"And I am praying to God on high,
And I am praying Him night and day
For a little house--a house of my own--
Out of the wind's and the rain's way."

         An Old Woman of the Roads, st. 6
Padraic Colum (1881-1972)



Miami-Dade County has hundreds if not thousands of inner-city developable residential lots where new single family homes could be built. However, there are virtually no private for-profit homebuilders building single family homes for ownership by low-to-moderate income families, except for Wind & Rain Homebuilders in West Coconut Grove. There are several reasons for this:

A. Flawed RFP Policy. The RFP application process to line up "soft" second mortgages for the homeowners-to-be is too cumbersome and penalizes "for-profit" corporations who must include their profit and overhead in their applications. Furthermore, it is unlikely that any "for-profit" company will buy and hold a "scattered site" for up to a year in hopes of getting a HOME or SHIP or SURTAX soft 2d mortgage allocation.

B. Apparent Funding "Shortage". The Miami-Dade County Housing Authority always seems to have too little funding for the number of applications and the amounts requested. For FY 1999, only about 25% of the applications were funded, all to "not-for-profits." There was only ONE true "for-profit " application, that of Wind & Rain, which was not allocated any "soft 2d" mortgage funding for the reason set forth above.

C. "Risk vs Reward". Most important, the "risk vs reward" equation is drastically out of balance in inner-city neighborhoods. Not only is the "reward" lower for building a house there because the profit margin has to be kept low to keep the price down, but the "risk" is also greater, primarily due to the uncertainty and slowness of "soft 2d" mortgage funding crucial to making the homes "affordable' and hence "salable" at all. The County funding process does not seem to recognize that "time is money."


The solution to the problem of how to get "for-profit" homebuilders to begin building single family homes in inner-city neighborhoods does NOT require putting taxpayers at risk but does require an innovative program as follows:

A. Identify "target" Neighborhoods. Government seems to always make the mistake of trying to direct where development should go, and generally tries to steer it to the "most needy" areas first. The Institute for Urban Studies correctly points out that this is backwards. Miami-Dade County should instead identify ALL inner city neighborhoods where no housing is currently being built by "for-profit"homebuilders and then allow those homebuilders themselves to decide in which of those neighborhoods they are willing to risk their capital .

B. Make "Soft 2d" Mortgage Funds Available w/out RFP .Because "time is money", when a "for-profit" homebuilder has put his or her own money at risk in a "target" neighborhood by i) buying a lot, ii) acquiring a construction loan, iii) building a house meeting all HUD size and quality guidelines, and iv) finding and qualifying a moderate income homebuyer, then it is more than reasonable that such a homebuilder should be given expedited access to the ONLY item being required from government: a "soft 2d" mortgage to help the homebuyer afford the house. Keep in mind that until the homebuilder has done ALL steps i through iv above, not one cent of taxpayer money has been put at risk. But the homebuilder will not be able to get a construction loan from any bank unless there is a reasonable expectation of a "take-out" in the form of an end loan involving a "soft 2d" mortgage.

C. Leverage the "Soft 2d" Mortgage Funding Available. If by doing A. and B. above, all of a sudden many more homes start being built, won't the pool of money available for "soft 2d" mortgages be rapidly exhausted? Under the County's current policy of loaning out HOME, SHIP and Surtax monies on a "a dollar in from the State/HUD, a dollar out as a loan" basis, this would be true. However, it will not be if the funding is leveraged.

1. Let us assume that the "default rate" for qualified homebuyers under this program is 5%. (Wind & Rain has built and sold 7 houses to low to moderate income families in West Coconut Grove since 1995 using the City's HOME program and none has defaulted.)

2. Let us also assume that, with legislation, the HOME, SHIP and Surtax funds can be used as a "guarantee" instead of being loaned out "dollar for dollar".

3. If the above two assumptions are true, then if it wanted to, the County could administer the funds it receives much the same way as federally guaranteed VA loans. For example, if the County received $20xx in funding, it could set aside $1xx to cover the anticipated 5% default rate, and employ the other $19xx to implement a revenue bond program for the tax exempt purpose of funding the "soft 2d" mortgages for the new homes built in the target neighborhoods.

D. More on Leveraging. While the undersigned is no expert on bond financing, he does know what the GI Bill accomplished in the way of getting homes built for and sold to qualified military veterans, so much so that private banks across the US now routinely make such guaranteed loans. The key point for translating the "guaranteed loan" idea over to financing low-to-moderate income working families is that the "soft 2d" mortgage component has to be big enough (approx. $35,000) and at a low enough interest rate (1% to 3% fixed) that when paired with a conventional 1st mortgage of approx. $45,000 at 7% fixed, the combined monthly payment, including taxes and interest, is approximately the "equivalent of rent." In the case of Wind & Rain's 3BR/2BA houses, PITI has averaged approx. $650 to $700 per month for the 1,536 sq. ft. houses. It might also be possible for the guaranteed tax-exempt revenue bonds (if sold for, say, a 4% tax free return to investors) to generate enough dollars to eliminate the higher rate conventional 1st mortgages altogether, or alternatively, to "buy down" their rate.

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