Providing affordable housing innovatively -- Habitat for Humanity Int'l 1

Providing affordable housing innovatively

By Ian Pearce

In recent years Habitat for Humanity in Great Britain (HFHGB) has faced a number of obstacles in continuing the “traditional” domestic program that we have all come to know and love. Across the country a huge gulf has developed between earnings and house-price inflation. This has generated an affordable housing crisis. The need for HFH housing is greater than ever, but the factors that are leading to high-level house-price inflation make it almost impossible for the traditional model to deliver affordable housing to hard-working people on low incomes.

A number of factors work against us: increasing land values; increasing costs of materials; an equity “giveaway” over time of more than US$200,000 per house; volunteers and partners questioning the effectiveness of the model; continual need to fund raise enormous amounts of money; and new government financial regulations mean we can no longer offer our own mortgages. Our largest affiliate had invested 10 years of hard work for just 16 families served. Something had to change!

Therefore, we are moving to a variety of approaches that will enable us to work more effectively. The objectives are:

  • To serve our target audience
  • To ensure that capital outlay is returned at the end of the build in affordable housing schemes
  • Fund raising is only a minor part of the budget
  • The projects become scalable at a much faster rate

We can only achieve these objectives by removing ourselves from the role of “banker.”

The emerging models are:

  • Shared equity: There are many shared-equity models on the market all designed to negate the effects of rapidly rising house prices. The idea is that the homeowner buys an equity share of the market value of the house through a commercial mortgage. The other part of the equity is owned by the mortgage company or a third party that will charge an interest or rent on the equity share they own.

    The HFH variation is that we can choose not to charge an interest or rent on the equity share we own, and sweat equity is represented as part of the homepartner’s equity share. The homepartner buys the equity share that he/she can afford, which may be more or less than the HFH costs of building the house. Averaged out, the cost of a project, say four houses, should be covered by the mortgages. But even here, there can be some flexibility—there are no restrictions on resale. When resale occurs, the homepartner receives the percentage of the current market value that he/she owns. At this point, HFH will also see its equity share capitalized, which will significantly boost the revolving fund.
  • Community land trusts: There is a concern in many parts of the country that housing should remain in the affordable market. Landowners will not give or sell land if they think someone down the road is going to make an enormous profit from their generosity. One means to keep the houses affordable is to work with a community land trust (CLT). Landowners or local authorities give the land to the CLT or sell it at a very low price. HFH agrees with the CLT on a selection policy for the homepartners and builds the houses, involving sweat equity and volunteer labor.

    At the end of the project, the CLT can buy the houses from HFH with a buy-to-rent commercial mortgage and rent the houses to the homepartners, who gain simple and decent housing at a low-level rent. There are alternatives to this model where the houses can be sold to the homepartners using a shared-equity mortgage. When the house comes up for resale, the sale price is agreed on with the help of a surveyor, and the CLT can nominate the new purchaser, ensuring that the house continues to serve the needs of people on low incomes.
  • Building partnerships: To reach down to even greater levels of housing need, we are working in partnership with other organizations to help them deliver their housing programs. There is a massive shortage of housing for people with special needs. We can help other charities deliver their housing projects at reduced costs through sweat equity, volunteering and gifts in kind. We have already delivered a conversion project to the Salvation Army: four staff apartments were converted into eight move-on1 flats for residents of the adjoining hostel. These flats will help the hostel residents to develop their independent living skills. We are working on a new partnership to deliver similar projects to an organization that specializes in housing people with mental health needs.

    In November, HFHGB hosted a conference on emerging models in Western Europe. Conference papers are available on request from
  • International focus: Our focus at HFHGB is predominantly international, rather than domestic. We value the domestic program as reaching people in need of a simple, decent place to live. Our aim is that this should be a beacon of excellence. But we want our domestic program to serve the needs of our international program as well. This is much more than tithing.

    Through participating in a domestic program we can encourage corporate partners to begin to engage in the international program. The domestic programs help to raise brand awareness, which impacts the direct-mail program—an international ask. And we can use the domestic program to host special events, such as CEO builds where the international needs can be outlined.

Ian Pearce is Operations manager of HFH Great Britain

[1]Move-on flats serve as a transition between hostel accommodation and independent living. The residents of move-on flats look after themselves but still have some support from the hostel staff.