Seattle group sees homeownership potential on Hilltop

The sub-prime lending fiasco could have a silver lining, according to one real estate professional.

HomeSight is a community development corporation based in Seattle. Its mission is to assist people who want to become homeowners through down payment assistance, financial counseling and other services. It has done numerous projects in Seattle, south King County and Snohomish County. Now it has its sights set on Tacoma.

Executive Director Tony To discussed his organization’s interest in Hilltop during a recent meeting of Tacoma City Council’s Neighborhoods and Housing Committee.

Last fall HomeSight received a grant from Neighbor Works America, which is funded by Congress. The grant, in the amount of $250,000 over three years, is for the organization to boost homeownership rates on or adjacent to Hilltop. The rate in this area is under 30 percent, To said.

He has been approached by developers doing projects on Hilltop who are interested in a property tax exemption offered by the city. These conversations, in turn, sparked To’s interest in the area.

HomeSight offers education counseling and is a developer itself. It has a revolving loan fund that provides financial assistance to homebuyers. The fund currently has about $14 million.

HomeSight has to do a certain amount of projects for its business model to work. “Lending, as you know, is a volume business,” To remarked.

To is closely following the volatility in the housing market. Market analysis showed a sizable inventory of housing stock on Hilltop. Much of this is due to foreclosures.

Councilmember Lauren Walker said many such properties on Hilltop, which is in her district, have been purchased by investors who are using them as rental properties for the time being to generate revenue. “It is pretty disturbing to see that happening.”

To told the committee that data for April shows that 60 percent of houses purchased were by homeowners; the remainder were by investors turning them into rental properties. To said in general, the nicer houses are bought by people who live in them while rentals tend to be in greater need of maintenance.

The easy availability of sub-prime mortgages had a drastic impact on HomeSight. “We got completely sidetracked by the sub-prime loans,” To said. When potential clients heard that HomeSight required financial counseling, income verification or down payments as small as 2 percent, many opted for sub-prime lenders who did not require any of that. “We mitigate our risk by counseling, and not by pricing,” he said. “Literally, overnight, we lost all our clients.”

To said a developer building condos cannot afford to sell them for under $250,000. In contrast, single-family homes on Hilltop are going from $130,000 to $200,000.

“We think that this is where the potential is for homeownership because the price is right.”

He has met with representatives of the Tacoma Association of Colored Women’s Clubs. That organization is interested in developing its property along South 23rd Street and Yakima Avenue and seeks a partner with experience, according to To.

To said HomeSight wants to team up with a non-profit organization in Tacoma to establish a center to provide services to prospective homebuyers.

His organization is also interested in funding from the city, which he said is important to leverage funding from the state and federal governments.

Councilmember Spiro Manthou asked what HomeSight offers that existing organizations in Tacoma do not. “What do you bring to the table that helps us sweeten that pot rather than dilute the pot of limited resources we have for affordable housing?”

To replied that one is its development capacity. It builds 40 to 50 units each year in the region. It also offers bridge loans, a financial tool that assists a potential homebuyer who needs a little time before closing on a deal. Without such a loan, To said, such individuals often see another person come in and purchase the home.

To feels Hilltop offers great opportunities for homeownership for people of modest means. “For us this an affordable market, a rarity in the Puget Sound area.”

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