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Cuts threaten successful homeownership program

Affordable housing in the District is disappearing, and programs to help low- and moderate-income residents afford housing in DC are dwindling. One of the affordable housing programs at risk in this year's budget, thanks largely to federal budget cuts, is the Home Purchase Assistance Program (HPAP), which has helped 13,000 low-income renters become homeowners in DC.

Photo by AKZOphoto on Flickr.

HPAP has a track record of success, a credit to the non-profit housing organizations that administer the program. In addition to financial assistance, HPAP recipients also receive intensive financial and homebuyer education, preparing them for the responsibilities and challenges of homeownership.

Even through the housing crisis, HPAP recipients only have a 2% foreclosure rate. And HPAP has helped maintain diversity in changing neighborhoods like LeDroit Park, Columbia Heights, and Logan Circle. HPAP assistance has been a key tool in supporting new homeowners in the District, even as the city has lost the majority of its low-cost rental and ownership housing since 2000, according to the DC Fiscal Policy Institute.

How does HPAP work? HPAP is the District's homegrown downpayment assistance program which provides up to $44,000 for first-time, low- and moderate-income home buyers. HPAP acts as a second mortgage. Recipients begin paying their loan down starting in year five of owning their home and make monthly payments over a 40-year period instead of the traditional 30-year period, making the payments more affordable. As HPAP recipients repay their loans, the city recoups the cost, which currently generates $2 million in repayment every year.

Although beloved by politicians and residents alike, HPAP has dwindled since 2008. The program in FY13 is slated to be only a third of its size only five years ago. As a result, the number of people who can use the program has fallen. And this year, the decrease will impact about 100 families. According the DHCD, last year the program served 246 families, next year it will serve around 150.

The city has used federal funding to maintain the HPAP program, relying heavily in recent years on stimulus dollars, but this year, federal funds are not available to fill the gap. The federal Department of Housing and Urban Development's grant programs that have also funded HPAP also dwindled; its HOME program shrank 37% in 2012, and its Community Development Block Grants (CDBG) dwindled by 12%.

Also, the 2010 Census made DC is eligible for less CDBG funding, since the city has fewer high poverty areas than in previous years. All of these combined losses have left few funds available for housing programs like HPAP.

HPAP budgets have decreased substantially since FY 2008.

In April, more than a dozen HPAP recipients attended the DHCD budget oversight hearing to advocate for the program that has helped them become District homeowners. Attendees highlighted the diversity of residents impacted by the program.

Elizabeth Palmberg purchased her home with an HPAP loan, only to be diagnosed with lymphoma soon after. She has been able to afford her mortgage despite her health struggles; "the HPAP program helped me to be able to still buy my condo, and now every month as I write my mortgage check, I am grateful to be building equity which will give me stability against shocks that life might send my way in the future."

Bernice Joseph was able to purchase her home in Logan Circle in 2002 and has no plans of leaving the neighborhood. She loves the convenience, and believes that HPAP has had a huge impact on her family and her educational opportunities. "Without this program I do not know where I would be. But I do know I would not be in my neighborhood, the one that is so dear to my heart, the one where I have put down roots, and the one where I have lived for the past 21 years. I have raised all four of my kids in DC. Without the stable price of my mortgage, I would not be able to afford to go back to school. I definitely could not afford my classes if I had to pay market-rate rent."

The value of homeownership of course extends beyond the individual. Homeowners pay property tax back to the city and provide an anchor for communities. Homeownership is an indicator of success for families and kids across the country and one of the most important wealth-building tools in our country, especially in communities of color and low-income communities. A 2003 study found that housing wealth accounted for 77% of all low income household's wealth.

HPAP has supported District residents and communities by encouraging homeownership, neighborhood stability, and equity building. This year, the program will become even weaker after years of reductions. The DC government should encourage residents to become homeowners, to invest in their communities and themselves by supporting the HPAP program with local funds.

Sarah Scruggs contributed to this blogpost, which can also be found at

Elizabeth Falcon is the campaign organizer for the Coalition for Nonprofit Housing and Economic Development (CNHED), an association of affordable housing developers, community organizations, government agencies and more in DC. She writes about how policies affect affordable housing at the Housing For All blog. 


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This entire post is based on the assumption that home-ownership is good, or better, than renting. "...provide an anchor for communities." That anchor can prevent people from easily relocating to where jobs may move. The classic argument that home-ownership also leads to less crime is disproved by Germany's high rates of renters vs. home owners.

