Ayanas and Mario Woodard of Detroit were approved for a $20,000 loan through the 0% Interest Home Repair Loan. In addition to the roof replacement, they also got their driveway repaved, a new furnace, central air and new windows. Their monthly bill for the loan is $208. “I really don’t know what we would have done without the loan,” Ayanas Woodard said. “If we couldn’t get bank financing, we probably would have had to do it ourselves.” Photo credit: Aaron Mondry

Over the last decade, tax foreclosure and abandonment were the main drivers of blight in Detroit. But today, residents are struggling to prevent the deterioration of the aging homes they own and live in. 

Tens of thousands of residents live in crumbling homes that are bad for their health and steadily losing value because owners are unable to finance the high cost of home repair.

Homeowners are eager for help. Almost a quarter of residents, when asked how Detroit should spend its allotted $826 million in federal American Rescue Plan Act, said home repair was their top priority. A recent University of Michigan study estimated at least 37,630 Detroiters live in homes with a major repair need.

One highly touted program designed to support, Detroit’s 0% Interest Home Repair Loan, has helped just 600 residents to complete renovations since the program launched in 2015, according to Damon Thompson, deputy director at LISC Detroit, which manages the program. Of those loan recipients, a majority make less than 80% of the area median income ($50,240 or less for a two-person household). The program has issued about $12 million in loans.

It’s hard to dispute that the 0% interest program has made home repairs possible for a subset of Detroit homeowners. But it’s also true that the subset is small, especially when compared to the vast need in the city.

Around two-thirds of all applicants, 2,038 out of 3,204 homeowners, have had their loan denied (around 400 walked away after they were approved). A majority of applicants carry too much debt or have credit scores that disqualify them.

A partnership between the City of Detroit and LISC Detroit—with loans guaranteed by federal Community Development Block Grants and corporate or foundation partners like Bank of America—the program promised quick and easy loans of up to $25,000 to homeowners who either made less than 80% of the area median income or lived in HUD-designated, low-income areas. The program gives recipients 10 years to pay the loan back without interest. 

COVID-19 is partially responsible for the low number of loans disbursed over the last two years. According to Thompson at LISC, the number of approved applications dropped by more than half in 2020 and 2021 due to the reduced capacity of contractors and community development organizations where applications are first processed in-person. 

But in the best of times, the program is handicapped by several requirements meant to ensure the loans get repaid. Applicants must have a monthly debt payment lower than 45% of their income, which is a fairly standard for renovation loans, but difficult for most Detroiters to meet.

“The debt-to-income ratio requirement has been a challenge for many low-income households, especially if they have other debts such as credit card debt, medical debt, etc.,” said Ryan Ruggiero, a research analyst at Mathematica who co-authored a paper surveying home renovation programs available to Detroit homeowners. “Simply put, low-income households may not be able to afford a $200 monthly payment even if it is interest-free.”

Applicants must also be current on property taxes or be on a payment plan and have homeowners insurance. The minimum credit score required for the program is 560, which is much lower than traditional bank-issued loans, but often isn’t a deciding factor.

“The approval rates in our home community have been very low,” said Michelle Lee, director of housing and neighborhood services with Jefferson East Inc., an eastside community development organization that serves as one of the program’s intake centers. “The majority of individuals who received loans had a credit score around 700.”

A home repair crisis

A report from 2020 prepared for the City of Detroit and shown to Outlier estimates that the average cost to rehab homes with major structural issues is $58,400. A separate University of Michigan Poverty Solutions report conservatively estimated the home repair need in metro Detroit at $2 billion.

But the resources to assist with home repair come nowhere near matching the need. Grants are often focused on specific groups, like a program run by Michigan’s Department of Health that provides funds for seniors to undertake accessibility renovations. In late September, Detroit launched a $30 million home repair program for seniors and disabled individuals that looks to replace 1,500 roofs. 

Other grants must be used exclusively for lead remediation or weatherization

Several property improvement programs are hard to access. According to the University of Michigan report, in 2018 Michigan’s Property Improvement Program issued just two loans in Detroit totaling $18,329.

Traditional bank loans for home repair require good credit. “When you’re getting an FHA or government loan, credit scores can be relatively low, around 620,” said Troy Fairbanks, a branch sales manager with Level One Bank in Ann Arbor. “But for someone getting a rehab loan, we typically want to see scores of 680,700 or higher. They’re simply riskier, so the buyer has to have a better score.”

He added that most of the renovation loans issued by his bank in Detroit go to homes in historic neighborhoods like Palmer Woods or Indian Village.

Homeowners who don’t qualify for grants and can’t take on more debt often make do with temporary fixes or launch crowdfunding campaigns

Who has (and hasn’t) received help

According to its website, the City of Detroit decided to structure the 0% interest program as a loan so that it would be “able to help more homeowners with limited funds.”

Thompson of LISC Detroit has been managing the program since its inception. “The program started as a way to bring low-cost capital back to the city for homeowners with the goal of preserving homeownership and creating intergenerational wealth,” he said. 

Recipients of the interest-free loan say it’s been a big help. In 2018, Ayanas and Mario Woodard, who are in their late 40s, lived in a home in northeast Detroit with a roof that leaked whenever it rained. Ayanas Woodard said they made slightly more than 80% of the area median income when they applied but qualified because they live in a HUD-designated area. 

They were approved for a $20,000 loan. In addition to the roof replacement, the Woodards also got their driveway repaved, a new furnace, central air and new windows. Their monthly bill for the loan is $208.

“I really don’t know what we would have done without the loan,” Ayanas Woodard said. “If we couldn’t get bank financing, we probably would have had to do it ourselves.” 

The city and LISC say the program has helped hundreds of people like the Woodards who can’t access grants but would have trouble qualifying for or paying the additional interest on a bank loan.

“While the overall numbers are not a huge percentage of the people that need home repair, I think the impact of the program has been significant,” said Anna Pinter, the single family home repair director for the City of Detroit. “Those people are getting the repairs they need and getting it at a reasonable cost.” 

Thompson at LISC said they’ve tried to structure the program to make room for people with more economic hardships, starting with financial counseling at intake centers. For those who don’t have homeowners insurance, the lender will deposit part of the loan into an escrow account to cover insurance for the duration of the loan. They’ll even use an alternative credit scoring that looks at an applicant’s past 12 months of utility bill payments. 

LISC Detroit said that 71% of the borrowers with completed projects have household incomes at or below 80% AMI. 

But the low totals and approval rates suggest the program can still be expanded. Ruggiero, the housing analyst, said the city should find ways to open it up to more applicants. 

“This program is helping to improve the quality of homes in Detroit, and it’s very much needed, but the program should be honest about who it is intended to help and who it is actually helping,” she said. “The notion that the 0% interest program is accessible or utilized by the city’s residents who are most in need of home repair is just not true.”

Ruggiero recommended making the loan repayable over 20 years, which would halve monthly payments. Or by offering forgivable loans after a few years to residents with lower incomes that could be offset by low-interest loans for residents with higher incomes.

Stephanie Williams, housing resource specialist at Central Detroit Christian CDC, another intake center, said forgivable loans or grants would be helpful for the many people who come into her office fearful of taking on more debt. 

“A lot of them don’t want to take that risk, even though they have extensive home repairs that need to be done,” she said.

In other words, the thing holding back solutions to an expensive problem is money. 

“We’re lending out money as fast as they send it to us,” said Hank Hubbard, president and CEO of One Detroit Credit Union, one of the program’s two loan underwriters. “The main thing that would improve this program is more investment by the city or corporate partner.” 

AARON MONDRY can be reached at aaron@outliermedia.org or 313-403-7221. 
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