» Lessons from Detroit’s Make It Home Program for Sustaining Very Low-Income Homeownership

By Margaret Dewar and Roshanak Mehdipanah

Introduction

Low-income homeownership is precarious. Households with limited income can lose ownership when they fail to pay their mortgages, which often have unfavorable terms, or property taxes, which are often inflated. Homeowners with low incomes frequently face major home repair problems they are unable to address and may be one major life event away—a breakup, a health problem, the death of a family member—from selling or abandoning their homes. The benefits of homeownership depend on sustained ownership, and early loss of ownership can leave purchasers worse off than before. Nevertheless, policymakers and others engaged in providing housing for low-income households remain committed to increasing homeownership for all, in part because of the economic and social benefits that can accrue to the household and the neighborhood, and in part because renting also often leaves low-income households housing cost burdened, living in low-quality housing, and vulnerable to eviction. Both circumstances—precarious homeownership and unsafe, unstable, and unaffordable rental experiences—disproportionately affect people of color, reflecting systems that discriminate against such households in housing and labor markets, and have prevented wealth accumulation.

In Detroit, the homeownership rate fell from 53% to 48% from 2000 to 2019 as mortgage and then tax foreclosures took a large proportion of homes from their owners. With a population 77% African American in 2019, those affected by the foreclosure crises were disproportionately African American. The loss of homeownership, continuing tax foreclosures, large numbers of evictions, and widespread reports of unsafe and unaffordable rental housing spurred efforts to enable more low-income households to become homeowners.

One of these efforts was Make It Home, a program that began in 2017 to enable tenants to become owners of the houses their landlords were losing to property tax foreclosure. Make It Home resulted from a partnership between the City of Detroit, Quicken Loans Community Fund (now Rocket Community Fund), and United Community Housing Coalition (UCHC). By exercising its right of refusal, the City of Detroit purchased tax-foreclosed properties before the county treasurer offered them at the tax auctions by paying the portion of tax debt owed to other entities, such as the county and the school district. Rocket Community Fund provided a grant to UCHC to purchase the houses for the city government’s cost and to transfer them to the tenants. Eighty tenants had the opportunity to buy the houses through 0% interest land contracts at low prices—$2,000 to $5,600—which reflected the amount the government paid to acquire the properties. Since 2017, the program has expanded to serve 1,100 additional households, including owner-occupants losing their homes to tax foreclosure.

We evaluated Make It Home to learn whether this type of program could sustain homeownership for very low-income households. The program’s goals were to prevent tenants’ loss of housing and to sustain homeownership for the purchasers, thus reinforcing the occupants’ housing stability over time. We evaluated whether the program achieved these goals in its first four years. We interviewed Make It Home buyers and compared them to similar households, also interviewed, whom UCHC assisted in trying to buy their houses at the tax auction. We monitored property data for both groups to track changes such as sales, vacancy, and tax delinquency. The two groups of aspiring buyers resembled each other at the time of efforts to purchase, such that the “comparison” group can show what would have happened to the Make It Home households had they not participated in the program. As a result, comparing the two groups can help show whether Make It Home made a difference in preventing loss of housing due to tax foreclosure and in sustaining homeownership over time.

In 2017, Make It Home worked to enable 80 renter households to buy their houses. Those becoming homeowners reported very low incomes, often less than $15,000 per year. Most homeownership programs serve households with incomes at least 60% of area median income, or about $37,080 for a three-person household in 2017 in the Detroit metro area, the median household size among Make It Home participants. Among those purchasing through Make It Home, 89% of households reported incomes lower than 60% of area median income in 2017; among the comparison group, 92% reported incomes at that level. In the comparison group, some purchasers succeeded in buying their houses at the auction, but most did not. UCHC aimed to help 154 households buy at the tax auction and succeeded on behalf of 34. Eleven additional households found ways to buy their houses or keep them out of the auction without UCHC’s help, by paying their tax bill just before the auction or by purchasing from the auction on their own, from the investor who bought at the auction, or from the estate of the deceased owner. The remaining 109 houses were sold to others at the auction.

Key Findings

By the end of the first year of the program, 81% of Make It Home participants had received a deed for their house or continued to hold a land contract.
In the four years following properties’ tax foreclosure in 2017, Make It Home resulted in sustained homeownership for 85% of participants.
Nevertheless, some purchasers sold their houses before the end of four years, too soon to realize the wealth-building and other benefits of homeownership.
Numerous conditions threatened longer-term homeownership, including property tax foreclosure, vacancy, poor condition of the houses, lack of home insurance, high housing-related expenses, and loss of income during the COVID-19 pandemic.

Implications for Programs

Provide pre-purchase homeowner education and financial counseling.
Inspect houses prior to purchase with details provided to the prospective buyers.
Increase home insurance awareness and access.
Provide financial help for major housing repairs.
Make post-purchase support available for dealing with housing costs so as to prevent loss of housing.
Monitor program results over time.

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