I enjoy the idea of providing affordable housing, but I'm not convinced subsidizing home ownership is the answer (same goes for the mortgage interest deduction, etc...)

by @SamuelMoore on May 9, 2012 2:39 pm • linkreport

I was going to jump in and say the same thing as SamuelMoore. Why is ownership always treated as the holy grail?

There are many cases where renting would be vastly superior to a low-income individual.

by andrew on May 9, 2012 3:06 pm • linkreport

Samuel Moore "The classic argument that home-ownership also leads to less crime is disproved by Germany's high rates of renters vs. home owners."

I'd argue that income and education are probably the deciding factors here, not renting or homeownership. I'd bet both are probably irrelevant to crime in a statistical study. Someone run a regression.

by Nick on May 9, 2012 3:28 pm • linkreport

And HPAP has helped maintain diversity in changing neighborhoods like LeDroit Park, Columbia Heights, and Logan Circle.

What kind of diversity are you referring to? Surely you can't mean racial or economic diversity. Those neighborhoods have gotten more diverse over the last 10 years, and it has nothing to do with HPAP.

by Scoot on May 9, 2012 3:29 pm • linkreport

reasons why people want to own homes:

1. In an appreciating market, increased housing values, upon sale, come back to the owner in "profit" and constitute a significant portion of a household's wealth and investment portfolio.

2. the mortgage interest tax deduction means that people who own houses tend to pay less taxes, thereby increasing household disposable income compared to not being entitled to the tax deduction when renting. (Some people buy "bigger houses" taking this cash flow into account and therefore may not have a larger disposable income as a result of the tax deduction.)

3. In strong markets at least, provided that incomes are stable, reduced risk of change in their housing status.

by Richard Layman on May 9, 2012 3:30 pm • linkreport

There's some question as to whether the dynamic RL describes (call it the post-WWII housing dynamic) will continue. It's unlikely we'll see the kind of increase in housing values which we saw during that period. As far as the question of stability of "housing status" goes, we address that in DC with very strong rent control and pro-tenant housing policies.

But putting that aside, "stickiness" of housing is a double-edged sword, as millions of Americans have found out: those who would move to find better employment, but can't because they're underwater on their mortgages.

by oboe on May 9, 2012 3:39 pm • linkreport

Full disclosure, I work for Manna, Inc- a nonprofit homeownership housing developer. Homeownership is distinct for numerous reasons and there are various studies that correlates a higher homeownership rate with crime reduction and enhanced educational outcomes. Check out our site:, for more information about this. The US middle class was created by government backed homeownership assistance programs after WW II. This was happening at the same time as minorities were being redlined, which disinvested entire communities and caused generational disparities in the wealth between races.

Additionally, homeownership for low and moderate income families is the only means for them to build assets and move up the socio-economic ladder. A DCFPI report indicated that the incomes of low and moderate income people in the District simply has no increased this past decade and in fact, for Black and Latino families, have gone down. So ownership becomes the sole means of economic growth for many of these households.

Manna’s track-record has proven this. We’ve developed in every quadrant of the City, with a heavy concentration of owners in Logan Circle, Ledroit Park, Shaw, and Columbia Heights, and we have a less than 1.8% foreclosure. Homeownership has enabled these residents to grow and HPAP enabled them to purchase.

So please look at the facts first become making unsubstantiated comments.

by Shiv_Newaldass on May 9, 2012 3:43 pm • linkreport

"As far as the question of stability of "housing status" goes, we address that in DC with very strong rent control and pro-tenant housing policies. "

which have various disadvantages versus ownership - ownership makes it POSSIBLE to stay when neighborhood change increases values, and also gives an incentive to leave when the opportunity cost exceeds the value of staying to the owner. Rent control does NOT do the latter, and the free market does not do the former.

I'm generally not a fan of govt subsidy to home ownership, but I would say in a gentrifying city, encouraging it for the existing population, has a lot of positives.

by AWalkerInTheCity on May 9, 2012 3:51 pm • linkreport

In the post-WWII US , where public policies have privileged the middle-class homebuyers with a large home mortgage interest deduction, there's obviously going to be a very large overlap between educated, middle-class people and homeowners. I think it's very easy to get the causation backwards.

