Down payment assistance essential to bridging national homeownership affordability gap John McDonald and Mary Ann KellyStatistics,Down-Payment-Assistance Programs,DAP
Down-Payment-Assistance Programs (DAP) have become vital
economic tools for helping low- to moderate-income families become
homeowners, according to the first study in the U.S. of the
economic impact of privately funded down-payment-assistance
programs. Conducted by the Milken Institute and sponsored by the
Nehemiah Corporation of America, a privately funded
down-payment-assistance provider, the study examined
down-payment-assistance recipient families to quantify the impact
of DAP on individuals, cities and communities.
During the past 12 years, home prices have risen 30 percent
faster than wages and salaries for low- to moderate-income
families, creating a growing "homeownership affordability gap." The
study found that between 1992 and 2003, the median sale prices of
single-family homes increased by about 68 percent, while wage
growth for low- to moderate-paying occupations increased by 38
percent, making the typical low- to moderate-income homebuyer face
a 30 percent affordability gap. The study used data on 36,240
Nehemiah gift recipients in six observed regions, primarily low- to
moderate-income households typically earning a median income of
$40,764 and who purchased a home with a median value of
$116,750.
Home prices grow faster than wages
As the rate of wages falls far behind the average increase in
home prices, the homeownership affordability gap for low- to
moderate-income families is constantly growing, making DAP gifts
instrumental in keeping home buying affordable for families that
can afford monthly mortgage payments, but are unable to save for a
down payment. This gap is making it increasingly difficult for
lower-income families to purchase a home without down-payment
assistance. DAPs are proven to bridge the "homeownership
affordability gap" and have put hundreds of thousands of
hard-working families in homes.
"Despite a low-interest-rate environment over the past several
years, accelerating home prices are far ahead of the gains in wage
income," said director of regional economics at the Milken
Institute, Ross DeVol.
He noted that of the more-than-36,000 area families in the
study, many "would have been excluded" from homeownership had they
not received a DAP gift.
The study also found that between 1997 and 2003, more than
115,000 primarily low- to moderate-income families
nationally--representing about 70 percent of Nehemiah's total DAP
program portfolio--reported an aggregated rise of more than $2.2
billion in home equity value, or an average of more than $18,000
per family.
Equity gains by Nehemiah DAP families
Homeownership has been a receding dream for most low- to
moderate-income families, and without down-payment-assistance
programs, these families would never be able to buy a home and
receive all the benefits that homeownership brings. According to
the Milken Institute study, down-payment assistance has helped
bridge the affordability gap, provided badly needed private funds
and helped families generate real wealth through home equity
appreciation, providing the families and communities with the
economic stability they have always sought.
John McDonald is a principal of McDonald, Head &
Associates and area manager for The Nehemiah Program, covering the
Utah and Nevada housing markets. He may be reached by phone at
(801) 897-5646 or e-mail
[email protected].
Mary Ann Kelly is the outreach manager for the Nehemiah
Corporation of America. She can be reached at (916) 231-5232 or
e-mail
[email protected].
