Habitat for Humanity in Whatcom County

Filling the “Missing Middle”

In our February 2020 Newsletter, I talked about the remarkable energy efficiency of the homes we currently build, the additional cost of construction required to exceed the City of Bellingham’s 2035 Climate Action Plan Task Force recommendations, and the journey Habitat for Humanity in Whatcom County has made in adapting its model to provide a “Return on Investment” (ROI) on the additional up-front costs of energy efficiency.

Our exploration of greater energy efficiency came about from asking the question “How do we make the homes we build be more affordable into the foreseeable future for our most economically vulnerable clients?” We soon learned that this approach to solving a deep, programmatic problem had greater implications because there are market forces at work that apply to all income levels and provide ROI. This has led our affiliate to explore other market forces that might, in turn, positively impact this model.

“How can I expand my business if my new employees can’t afford to live in Whatcom County?” This is something we hear a lot, along with “Where will my children be able to afford to live?” These are very serious questions that need immediate answers because over 42,000 people living in Whatcom County who struggle every day with housing costs. A family of 4 earning more than $63,000 a year, but less than $98,000, is all but locked out of the home-ownership market, even with current mortgage interest rates at historic lows.

These families earn too much to qualify for programs like Habitat’s, and too little to afford a $350,000 “starter home,” or “fixer-upper.” This group, which simultaneously earns too much and too little, has become known as the “Missing Middle.”

There’s a high-demand market in Whatcom County for safe, decent homes priced under $350,000. The uniqueness of Habitat’s model (where the value of volunteer labor and in-kind gifts work together to create significant reserves of equity) also creates conditions where this equity reserve can be leveraged to provide home-ownership opportunities for the Missing Middle.

There were several concerns to be tested before venturing into this new, high-demand market. How might Habitat volunteers feel about building homes for those who earn too much to qualify for the traditional Habitat Program, who are living in substandard conditions as defined by Habitat’s Selection Criteria, but earn too little to become homeowners? Our volunteers told us that it doesn’t matter to them if someone earns less or more than 80% of Area Median Income (AMI). If they’re living in substandard conditions and have the need for safe, decent, affordable shelter, and were willing to put in 500 hours of sweat equity, our volunteers are willing to work alongside such applicants. They see it as just one more way of building community.

Similarly, how would for-profit homebuilders feel about Habitat providing a homeownership product for the Missing Middle? The feedback we’re hearing is equally encouraging. In good economic times, ours is not a market that’s profitable for these builders. In fact, they’re willing to help Habitat with in-kind and no-profit added services, especially if these contributions provide housing their employees can afford. In difficult times, they’ve also expressed an interest that they would like to work with Habitat, not only to help alleviate the housing crisis, but to keep their best employees on their payrolls. Billing for work at cost is essentially the work that Habitat does as a matter of routine.

How would foundations and brokers of Government subsidy respond to this need, which would mean not being bound by a traditional number, specifically 80% AMI? So far, the response has been mixed. Foundations tend to encourage this idea, especially because it has the potential to create mixed-income communities and stimulate greater social enterprise, which can be self-supporting.

Foundations also see this pathway as a way of moving the needle in a positive direction that doesn’t require indefinite, ongoing support on their part. However, Government seems limited in its ability to respond in this area. We have no expectation that any subsidy will be available to applicants earning 81% AMI or greater, regardless of need.

In September of 2019, the Habitat for Humanity in Whatcom County Board of Directors approved, with appropriate safeguards to protect the lowest income applicants, our Affiliate building a limited number of homes for applicants living in the Missing Middle. This is a landmark moment in our Affiliate’s willingness and capacity to have an impact on Whatcom County’s housing crisis. A social-enterprise model that creates surplus revenue, that can be easily duplicated, that can manage several projects simultaneously, that has the potential to what Habitat in Whatcom County, has never been done. Scaling up could have a significant impact on the housing crisis in our community.

If you agree, please join us: Volunteer, Shop, Donate. If you don’t agree, join us anyway and bring your voice and ideas and share your vision of what you think Whatcom County’s housing future might look like.

John Moon

The Telegraph Townhomes development is a partnership project between Habitat for Humanity in Whatcom County, Kulshan Community Land Trust, and the Whatcom Community Foundation.

[Every cash gift we receive at Habitat, no matter how small, returns when each Habitat home buyer makes their monthly mortgage payments. This enables us to purchase more supplies for another home. Habitat’s core value, “a hand-up, not a hand-out,” means that every penny is repaid. Please consider pledging $5 per month.]

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