The American Dream is to enter the middle-class. Buying a house is what middle-class people do. Why? Because government policies distort the market to prop up the NAHB (a slight exaggeration). But people are not necessarily middle-class because they've bought homes. Particularly in the post-bubble landscape we live in.

by oboe on May 9, 2012 3:54 pm • linkreport

2. the mortgage interest tax deduction means that people who own houses tend to pay less taxes, thereby increasing household disposable income compared to not being entitled to the tax deduction when renting

Actually, very few low income families actually take the mortgage interest deduction, as the standard deduction is usually worth more:

by Scoot on May 9, 2012 3:58 pm • linkreport


A. is a form of hedging against price changes - logically own or rent should match expected tenure in a given market - owning when one expects to move soon increases risk - renting when one expects to stay increases risk

b. Eliminates certain agent-principle issues between landlords and tenants - The occupier makes their own decisions on maintenance, renovation, etc, which eliminates certain economic friction on those things.

C. Owner occupation internalizes the effect of neighborhood changes in a politically relevant way - since the occupier lives in the neighborhood, and votes there, while the absentee landlord may not. An owner is, presumably, more likely to support changes that increase home values, whereas renters sometimes have an incentive to oppose them

by AWalkerInTheCity on May 9, 2012 4:06 pm • linkreport

Most (maybe all) neighborhoods are full of homeowners who oppose changes that are likely or proven to increase home values. It's happened everywhere from Cleveland Park to Tenleytown, Anacostia to Georgetown to Friendship Heights to Skyland and everywhere in between.

For example:

by Scoot on May 9, 2012 4:18 pm • linkreport

Im not thinking of development questions, about which reasonable people may disagree, but about things like decreases in crime, improvements to schools, reductions in litter, etc.

If you are someone who thinks that development questions such as those are things about which there is no reasonable disagreement, than I can see why you would believe that ownership makes no particular difference.

by AWalkerInTheCity on May 9, 2012 4:23 pm • linkreport

oboe/Scoot -- we aren't talking, on this blog, about all of the US, only DC. I think that it's likely that housing values in DC will continue to appreciate, as this market is one of a set of generally strong real estate markets (NYC, DC, San Francisco, Southern California, parts of Boston, etc.) that are likely to function somewhat differently than all markets, even with significant changes in the national housing trends.

Relatedly, Scoot, we aren't talking about "nationally" where it is likely that lower income households (living in relatively low cost housing) don't take advantage of the mortgage interest deduction because it doesn't pencil out, we're talking about DC. I would expect, at least for mortgages executed within the last 10 years, that for the most part, itemizing deductions would be favorable vs. the standard deduction, especially for two-wage earning households.

by Richard Layman on May 9, 2012 4:49 pm • linkreport

@Richard Layman - we aren't talking about nationally? That's news to me -- did your original post indicate or specify you were limiting your generalizations to DC?

Even if you consider a "low to moderate income" for a 4-person DC household to be in the 36k-60k range (as DCHD does), then the typical MID is $200-$750... barely enough to cover property taxes, annual maintenance and so forth, and probably not enough to significantly affect a family's disposable income ... especially since the benefit from the MID does not come in the form of an increase in taxable income.

by Scoot on May 9, 2012 5:18 pm • linkreport

HPAP is a DC Govt. program. So the entry seems very DC-specific. Although I have nothing against generalization, I do it all the time. I just try to do like-to-like.

On housing issues and transit, I have noticed that some commentators in this blog will use national data (e.g., "no one uses transit, basically") to make points about the local situation, in situations when the local data varies widely from the national data (e.g., in DC, 37% of people use transit to get to work, and an additional 14% walk or bike).

WRT the mortgage interest deduction, when you itemize, then you can deduct other things as well, e.g., local tax payments (including property taxes), charitable contributions, etc., which further reduce taxable income, at least for federal taxes.

by Richard Layman on May 9, 2012 5:26 pm • linkreport

@Richard Layman

WRT the mortgage interest deduction, when you itemize, then you can deduct other things as well, e.g., local tax payments (including property taxes), charitable contributions, etc., which further reduce taxable income, at least for federal taxes.

This is true. And all of those other things (particularly charitable contributions) tend to be much lower for poorer households. Moreover, because a tax deduction is removing marginal income from taxation, one deductible dollar is worth much more in tax savings to someone in a higher tax bracket than it is to someone in a lower tax bracket. This is even after the poorer filer gets over the hurdle of being able to get more deductible dollars from itemizing than from the standard deduction, which is by no means a given.

