Will the American dream return to Hartford

Will the American dream return to Hartford?

City and state attack abysmal homeownership record

By Diane Weaver Dunne
May 6, 2003

Two decades ago, long before Eddie Perez was elected Hartford’s mayor, Perez bought his first home in the city, a three-family unit that he occupied with his relatives.At that time, Perez recalls, many families were doing the same because it enabled them to attain their own piece of the “American dream.”

“It gave all three of us equity and stability,” Perez said of his own investment, “and [empowered] us to begin thinking about becoming individual homeowners.”

Today, the appeal of multi-family units as owner-occupied homes no longer holds that same attraction. This explains one of the key challenges facing efforts to increase homeownership rates in Hartford. Most of the city’s 50,664 housing units are multi-family units. In fact, there are very few detached single-family units — 14.9 percent — in Hartford.

Hartford’s housing stock thus works against efforts to increase homeownership rates, ranked second lowest in the nation. Only 24.6 percent of Hartford residents own their own homes, compared with the national average of 50.5 percent for similar sized cities. Hartford’s homeownership rates also are in sharp contrast to the state’s average homeownership rate of nearly 67 percent.

Owner-occupied housing is widely regarded as key to stable and prosperous neighborhoods, which themselves are the building blocks for successful cities. Boosting Hartford’s homeownership rate is thus essential to achieving a host of inter-related economic goals.

Improvement will not be easy, Perez explains, noting that the city’s minority population historically has had very low homeownership rates. Citywide, the lowest rates of homeownership coincide with the highest rates of minority concentration, with some areas, such as in the Northeast neighborhood, dipping below 10 percent. (See homeownership map.)

Years of discrimination against minorities has got to be part of it, said Bob Kantor, director of the Connecticut office of the Federal National Mortgage Association (Fannie Mae), the nation’s largest provider of mortgage funds. Kantor explains that the U.S. government actually had a practice of redlining housing loans to families in black communities before 1964.

“It’s hard for you to get into the game if your family hasn’t acquired wealth,” he said.
Because a home remains the principal investment for most Americans, limiting homeownership has a devastating impact on families’ ability to accumulate wealth, Kantor said, and spawns a host of other negative factors for the community. One such example is that renters are far more transient than homeowners. And renters with children generally relocate more often, resulting in the frequent upheaval of children from one school to another. Homeownership provides more academic stability for children, boding well not only for children attending public schools but also for the school system, he said.
Other advantages of homeownership include stabilizing housing costs, providing the city with tax advantages, and improving the quality of living.

“Although this is not a scientific [measure], when homeownership exceeds 50 percent, the look, feel and safety on that block is far greater compared with blocks where homeownership rates fall far below that rate,” Kantor said.

Perez is aware of the benefits to the city. “The reason I have homeownership as a priority is that it sets the tone for the balance for the city,” he said, noting its effects are far-reaching, ranging from voter participation to quality-of-life issues.

Perez campaigned in the 2001 election on a platform of raising Hartford’s homeownership rates by 5 percent in five years to 30 percent. “In the total infrastructure of the community, it means that if you know you are going to be somewhere for 30 plus years, your outlook on how you can affect that place changes,” he said.
“If you are connected to a community, you’re connected for life. And therefore, you become part of the life of the community. … I tell people that homeownership is not the white picket fence, the big dogs and the 2.5 children. It’s really about how you become a critical part of the economy and the social fabric of a community. And cities have had a harder time,” Perez said.

But there are many challenges to improving Hartford’s homeownership rates. First, there is little vacant land available — only 45 city-owned lots are deemed appropriate for residential development. Hartford’s options to increase homeownership thus must include converting larger, multi-family units, such as those referred to as the “Perfect Sixes,” into two-family attached homes. Often those conversions include costly historical renovations.

Another option has been for the city to partner with federal, state and private organizations to transform former public housing projects into owner-occupied neighborhoods, such as Rice Heights, Stowe Village and Charter Oak Terrace.

All three of these former public housing projects have been razed and new, owner-occupied single-family and duplex homes have been or are in the process of being constructed in their places.
A diverse group of families is now qualifying for mortgages to buy new homes at Stowe Village and Rice Heights. To date, 55 families have purchased homes at Charter Oak, with 20 single-family units and 110 duplexes all geared for homeownership.

The Rice Heights development project is unique because it is the first homeownership venture undertaken by the State of Connecticut specifically as the project developer, said Tim Coppage, deputy commissioner of the state Department of Economic and Community Development (DECD).
“The $17.4 million [Rice Heights] project is indicative of Gov. John Rowland’s commitment to the state’s urban centers and to homeownership,” Coppage said, noting the project illustrates a team effort between public, private and non-profit organizations. For example, the development team for Rice Heights includes Sheldon Oak Central Inc., SRC/Carabetta Construction, DECD, Co-Opportunity Inc. and Fannie Mae. The City of Hartford also participated in the project through the Hartford Housing Authority and other city departments, such as Licenses and Inspections.

