For years, purchasing a house has been intertwined with the vision of the “American dream.” A home was originally a place for putting down roots and raising families, a symbol of a promised future. Later, homeownership became an encouraged financial investment in a burgeoning market. Yet many Americans today don’t own homes and even more worry they never will.
While the homeownership rate has steadily risen since the great recession, young adults, people of color, and those living in urban areas have faced new and lingering challenges to purchasing homes. In the last 15 years, the median cost of rent has almost doubled. Meanwhile, the cost of purchasing a house spiked significantly, jumping nearly $100,000 in the last four years. The combined costs have especially hit low-income individuals, who have found it increasingly difficult to pay rent and save for a house payment. Just last year, the National Low Income Housing Coalition released a report showing that full-time minimum wage workers are unable to afford a two-bedroom rental anywhere in the United States.
It’s an issue that the nonprofit housing developer MANNA has been working to combat for nearly 40 years. Since 1982, MANNA has developed and sold affordable townhouses, condominiums, cooperatives, rentals, and single-family homes in Washington, D.C., which has become one of the costliest housing regions in the nation. Through their first-time homebuyers program, they’ve helped low-income residents gain access to over $200 million in home equity, enabling buyers to develop financial security while revitalizing neighborhoods in the city that was once referred to as the “murder capital” of the country.
“The house, the property, is their ticket to get into another income category,” said founder Rev. Jim Dickerson who recently retired as the organization’s president.
But Dickerson will be the first one to say that Washington, D.C. is a much different place than it was when MANNA first began in the 1980s. The cost of purchasing a home in the district has skyrocketed in recent years, putting homeownership out of reach for all but the most affluent in many of the district’s wards. And developing new homes in the region has become a huge cost burden, with NPR reporting one acre of land at a value of $1.2 million on average.
The rising costs are in part due to increasing demand in the city. But an even larger driver has been zoning restrictions, which determine what can be built where and push multi-family and affordable units to certain parts of the city.
To curb rising renter and buyer costs, the district has adopted new policies. One policy, known as Inclusionary Zoning (IZ), allows developers to build additional for sale or rental units on a given site — so long as a certain percentage of those units are designated as “affordable.” The other effort, known as Affordable Dwelling Units (ADU), requires that certain homes be rented or purchased by individuals who fall within an established income bracket at a below-market rate if they are using a district subsidy.
While these policies target rising costs, they can create an unintended side effect: When owners are ready to sell, they are required to sell to those within their own income bracket. A maximum resale formula determines the sale price of an IZ unit, which often places the original buyer in a precarious situation without the ability to reap equity and with limited options to purchase a second time.
“It’s not really ownership in the true sense of ownership,” Dickerson said, which is why he says MANNA has been fighting for these policies to be changed. “What we’ve learned is IZ purchasers can receive a nice home in a nice area, but they can’t take out a home equity line of credit, or gain adequate equity out of it, if they choose to move to another neighborhood. They also can’t pass it on to another family member to build general wealth. People with education and high-income potential have greater choices to move elsewhere, so equity gains may not hinder them as much. However, people with lower or modest incomes can’t do that. They can’t afford to sell the unit for nothing and go somewhere else to repurchase. They’re pretty much stuck in their income category.”
The motivations for these policies are in the right place, Dickerson said, but fears of compounding housing costs will not be solved by restricting the limited number of affordable homeownership units being produced. It’s an action Dickerson said is an “unintended injustice that’s being perpetuated in the name of good.”
Some aspects of the policies add to inequality by giving buyers the worst units in a development. In some IZ for-sale units, the finishes provided in the market rate units are not offered in the affordable units, Dickerson said.
“They get the worst location in the building where they are facing a wall or something. And then they don’t have an equal voice in the condo association and the condo owners resent them because they can’t pay all these extra fees and everything else as the upper-income people,” he said. “There’s no real social integration in some of these buildings, not really.
Dickerson hints at something larger here that’s often left out of housing conversations: community. When MANNA first started purchasing houses in the district, Dickerson said that they often focused on the affordability of the unit, prioritizing getting a family into housing without really thinking about the surrounding community. But in MANNA’s early years, as the families began to settle, the importance of neighbors — and neighborhood — became more apparent.
“They sent their kids to the school. They were in the PTAs. They were in the community associations. They were the driving force to changing the neighborhoods,” Dickerson said. “They’re the best neighbors you can have. They’re the best citizens … people who really engaged in the community and had a stake in the community.”
It’s another reason why Dickerson is continuing to fight for homeownership. Years ago, Dickerson said the Coalition for Nonprofit Housing and Economic Development was able to secure a 15-year limit to some of the resale restrictions for affordable housing homeowners, meaning that after 15 years of owning a property, the family could sell the home and gain equity from the sale. It’s part of the ADU program that MANNA has been using to build some of its for-sale units.
“One of the buyers who fought alongside us said: The long-term restriction is like sharecropping. We don’t get the benefits of it, other than just a roof over our heads,” Dickerson said.
If racial equity and closing the wealth gap is the goal, then what’s needed, he said, is a fair formula that gives people the true benefits of ownership. As for how to curb mounting house costs, Dickerson said they’re figuring that out. While MANNA firmly believes that homeownership should be an investment with return, the rapidly rising costs have impacted MANNA’s ability to purchase properties for families. Dickerson said they have struggled in recent years to buy on the private market because properties are quickly snapped-up by for-profits and investors. Currently, MANNA has 450 units of rental housing in multi-family buildings in the pipeline to be financed
But Dickerson knows the desire and need for ownership is there. MANNA has over a hundred people right now in their homeownership training program who are mortgage-ready. The problem is that there’s few affordable properties for them to purchase in the district.
That doesn’t have to be the case.
“I do believe that the city has several options in its toolkit, and I don’t think that they’re being exercised quite the way that they could to really benefit low-income people,” Dickerson said. “For example, a greater percentage of properties in the city’s inventory could be made available for folks in the 50% to 80% income range. In addition, a shared equity type program could be refined where people do get enough of a return that they can use to move up, and some of equity recycles into new homes for folks in these modest categories.”
What’s not right, he stressed, is for affluent buyers to continue reaping the benefits of public investments, such as the Metro system, while low-income buyers are forced to move within their income bracket. There needs to be investments that make it possible for people to really own and gain the same financial security in their ownership as anyone else, he said.
“What I don’t think that we can do is simply say we’re doing homeownership when we’re really not; we’re just restricting it. There’s no equity. There’s no benefit to it other than having a long-term place to live while having the risk associated with owning a home,” Dickerson said. “I think there are options that we can begin to work on, but I also realize that it’s going to be very difficult, and the city is going to have to come up with strategies as to how we write the costs down and put money into creating units in order to make it possible and affordable for people to own. Otherwise, it’s just going to be all a city of low- and modest-income renters and upper-income people owning. That’s not an acceptable option. You’ve got to have some ways that people can take steps and they can see a future.”
For Dickerson, that future is clear: a housing market in which all people have the tools and ability to purchase a home that can be invested in, lived in, and passed down. Houses are more than homes after all, they’re tuition costs for college degrees and starter funds for small businesses. For low-income people, houses can propel them financially for generations to come. Investing in homeownership is not just an individual investment in the here and now, it’s a community investment in what’s to come.
Christina Colón | March 23, 2021
Christina Colón is a writer, editor and digital strategist. Her work has appeared in Sojourners and Global Press Journal.