buyer develop a plan to strengthen credit, pay down debts, increase savings, and budget for homeownership. In addition, CNE has licensed loan officers that determine how much a buyer can comfortably afford to spend on a home purchase, and to review the mortgage loan options most suitable for the buyer. CNE specializes in safe, affordable, fixed-rate mortgages including conventional and FHA (insured by the Federal Housing Administration). These mortgages will work in tandem with either of the mortgage subsidy programs. |
| Please explain how your project meets the requirements of the American Rescue Plan | The American Rescue Plan seeks to address the pandemic’s widening of public health and economic disparities. Affordable housing is identified in the Treasury’s Interim Final Rule as an allowable use for ARPA funds. The Interim Final Rule states that when providing affordable housing programs: households that qualify for the national Housing Trust Fund (HTF) and Home Investments Partnerships Program (HOME) are an eligible use of funds. Mortgage subsidy funds would be restricted to households who qualify under the HOME program guidelines. |
| Where would your project take place? | The mortgage subsidy program would be available for use by first time homebuyers within the city of Chattanooga |
| How much will your project cost in total? | 5000000 |
| Do you have any matching funding sources from other local governments, private entities, non-profits, or philanthropic entities for your project? | No |
| Please describe the source and list amounts of any other funding. | |
| What portion of the project are you asking the city to fund? | |
| If funded, when would your project start? | May 2, 2022 |
| How long would your project take to complete? | 3 years |
| What milestones would you use to measure your project’s progress? | CNE would measure the number of homebuyers created. We create annual KPI’s and have a dashboard report that shows our current actual numbers against our goal for that period. The report is reviewed by the Board of Directors on a quarterly basis. |
| How would you ensure accountability and transparency throughout the project lifecycle? | CNE maintains accountability and transparency through the following practices: • Engaged board of directors whose names are posted on CNE’s website, www.cneinc.org • Active Governance Committee that reviews CNE’s governing documents to ensure they are consistent with applicable laws and actual or desired organizational practices and amend governing documents as needed. The Governance Committee is also responsible for reviewing the performance of the board and committees, including the effectiveness of meetings, and making recommendations, as appropriate. • Organizational KPI Report is reviewed by the board of directors at every meeting. The report shows how the organization is performing against specific goals. • Financial information is available for review on the CNE website • In addition to undergoing an annual audit by an outside accounting firm, CNE undergoes an organizational assessment by NeighborWorks America. The assessment reviews production and program services, financial management, board governance, as well as technical and compliance systems. The assessment forms the basis of a rating that NeighborWorks America gives the organization. CNE has earned an “Exemplary” rating since 2016. • CNE has a history of reporting its production outcomes to the city, both through the community development department and the BFO. CNE would continue to report as required under this program. |
| If successful, how would your project benefit the community? | Home ownership is the primary tool to accumulate wealth in America. This is achieved by paying down the loan principal, (serving as a forced savings plan), and the home appreciating in value. CNE recently conducted an analysis of all the homebuyers it has assisted from 2012-2019 and we estimate that on a per household basis, our homebuyers have accumulated equity ranging from an average of $29,000 for homes purchased in 2019 to $96,844 for those bought in 2021. Collectively, our buyers have amassed over $77.4 million in wealth creation over ten years. In addition, CNE’s lending rate to African Americans is 32% versus the overall market rate of 6% (HMDA 2020 data). We anticipate that this number will increase under this program. |
| How will you attract community buy-in for your project? | Affordable housing is consistently raised as an issue by both Chattanooga residents and business leaders. We believe that providing funding to help overcome the affordability gap in the marketplace will be embraced by the community. It is important that the availability of funds is well advertised and understood by those who could benefit from it. CNE will hold informational sessions with the Greater Chattanooga Association of Realtors and conduct outreach with local churches to raise awareness. |
| Name | Martina Guilfoil |
| Contact Information | mguilfoil@cneinc.org |
| Name | Jens Christian |
| Contact Information | jchristensen@habichatt.org |
| Is there anything else you would like us to know about your project? | For those who wouldn't qualify for this program, CNE operates a loan program for households whose incomes are 80%-110% AMI and for those who buy in the county. |