Across the state of Mississippi, more than 5,000 single-family homes stand poised to transition from Low-Income Housing Tax Credit rentals to homeownership opportunities through the Single-Family Lease Purchase Homeownership Program administered by Mississippi Home Corporation. Making that conversion viable for the renters — many of whom have been leasing their unit for up to 15 years — is the genius behind Hope Enterprise Corporation’s housing innovation known as Year 16 (Y16).
Hope Enterprise Corporation (HEC) is a winner of the Housing Affordability Breakthrough Challenge that Enterprise leads with support from the Wells Fargo Foundation. The Y16 innovation blends down-payment assistance and a unique mortgage product that relies on rent reporting to qualify borrowers. According to Stacy Spann, Wells Fargo’s head of housing access and affordability, this one-of-a-kind financing solution is nothing less than “lightning in a bottle.”
We paired our own senior director of rural communities, Robin Wolff, with HEC’s Jena Reed, vice president of community and economic development, to learn how the idea for Y16 emerged and what potential it holds for increasing homeownership and revitalizing communities across the Deep South and beyond.
The narrative about people who live in tax credit developments doesn't match the pride, joy, and love inside the walls of their homes.
Jena Reed, Hope Enterprise Corporation
Robin Wolff: I’d love to start by zooming out. When you’re introducing someone to HOPE for the first time, what’s your go-to elevator pitch?
Jena Reed: HOPE — Hope Enterprise Corporation, Hope Credit Union, and Hope Policy Institute — is a family of organizations dedicated to strengthening the financial health of under-resourced communities in the Deep South — Mississippi, Alabama, Louisiana, Tennessee, and Arkansas. My favorite thing about HOPE is that we have the ability to braid together resources in ways that traditional financial institutions do not, to really get work done that’s being left out of the conversation or doesn’t have a clear solution.
To carry out this work, we have a CDFI-certified nonprofit loan fund and a credit union. HOPE also has a policy institute that we use to elevate resident voices and tap the expertise of our people in communities to advocate for change and influence the flow of resources towards places where opportunity is great but far too often overlooked. What makes us unique is that we can pull all of that together and get the hard stuff done.
RW: From the outside, HOPE’s Y16 innovation, which builds off the Low-Income Housing Tax Credit, looks like hard stuff! At Enterprise, we consider LIHTC one of the most important tools to build affordable housing in the nation. But we don't often see it supporting homeownership. I've had the opportunity to visit some of the LIHTC communities where you’ve closed some mortgages. Would you walk us through how the idea for Y16 emerged at HOPE and how it works?
JR: We started what we didn't know at the time would become Year 16 back in 2014, when we worked with a community called Eastmoor, initially a single-family LIHTC development, just outside of the city limits of Moorhead, Mississippi. Residents had already become homeowners as a result of a lawsuit, but the homes they acquired were in poor condition. Many were in need of extensive repair and residents didn’t have the resources to get the work done. We worked with that community to rebuild, repair, and replace homes. We also worked with the city and county to update community infrastructure. We had all kinds of resources going into that project.
Looking back, we can point to our work in Eastmoor as the beginning of Y16. It was resident-driven change that brought us to that community. There was a big celebration at the end of the work, so people knew that we helped that community.
Pine Circle is another development really close to Eastmoor and the residents there came to us with similar concerns about their path to homeownership. We started looking into it and realized this whole lease-purchase thing was not going away. And we began to imagine what our involvement might look like — if residents could qualify for a traditional mortgage product, or an in-house product to be created, and what we might need to do to ensure the quality of the homes was up to par with livable standards to not repeat what happened in Eastmoor.
As we dug in, we realized many residents were not well prepared for the conversion to homeownership as intended by the lease-purchase program and that there was a need for creative financing. We had the opportunity to apply for the Breakthrough Challenge, and about halfway into the process, we got the number of lease-purchase units in Mississippi that would convert over the next 10 to 15 years — more than 5,000. We were wowed. Lease-purchase is not new and it’s not isolated to a few developments. And it was the residents elevating their concerns that got us into this work.
Y16 is unique because there are not a lot of financial institutions looking at rental history as a primary means to underwrite a mortgage loan. That is the big piece that will go beyond the Breakthrough Challenge and our work in these communities. There are better ways to underwrite and look at the quality of a borrower and their ability to repay. We're demonstrating how the mortgage underwriting system can work better, in a more inclusive way, for people it currently leaves out.
