Poor Miami: More Good Ideas

According to these folks, there's hope for America's most impoverished city

This would please Republicans who like the idea of a successful program that removes minimum wages. For Democrats it would be a "work first" program that's strictly voluntary and promotes the vision and opportunity inherent in helping the underprivileged.

Andy Parrish, Coral Gables: Federally funded Section 8 housing programs offer vouchers to low-income families so they can rent privately owned apartments or single-family homes. Residents pay approximately 30 percent of their income for rent and HUD pays the rest. According to HUD, there are 15,000 such subsidized rental housing units in Miami-Dade County. Locally the vouchers cost taxpayers more than $100 million per year. But they create zero equity for the people who receive them. Maybe we can do better.

In west Coconut Grove there are three-bedroom, two-bath houses in the Section 8 program that rent for $1000 per month and more. This means the taxpayer-funded subsidy for such a house is at least $700 per month. By comparison Wind & Rain, a private, for-profit homebuilder of which I am president, has built more than a dozen three-bedroom, two-bath houses for ownership by low- to moderate-income families. The total monthly cost to the owners (including principal, interest, taxes, and insurance) comes to about $750 per month.

Three cheers for FIU's poverty fighters (from left): Ginelle Nelson, Alicia Pichirilo, Marika Krausova, Maureen Muhlena, Bianca Escorcia
Steve Satterwhite
Three cheers for FIU's poverty fighters (from left): Ginelle Nelson, Alicia Pichirilo, Marika Krausova, Maureen Muhlena, Bianca Escorcia

What makes this possible is a low-interest (zero percent to three percent) "soft second" mortgage administered by local government or the local housing authority, usually with state or federal funding. This amounts to $40,000 of the $100,000 purchase price of the house, with the balance coming in the form of a modest $3000 down payment and a market-rate first mortgage of $57,000. (There are programs already in place to pay closing costs.) The cost to taxpayers of providing the subsidy on a three-percent soft-second mortgage of $40,000 is approximately $75 per month, albeit for 30 years.

Those who advocate for Section 8 rental vouchers would argue: "Yes, the cost of vouchers is $700 per month instead of $75, but many families can't afford to pay the $750 per month it would cost to become homeowners. Besides, Section 8 is a very popular program politically, both with the landlords who own the houses and the tenants living in them who might otherwise be in an even less desirable apartment complex."

This is a plausible argument on the surface, but let's follow the money. In the Section 8 voucher program the public money ($700 per month or more) goes to the landlord. The family remains a tenant, maybe forever. With a soft-second mortgage, the low-income family buying the house receives the benefit of the taxpayers' largess ($75 per month), which propels them into the middle class forever.

Now let's see what happens if we mustered the political will to change at least a portion of the Section 8 program. What if all the taxpayers' $700 per month in Section 8 rent subsidy was used to fund a larger mortgage with a lower interest rate? Call it a "soft first." A one-percent soft-first mortgage of $97,000 would result in a taxpayer cost of $270 per month, with the family paying around $312 per month to fully amortize the loan over 30 years. If taxpayers were also to pick up the $240 per month in real-estate taxes and insurance, they would still be saving $190 per month over the $700 rental subsidy. Suddenly you have a family making only $12,500 per year able to buy a house that would be their own and which would give them a stake in society.

Imagine a government program that is cheaper and so much better than the one it replaces. Imagine what a better and wealthier Miami this could be.

Anne Manning, Miami: Habitat for Humanity of Greater Miami, which I serve as executive director, offers a solution to Miami's lack of affordable housing. Since 1997 Miami Habitat has completed 50 homes in the City of Miami. All are home-ownership units and all were built on vacant lots in Overtown and Little Haiti. Like the 400 homes we've built elsewhere in Miami-Dade County, these were built in partnership with poor families and sold according to the biblical principles that profit is not to be made on the backs of the poor and no interest should be charged when lending money to the poor. Homes are built primarily with the labor of partner families and volunteers. Funds come from house payments of completed units and from contributions from concerned individuals, churches, civic organizations, schools, and businesses.

Below is a list of benefits realized by the families purchasing homes:

Decent, affordable housing. The average monthly mortgage payment of $400 is less than what poor families typically pay in rent.

The cycle of poverty is broken as a low-income family is given the opportunity to build equity that will be passed down from generation to generation.

Home ownership gives families dignity, self-respect, and opportunity. Children of homeowners are less likely to drop out of school, less likely to be arrested, and less likely to give birth to children as teenagers.

The community also benefits:

Poor inner-city communities are stabilized and revitalized through the replacement and restoration of the housing stock.

Members of our diverse community work alongside each other and gain an appreciation for people from other backgrounds. Cynicism and fear abate when volunteers work together and see the results of their labors.

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