The 44 Rice Heights homes were designed with features homebuyers are looking for, said Emily Wolfe, deputy director of Sheldon Oak Central. Each is either a three- or four-bedroom, single-family detached home with a garage, yard and full basement. The colonial-style homes cost about $160,000 to construct, however each will be sold for between $95,000 and $111,000, she said.

Once the 380 rental units at the former Rice Heights and 960 units at the former Charter Oak Terrace public housing projects were demolished, it served as a catalyst for private reinvestment in home improvements nearby, Coppage said.

The same type of private reinvestment also is evident on the street adjacent to the former Stowe Village public housing project. Stowe Village once housed 598 rental units, said Victor Rush, director of human services for the Hartford Housing Authority, and now will be the site for 100 duplexes also geared for homeownership.
Rush pointed to the construction of a single-family home at this former public housing project site’s entrance as yet another example of neighborhood revitalization.

Improving the city’s housing stock so it serves as a catalyst for this type of private homeowner reinvestment is part of the goal of the Mayor’s Homeownership Task Force, said David Chabot, executive manager of a new non-profit organization, Neighborhoods of Hartford Inc. The organization, established to implement the task force’s initiatives, will direct public money and home improvement loans to give designated city blocks a little push to become neighborhoods of choice, not of last resort, Chabot said.

Part of the city’s early successes — there has been a low default rate of 7 percent with new homeowners — is attributed to financial literacy and homeownership management training of prospective homebuyers. Another reason is that financial assistance has been provided, said Laurie Krause Fons, COO of Prospect Financial, the chief lender and mortgage broker for the Stowe Village homeownership project.

However, even for those who work full time but at minimum wage, their annual salary is about $14,000, Fons said, about the level for many of the Stowe Village homebuyer applicants. That income is not enough to support a family and pay a mortgage at market rates, she said.

“The price of housing is still too high for most of their income levels,” she said. “The other problem is their credit history, or having no credit history.”

Another issue confronting homeownership initiatives is the high cost of home improvements, which in most cases exceeds the market value of the property, said Bruno Mazzulla, director of the city’s Property Acquisitions and Dispositions Department. The city has a program, called appraisal gap financing, to help pay for residential home improvements or rehabilitation that often cost more than what the market value will render for the property, he said.

During the past five years, the city has spent nearly $20 million improving the city’s housing stock and neighborhoods, Mazzulla said, providing such things as downpayment assistance, gap financing, demolition and legal foreclosure fees. About 700 downpayment assistance loans have been provided with those funds, and another 188 families received appraisal gap financing, he said.

Perez expects the total price tag for the homeownership initiative to become much heftier — an estimated $50 to $100 million — yet necessary for the city’s future.

Susan Coleman, the Ansley Chair of Finance at the University of Hartford, applauds the city’s homeownership efforts, noting the benefits are well documented.

“I think it’s a better place to live and you get better services for everybody,” Coleman said. “Renters have no reason to get involved in their communities.”

However, she said Perez has his job cut out for him. A key challenge confronting his homeownership initiatives goes beyond improving the city’s housing stock. It requires improving negative perceptions of the city.

Cities generally are considered less desirable places to live compared with the suburbs, she said, commending Perez for understanding that Hartford’s revitalization requires more than attracting businesses and special activities to Downtown.

“You want neighborhoods where people want to live, and maintain and build on the quality of life,” Coleman said.

According to Coldwell Banker Realtor Susie Hatch, a city resident, Hartford is becoming that place where people want to live. “People are interested in the city,” Hatch said. “There were areas [in Hartford] where you couldn’t give a house away two years ago, and now you have people who want to live there because more people are committed on that street.”

With the help of low-interest rates, a growing number of young professionals would love to live Downtown, she said, noting there is very little housing in Hartford to offer them. “If I had more [housing] available, I could sell it,” Hatch said.

Harry Freeman, executive director of the Hartford Economic Development Commission, also has seen a spike in interest during the past year.

“The biggest indicator of the change is that there are multiple developers interested in every parcel [the city] has to develop,” Freeman said, noting that three years ago, it was very difficult to find developers who wanted to purchase city-owned properties for development.

“People are seeing the opportunities to living in Hartford now,” he said. “When you see developers coming back and doing a second or third or 20th project, you see Hartford is a worthwhile business investment. This is really what many people have been looking for. Market forces will make Hartford attractive for both developers and for people to live in the community.”