Move over, real estate companies. There’s a new game in town.
Nonprofits that work with mostly low- and moderate-income families to widen their homeownership opportunities are expanding their missions into helping clients actually buy and sell houses.
Take NeighborWorks America, for example: It’s a Washington-based, Congressionally chartered nonprofit network, and a leading trainer of professionals in community development and affordable housing. Typically, local nonprofits in the NeighborWorks network educate would-be buyers about the ins and outs of ownership and, if necessary, help them straighten out their finances and boost their credit scores. Then, when people are ready to take the next step, they are turned over to an outside realty professional.
Now, though, 30 or so NeighborWorks member organizations are keeping their clients in-house, offering not only realty services but also, in some cases, financing and insurance. Some are even building houses.
Over the next few years, Marietta Rodriguez, NeighborWorks’ vice president of national homeownership programs, expects the number of nonprofits that build, sell, finance and insure houses to grow as they look to become less dependent on shrinking federal and state dollars.
“The housing industry and the funding options for the nonprofit community business are changing,” Rodriguez says. “To adapt, more and more NeighborWorks organizations are building complementary businesses that generate revenue that they funnel back into their mission-based operations. The result is a more complete social enterprise that offers double bottom-line benefits for them and the community.”
The move toward self-sufficiency makes sense. Nonprofits see thousands of families who yearn to be homeowners. After these people go through an extensive education program, many are mortgage-ready. But then they go off to buy a house through an often unknown real estate agent and mortgage company.
In many cases, then, the nonprofit is helping agents and lenders, but getting nothing in return. So it’s “only natural,” says the NeighborWorks executive, for local groups that have the capacity to add realty services to do so.
“Vertical integration in this instance makes a lot of business sense,” she says.
For NeighborWorks of West Vermont in Rutland, the move into realty services “fills a gap” for its clients, says Ludy Biddle, the group’s executive director. ”They’ve gone through our classes and built their credit scores, and they are excited about homeownership, and then we didn’t have anyone to help them. So we decided to fill that piece.”
The Vermont chapter has only one agent on staff just now, but he’ll do 28 sales this year, says Biddle. “He got tired of selling ski condos, and wanted to do something to help people.”
To which, Riddle adds: “All of us in the nonprofit world are working to become self-sufficient and still support the people who need our help. If we can make a little bit of profit, we can be less dependent on state and federal grants.”
To help the trend along, NeighborWorks has embarked on a three-year program to educate more of its 250 member organizations about how to build revenue streams that they can pour back into their core functions.
The goal is to be something like Homewise, the 31-year-old New Mexico nonprofit that began adding realty services to its menu about a half-dozen years ago. Today, it has seven agents on staff in Santa Fe and two in Albuquerque. It also finances the houses its clients buy, and has just started insuring those properties, as well.
“Anything we get in terms of grants or funding is used for growth,” says Communications Director Laura Altomare. “Our day-to-day operations are funded by our real estate services.”
In Homewise’s most recent fiscal year, 372 families who went through its education programs went on to buy houses. Of those, 271 used one of the group’s agents. Clients don’t have to use a Homewise agent, say Altomare, but most people choose to.
With the increased competition for business, you’d expect some pushback from the local real estate community. But the opposite has been the case so far.
For one thing, real estate agents tend not to like working with low- and moderate-income customers, who require too much work for smaller commissions. Beyond that, real estate agents often refer clients to the nonprofits.
“We have a great relationship with our local Realtors,” says Altomare. “We get quite a few referrals from them about people who are not quite ready to buy.”
Another vertically integrated nonprofit, NPHS in Rancho Cucamonga, California, also has a good relationship with the local real estate community.
“You never want to ruffle any feathers,” says Communications Director Victor Ramirez, “but we’ve been well received. They’d rather be doing easier deals, so they’d rather have us do the more complex ones.”
NPHS has two agents on staff: one to handle residential clients and the other to work on commercial deals, which is a new line of business the organization has just launched.
So low-income buyers can take heart: More homebuying options and help are available every day.