And of course the poor will be paying less in mortgage interest in absolute terms than the wealthier, so . . . yeah. In every way, the vast majority of the benefits mortgage interest deduction are slanted to flow to the wealthy.

by Gray on May 9, 2012 6:11 pm • linkreport

Umm. again, we are talking about DC. Since we are talking about HPAP we are talking about current mortgages. $100,000 of mortgage is about $650/mo. So a $300,000 K house is about $1900 month in mortgage interest, and about $225/mo. in property taxes. While it's true about contributions (and I know all that), DC households that are lower income may be likely religious contributors.

When I owned a house outright and didn't make that much money, these amounts, even at 1/3 these rates, were significant enough for my taxable income.

by Richard Layman on May 9, 2012 9:41 pm • linkreport

These programs don't really sit well with me. Take for instance my fiancee and I. We both live and work in the District, pay District and Federal income tax, and will never see a single benefit from or take advantage of these programs. Yet our tax dollars fund these programs for other people. The maximum income limits are pretty low, IMO, and our household income eliminates us from being eligible. I know the limits are based on median income and so forth, which is another issue. Ok, so we make too much money for these programs, I get that. But it's not like $450,000 for a one bedroom condo is pocket change either.

Right now, we could never afford to go out and buy in the district. So we are basically forced to rent until one of us or both starts making more money. We would like to buy in the District, and think we would be exactly the type of people these programs were meant to help. So what are people like us supposed to do when we want to own? Probably not stay in the District, or even just outside the District for that matter. NoVa/Bethesda, etc. aren't exactly cheap either.

by Nickyp on May 9, 2012 9:55 pm • linkreport

Have you guys thought about getting a press pass? They're pretty straightforward and you would all undoubtedly qualify. There's strong precedent for other DC bloggers likewise having press credentials:,a,1245,q,548957.asp

by Bossi on May 9, 2012 10:05 pm • linkreport

First, I'm sorry, Nicky, but if you want to live in a neighborhood where a one bedroom condo sells for $450K, you have to earn it. Check out Redfin or Zillow or any number of other sites listing for-sale homes, and I'm sure you can find something much more affordable than that, close to a Metro and in a safe neighborhood with lots of services available nearby. It won't be Dupont, but it will be serviceable, and as your property gains value and you move up the income ladder, you can then afford to live in neighborhoods where a one-bedroom condo sells for $450K. No one starts at the top.

I actually know a number of people who have used HPAP to buy their homes. They all had one thing in common: they were impatient. They moved to DC and started in an entry-level job for an educated person, making somewhere between $45-55K for their first year, with lots of upward potential. They saw those of us who had been working at those jobs for a few years, living lean, renting apartments we could barely afford, and stashing every penny away while we moved up the income ladder, buying homes. They wanted a piece of the action. So they hooked up with a Realtor good at paperwork, used HPAP to get assistance sufficient to meet an FHA down payment, and bought. Nowadays, they're making good money to the point that they would be considered middle to upper middle class BY DC STANDARDS. So, I suppose if you want to let a lot of people buy homes in DC quickly...

Yes, there are people HPAP has helped buy homes who do not fit the above-described demographic, but I'd be a lot more comfortable with the program, given my exposure to it, if the repayment plan accelerated if your income increased. These people knew they'd be making enough money to afford a home without assistance in 2-3 years, but they knew they wouldn't get the assistance then. While I'm all for helping moderate income people buy if they want to, if people are gaming the system like this, then repayment should start as soon as they exceed the maximum income to qualify for the program (if before the 5-year grace), and the payments should be x% of their income, increasing as income increases, if it ends up exceeding the maximum to qualify for the program in the future. That would help push these loans to people who benefit from all the things mentioned (mortgage interest and itemized tax deductions, stability of payments, stability of residence, etc.), and replenish funds given to people who no longer need them faster.

by Ms. D on May 9, 2012 10:49 pm • linkreport

Oops, just realised I posted to the wrong article... editors- feel free to delete my comments here!

by Bossi on May 9, 2012 10:54 pm • linkreport

@Richard Layman: I get that, if you're talking about lower income in DC, then such people are likely to qualify for some sort of gain from taking the mortgage interest deduction if they are homeowners. My broader point is that despite that some lower-income homeowners are able to get some benefit from the MID, the benefits accrue overwhelmingly to the wealthy.