RW: With 5,000 potential LIHTC homes slated for conversion in Mississippi, you've got a lot of work ahead of you. I know you intend to broaden this work across HOPE’s footprint. What can other groups around the country glean from Y16 to create their own homeownership innovations?
JR: We’ve closed 31 mortgage loans across four communities so far. And we're working on another 40 right now in another development. In each community, there is at least one resident who is the leader. It's those residents who stand out for me because they exemplify how one person can shake things up and rally their community. These folks read their contract and they advocated for themselves. They brought residents in their community together and said, “We're not going to stand for this. We're going to push for what we were promised.”
Again, the lease-purchase concept isn’t new. So when we think about scalability, yes, we have a lot to do in Mississippi. And we know there's a similar number of units in Louisiana, and we've gotten some scope of other states in our footprint. We are learning a lot about lease-purchase in general. The way it looks on paper is great. When you actually go to execute and think about all of the things that have to happen to get to a successful conversion, it's a lot more complicated. And so we're trying to do as much as we can to learn about the concept so that we can help lead a way forward for other lenders and stakeholders working to close the homeownership gap.
RW: With your focus in the South, why is the lease-purchase concept so important to HOPE and the communities you serve?
JR: The first point on HOPE's strategic plan is to bring homeownership levels in the Deep South to national levels for all people. This project represents one way to advance homeownership in places where it was not previously available.
There is a lack of high-quality housing in rural communities — especially high-quality for-sale housing. When you live in your home for 15 years, and you know you're going to buy it, you're going to treat your home better than if you're just a renter for 15 years. So you have homes that are actually pretty great, which residents are getting at an extremely discounted price through the lease-purchase program. The narrative about people who live in tax credit developments doesn't match the pride, joy, and love inside the walls of their homes.
RW: Shifting gears a bit, I’m curious about your experience with the Housing Affordability Breakthrough Challenge. Beyond receiving a $2 million grant to advance your innovation, what has it meant to be part of the challenge?
JR: My favorite part of my role at HOPE is getting to be involved in the Breakthrough Challenge — the networking, the learning, the collaboration with the rest of the cohort is unmatched. I always leave the group with some action to take, idea to execute, or follow-up with another cohort member. It’s an honor to be a part of that group.
RW: Tell me what y'all are doing with another challenge winner, BuildUp, in Birmingham, Alabama, a high school that prepares young people for the building trades, while giving them access to paid internships and a pathway to homeownership?
JR: BuildUp students open an account with Hope Credit Union as freshmen. With that comes financial education workshops and resources they can access online to continue learning beyond the basics. BuildUp students are compensated for work they do through deposits to their HOPE account and eventually, those students are able to get into a HOPE mortgage.
Our affordable housing mortgage product is a pretty great fit for those students who have been working since freshman year to increase their financial wellness. There is some overlap between Y16 and the student mortgages when it comes to rental history and other forms of credibility for underwriting beyond credit score.
RW: I'm glad to hear about that synergy. I would love to know more about you, Jena. How did you get involved in housing and community development?
JR: I started my career with Teach for America. They sent me where they needed me, Yazoo City, Mississippi. I have always had a heart for service, and innovation is core to who I am. Somebody told me, “Oh, you should work for HOPE when you decide to leave the classroom.” I heard that a few times. But then I moved to Jackson and opened a charter school. One of my colleagues at the charter school started working at HOPE, and so I kind of followed him.
I began as a grant writer and during that time, got a master's in community and economic development. It was inspiring to be outside of the classroom, but in communities in a way that still sparked change and impacted the things that I knew my students struggled with. As a teacher, you can only hope that things get better for your students and be there for them in the classroom. At HOPE, I can really change things, like food and housing access, that impact them in their communities every day.
RW: Reflecting on your career journey, what are the most valuable insights that you've gained?
JR: I’ve learned I’m most successful at the intersection of purpose, passion, and need. At the Breakthrough Challenge convening recently, David Hardin of BuildUP reminded us that you can only build at the speed of trust. And that really sticks with me, because you can't just catapult into community and expect to see change. It’s about trust and patience. You just can't give up.