Hunting for Habitat

As a cold wind swept over a weed-infested lot in east Spokane one afternoon last week, Michone Preston walked along an unpaved street and discussed plans to build a string of multifamily units for low-income families at the site.

Preston, executive director of Spokane’s Habitat for Humanity, said her agency jumped at the opportunity to buy the lot for a simple reason: “It was in our price range.”

“In order to make it affordable for our homeowners, we are having to look at land that is less than ideal,” she said.

Rising real estate prices across the Northwest have presented a challenge to the international nonprofit: How can the agency continue to build affordable homes in a red-hot housing market?

In Seattle, Habitat officials recently launched a pilot program that allows families to purchase the home but lease the land from a trust held by Habitat for Humanity. Agency officials said the cost of the land is simply too high for struggling families.

On 1.7 acres west of Post Falls, Habitat officials began construction on a 12-unit subdivision this fall, after being thwarted in their search for single lots.

“It looks like that’s the only way we are going to be able to get any property, because single lots are almost extinct in this area,” said C.C. Jones, interim chairman of the affiliate’s North Idaho building committee. The prices are “creating a terrific problem, because in Kootenai County there is very little available land,” Jones said.

Nationally, the nonprofit has begun extending interest-free mortgages from 20 years to 30, in an effort to lower the families’ monthly payments. Habitat officials also adopted a national plan this year to search for low-interest loans – a significant change for an agency that historically shied away from incurring debt.

“It was really a recognition of the fact that in order to sustain the scale of our construction we have to use all the resources available to us,” said Stephen Slidell, the agency’s national Urban Program Director.

The real estate boom is also forcing more subtle changes in the business model for Habitat for Humanity, which has built more than 200,000 homes for low-income families around the world since it began in 1977.

Across the Northwest, officials said, the agency increasingly must turn away poor families who meet income guidelines but fail to earn enough money to afford the payments – often as little as $300 a month.

The agency works with families that earn between 25 percent and 50 percent of an area’s median income. To qualify in Spokane, a family of four must earn less than $27,300.

But Habitat officials also try to ensure that the family doesn’t spend more than 30 percent of its income on housing costs – a prospect that has become more difficult as the growth in housing prices has far outpaced wages.

“We’re concerned that we’ll reach a point where we can’t provide affordable housing to our low-income community,” Preston said. “It’s frightening how many people apply who are under 25 percent of the median income.”

While wages have remained relatively stagnant, the median home price in Spokane rose from $119,900 to $160,000 in the past two years, an increase of more than 30 percent.

To accommodate its poorer clients, Spokane’s office has turned its focus to more affordable duplexes and townhouses. The agency, which plans to build 20 units in the next year, currently has no single-family homes under construction in Spokane.

Last week, Preston walked past a block of new brightly painted townhomes with neatly tended yards that stand out in a low-income east Spokane neighborhood.

“We’re still looking in areas where poverty is high, where land is not necessarily the most desirable,” Preston said. In the process, she said, “I think we’re changing the face of low-income neighborhoods.”

The Spokane office is careful not to disclose how much it pays for its property, fearing that real estate agents could use past purchase prices to drive up sales. The agency actively seeks out vacant land because it cannot afford to engage in bidding wars, Preston said.

But Spokane’s rapid rise still doesn’t approach prices in the sizzling Seattle market, where the median price of a home topped $380,000 this fall.

Dorothy Bullitt, executive director of Habitat for Humanity of Seattle/South King County, said the rise in real estate prices has also decreased the quality of property donated to the agency. Often the donated land has suffered environmental damage, or requires extensive engineering to create a building site, Bullitt said.

“There’s often another reason why someone wants to donate the property,” Bullitt said. “It can end up being extremely expensive for us.”

Because of the scarcity of affordable land, King County officials are looking to optimize their existing land by building multifamily units like townhouses and condos. Officials have also begun renovating and repairing older homes to improve the area’s low-income housing stock.

Although financial donations have grown in recent years, Bullitt said the agency must continue to adapt in a rapidly shifting market.

“The cost of land has just continued to go up,” Bullitt said. “We are competing for land with the big developers in a county where all the land is disappearing.”