This is for two reasons: (1) wealthy homeowners are definitely able to gain from itemizing, and are able to itemize a lot more interest, and (2) more directly addressing your point, wealthy homeowners are paying much higher marginal tax rates, so they gain a lot more for every dollar in MID.

by Gray on May 10, 2012 7:23 am • linkreport

HPAP is a DC Govt. program. So the entry seems very DC-specific. 

On housing issues and transit, I have noticed that some commentators in this blog will use national data (e.g., "no one uses transit, basically") to make points about the local situation, in situations when the local data varies widely from the national data. 

@Richard Layman. For low-income households (the beneficiaries of programs like HPAP), the MID is generally not considered to be a benefit of homeownership because low-income households rarely itemize, and when they do, the MID provides little measurable benefit to them.  This is true for low-income residents in DC and elsewhere, even taking into account DC's higher median incomes. 

by Scoot on May 10, 2012 9:36 am • linkreport

oboe/Scoot -- we aren't talking, on this blog, about all of the US, only DC

Good point. I still think the greater danger in DC proper is the bifurcation of household income (i.e. the only people who will live here are the wealthiest and most indigent, but no one in between), not the slow attrition of extremely poor households.

I'm a broken record on this, but DC's extremely high poverty numbers are not some natural tragedy, but a confluence of local policies. More equilibrium in poverty numbers between DC and the surrounding jurisdictions is the best thing that can happen for the health of DC, and likely for the region's poor.

What DC needs is housing opportunities for middle-income earners.

by oboe on May 10, 2012 9:55 am • linkreport

I'd like to know, if this current trend continues, what happens to HPAP long-term? And what about the people who are HPAP recipients? If HPAP is fully defunded, does that mean that current holders of a second HPAP mortgage are off the hook for repayment?

by Anon on May 10, 2012 9:55 am • linkreport

I was super lucky to get a HPAP loan almost 20 years ago to purchase a coop. There's no way I could have afforded to stay in Adams Morgan working on a small non-profit salary. It's a great program and allows people to put down roots and contribute to the community.

by jeh3025 on May 10, 2012 11:57 am • linkreport

we address that in DC with very strong rent control and pro-tenant housing policies

Wait, what? That's not true at all. Very few renters in DC are subject to any meaningful form of rent control, and as I found out recently, you basically have no rights at all if you're subletting.

by andrew on May 10, 2012 3:29 pm • linkreport

@oboe about bifurcation, my point exactly, I completely agree.

@ms d, I don't think 450,000 is really that far off, from what I've seen. There probably are exceptions, but I think it's ballpark. And I have no problem of having to "earn it" to buy a $450,000 condo, if the person is using their income and gets no money from any type of state, local, federal gov't program. I think what I'm trying to get at is there are plenty of people who make too much to qualify for those programs, but buying a place in this city would be out of reach because they're not wealthy by any means. Which brings me to oboe's point that you will just have the lower income people and the very high income people, and no middle, as the middle will be moving out.

by Nickyp on May 10, 2012 8:06 pm • linkreport

Nicky, District-wide, over all property types and sizes, the median home price in DC sits just below $450K. If a one-bedroom condo is $450K, that's at the high end of one-bedroom condo prices. Maybe you need a different Realtor? I have friends who are currently buying HOUSES in pretty darn nice neighborhoods for prices in the vicinity of $450K. Seriously, just TRY Redfin or Zillow, you'll see lots of stuff you can most likely afford in nice neighborhoods. It may not be your "ideal" neighborhood, or it might be a smidge more than half a mile to a Metro, or there might only be a few bars/stores/etc. in the .5 mile walking range, but they exist, in spades. And, again, as your property gains value, you can eventually have your dream neighborhood.

I'm not suggesting you live in an undesirable or super-inconvenient neighborhood, just maybe broaden your search a bit. I'll start you with one example...I used to live around the corner from this location, and it's a super cute, convenient, and safe neighborhood:

by Ms. D on May 11, 2012 7:11 pm • linkreport

That search took me about 10 seconds, BTW.

by Ms. D on May 11, 2012 7:13 pm • linkreport

Sorry, the property investor in me just couldn't stop at's a 2 bed guaranteed to increase in value for $325K. Pretty close to grocery, Metro, bars, shopping, and other stuff:

If I didn't already have a few properties, I'd buy this and live in it while renting my primary home...

by Ms. D on May 11, 2012 7:32 pm • linkreport

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