Homeownership Program Faces Real Test

High Ratio Of Debt, Bad Credit A Surprise

February 15, 2005
By OSHRAT CARMIEL, Courant Staff Writer

They've planted mums on Greenwich Street, painted pumpkins on Capen Street and trimmed overgrown tree branches on Newton Street.

That handiwork, paid for by a group set up to advance the mayor's homeownership initiative, was the easy part.

Now the real test of Hartford Mayor Eddie A. Perez's homeownership plan begins - namely, are Hartford residents willing to take out home improvement loans and embark on major home renovations themselves?

The mayor's plan relies on that willingness to boost the city's dismal homeownership rate from the present 25 percent to 30 percent by the end of his term in 2007. The idea is not so much to build more homes in Hartford as to make them more valuable - and with that, to trigger an interest in buying in Hartford among people who have the means to buy elsewhere.

That's where the home improvement loans come in. So far, interest has been mixed.

The city designated about 1,650 homes as eligible for a special home improvement loan fund, backed by The Neighborhoods of Hartford Inc., the group designated to carry out the homeownership initiative. Since August, when the group began making loans, 25 owners have applied and qualified, including three homeowners who were approved and are already busy replacing roofs and windows. At least one property owner, buoyed by the spirit of reinvestment, took out a $20,000 loan on his own, separate from The Neighborhoods of Hartford program, and put a fresh coat on a three bedroom Victorian he rents out in the West End.

But there is also a downside: Ten other homeowners applied for the loan and were turned down because they were not creditworthy or were already carrying too much debt, a setback that leaders say was greater than they had banked on.

"The trends we were seeing were very high ratios in terms of percentage of income going to pay off loans, or bad credit," said Bob Kantor, director of the Connecticut office of Fannie Mae and a board member of The Neighborhoods of Hartford.

"The families were in dire straits. In some respects we didn't anticipate that."

The quality of the applicants has improved over time, Kantor said. And Neighborhoods of Hartford is looking for ways to include some of the debt-ladened property owners in the program, which is offering loans between $5,000 and $30,000.

They are considering a loan deferral option, allowing those who take out loans to defer payment until they sell the house or refinance, said Donald Poland, executive director of The Neighborhoods of Hartford. The interest rate on the loans range from 0 to 6 percent, with the lower rates reserved for those who are low income.

"The more loans we do in the neighborhoods, the more investment we get in that area," Poland said. "If we do enough of these, we will actually move the market."

The idea, Poland and others say, is to create a momentum of home improvement on a given block or neighborhood. That momentum would create a buzz about living there, and would ideally lead to higher home values. Higher home values might cause a homebuyer, or developer, with means to buy in Windsor or Rocky Hill to consider Hartford a viable option.

Getting loan dollars into certain sections of the city is key, Poland said, especially into houses that sit on a corner or an intersection and are most visible to passersby.

New loan programs take time to catch on and usually become popular through word of mouth, said Cynthia Russell, president and CEO of the Connecticut Housing Investment Fund, which is helping administer Hartford's loan program.

Poland and other leaders of the initiative will deliver an update on the homeownership initiative to the city council's housing committee tonight.

The program, launched in 2003, calls for infusing relatively stable neighborhoods with money and attention, allowing for the kind of home improvements that residents might not otherwise be able to afford. The mayor and housing consultants picked concentrated sections of five neighborhoods - called Rising Star Blocks - and 12 individual blocks - called Pride Blocks - citywide. The Rising Star Block clusters were given $50,000 in grant money . Pride Blocks were given $10,000.

It was hoped that that The free seed money was intended to would inspire homeowners to make bigger improvements.