Time to Get Behind the Home Preservation Loan Program Ordinance
On November 1, Jill Roberts, Healthy Rowhouse Project Executive Director, and Markita Morris-Louis, Clarifi General Counsel and Senior Vice President for Community Affairs, testified before the Finance Committee of Philadelphia City Council on the subject of extending credit for low-to-moderate income homeowners to pay for important health-related repairs to their homes.
The Finance Committee was considering Bill 170878, sponsored by Council President Darrell Clarke and Councilwoman Cherelle Parker. When passed by Council, the bill will allow for the issuance of a $40 million bond to support a loan program for hard-working low-and-moderate income Philadelphia families. Roberts and Morris-Louis, along with other organizations, made the case that the loan program should reach Philadelphia homeowners with credit scores as low as 560, which is below the 620-640 range that most banks and lenders consider the minimum scores acceptable. Only with this lower credit score limit will the program be able to meet the needs of those residents City Council wishes to target with the home preservation loan program.
As an example of the need for the program, Emily Lucas of Habitat for Humanity Philadelphia, said that Habitat’s home-repair program gets 300 calls a month asking for assistance. Thomas Flaherty of the Energy Coordinating Agency said 20 percent of the city’s affordable housing stock had been lost between 2000 and 2014 and sees the City losing “vibrancy of diversity and opportunity” as more is lost. Andy Frishkoff of LISC supported the bill’s inclusion of a loan program for landlords. Greg Heller of the Philadelphia Redevelopment Authority, citing Philadelphia’s high (52 percent) rate of home ownership and our aging housing stock, enthusiastically backed the program.
A credit score can be low for many reasons, not just untimely payment of debts, such as insufficient traditional credit history or accounts not opened long enough or used frequently enough. These scores deprive people of the opportunity to maintain their homes and build wealth through homeownership.
Roberts testified that a low-interest loan program, like the one that Bill 170878 supports, is an essential tool to help homeowners maintain their homes and avoid displacement. Research by Healthy Rowhouse Project shows that extending credit to individuals with scores as low as 560 would allow up to 94,000 more Philadelphians, many who are homeowners, obtain the capital that they need to repair their homes.
A loan program with financial counseling— as well as other wrap around services incorporated into it can have very low default rates. In 2015, Detroit established a home-repair loan program, that lends to homeowners with credit scores as low as 560. Detroit currently has 570 loans outstanding to homeowners with credit scores below 660 and has suffered no defaults. Only three percent of the loans are as much as 90 days behind in payments. Detroit’s experiences shows what can happen with the right wrap-around services in place.
Higher credit score thresholds disproportionately exclude communities of color. Among the Philadelphians to whom Clarifi provided financial counseling from the beginning of 2015 through September of this year, the initial average credit score for people who self-identified as black or African American was 571, for people who self-identified as white or Caucasian the average credit score was just above 600. With counseling, the clients achieve an average 42-point increase in their credit score after about six to eight months. Even so, a gap remained along racial lines. Our next newsletter will explore this topic in more detail.
Roberts closed by citing the benefits of the loan program to the city as a whole. Homeowners need access to funds to improve their homes or many will face displacement and their health will continue to be harmed by mold and other unhealthy housing conditions. She asked the Committee members, “If our thousands of affordable houses turn to blight and decay, will there be enough affordable homes there for the next generation?”
The Healthy Rowhouse Project will continue to support City Council’s efforts to pass Bill 170878, to create resources for a loan program that will connect Philadelphia homeowners with credit scores as low as 560 to the capital they need to repair their homes and lead healthier lives. The bill is scheduled for a second reading at Council on November 16, and then may be passed shortly after that. We will keep you posted. Thank you, as always, for your support.