Best Practices for Repair Projects

1. Best Practices for Repair Projects SaraBeth Sellers ABWK Program Specialist Presented October 12, 2013 Oregon State Support Organization Conference Eugene, OR

2. Repair Categories • Three Repair Categories : • Home Preservation (ABWK is a HP program) • Weatherization • Critical Home Repair • Often, multiple repair types done on same house. • All repairs should be reported individually on Housing Production Report. • Work on one home only counts as one family served on Affiliate Statistical Report.

3. Repair Definitions • Home Preservation • Exterior only - Minor repair , landscaping & painting . • Weatherization: • Improves energy efficiency, air quality, and comfort. • Pre-work energy audit • Homeowner education • Critical Home Repair: • Extensive interior and/or exterior repairs.

4. Habitat Construction Products (Owner-Occupied) (Affiliate-held) Repairs Rehabs New Homes Home Preservation Weatherization Critical Home Repair ABWK A Brush with Kindness is a home preservation program underwritten by Valspar.

5. What is the difference between repairs and NRI? • Repairs ≠ NRI. Construction products are just some of the tools affiliates can use in revitalizing neighborhoods. • NRI Mission Statement: Neighborhood Revitalization Initiative affiliates serve more families by responding to community aspirations with an expanded array of products, services and partnerships, empowering residents to revive their neighborhoods and enhance the quality of life.

6. Family Selection for Repairs

7. Selection Criteria • Demonstrated need • Ability to pay • Willingness to partner • Within program scope • Start with your existing criteria and adjust as needed. • Work can only be performed on owner-occupied homes. • Make sure you revise policies when necessary, and apply all policies consistently.

8. Selection Criteria • The same laws that govern family selection for new home construction also govern family selection for repairs. • Consult a local attorney to make sure you are following all federal, state and local regulations.

9. Demonstrated Need • Health and safety concerns should be addressed first. • Cost of operation (heating, cooling, etc.) • Inability to perform the work: lacking $, knowledge or skills; age or disability.

10. Ability to Pay • Repayment is still expected (more on that later). • Use your existing area median income guidelines. • The homeowner’s payment when combined with current housing costs shall not exceed 30 percent of the household’s gross income. (Policy 23) • Ensure that the payment option does not cause all loans on the home to exceed fair market value for the home.

11. Willingness to Partner • You may reduce the number of sweat equity hours required for repairs. • We recommend a minimum of 8 hours, with half completed before work begins on the home. • Elderly and disabled homeowners can contribute in other ways.

12. Within Program Scope • Determine what types of projects your affiliate can complete successfully, and do not accept work beyond that scope. • For repairs you cannot perform, work with other organizations to help homeowners get necessary repairs completed.

13. Calculating Cost, Determining Price and Collecting Payment

14. How Habitat works (even for repair projects) • The Habitat model, which requires payment for construction services by the recipient of those services, is the same whether performing repairs or building a new house.

15. How Habitat works (even for repair projects) • Habitat for Humanity affiliates sell construction services to people in need of decent housing at no profit and charge no interest. • Payments from the sale of these services are recycled to fund future projects.

16. How Habitat works (even for repair projects) • Habitat for Humanity affiliates need policies governing repair pricing and payment that follow the repair pricing guidelines.

17. Determining Repair Costs In order to determine the amount a homeowner will pay for any repair, you must first determine the cost of the project.

18. Determining Repair Costs Each affiliate needs a policy for determining costs that includes: • Cost of purchased building materials • Value of donated building materials and donated professional services • Cost of professional services and contracted labor • Direct costs of affiliate labor in performing, supervising or coordinating the work • Permits and other direct costs (including, but not limited to transportation, material storage, insurance, loan origination, closing and servicing) • Indirect costs (including, but not limited to staff time and office overhead)

19. Determining Repair Costs Once you have determined the full cost of the project, you can assign a price to the homeowner using a Board-approved pricing policy based on the following models.

20. Pricing Models • 100% Cost Affiliate provides a zero interest loan to the homeowner to recover all costs, or the homeowner pays up front.

21. Pricing Models • Sliding Scale Affiliate offers a sliding scale pricing model in which the price a homeowner pays is based on household income.  The homeowner repays a zero interest loan or pays up front.

22. Pricing Models • Sliding Scale Example

23. Pricing Models • Fixed Price Affiliate determines a fixed price for housing products (for example, $500 for ABWK) and either offers a zero-interest loan, or the homeowner pays up front.

24. Pricing Models • Fixed Percentage Affiliate determines a fixed percentage of the cost of the repair (for example, 50% for Critical Home Repair) and either offers a zero-interest loan, or the homeowner pays up front.

25. Pricing Models • Multiple models (optional): When developing a policy for pricing repair products, you may have one pricing model that is used for all repair products (Affiliate A) or you may use a different pricing model for each repair product (Affiliate B), provided the pricing model is applied consistently among all projects within that product.

26. Payment Options • Secured/Unsecured loans (affiliate decision): Affiliate provides a secured loan for projects above a certain price (a minimum of $3,000 suggested), for projects below that level the loan is unsecured. • Down Payment: Affiliate requires a fixed amount or percentage of price prior to starting the project.

27. Payment Options • Early Payment Incentive: Affiliate provides an incentive to homeowners for early repayment. For example, if a homeowner repays the loan within a year they are given a 30% reduction in the cost, within two years a 20% reduction in the cost. • Partnerships: Affiliate partners with a 3rd party financer that offers the loan to the families, need to ensure that the loan is offered with 0% interest or the price should be reduced so that it is a 0% equivalent. One exception is USDA loans, which do have interest as a component.

28. Guidelines • Make every attempt to fit the payment option to the homeowner’s ability to pay. • The homeowner’s payment when combined with current home financial obligations (mortgage, insurance, property taxes and, where applicable, mortgage insurance and loan servicing) shall not exceed 30 percent of the household’s gross income. (Policy 23)

29. Guidelines • Ensure that the payment option does not cause all loans on the home to exceed fair market value for the home. • All laws governing credit applications, credit decision timelines, and making loans are fully applicable. For more information, see the Family Selection Affiliate Operations Manual.

30. Guidelines • You should periodically analyze the extent to which you subsidize your work. It is important to maintain a balance between affordability for partner families and sustainability for your affiliate. See Policy 28 for more guidance.

31. Guidelines • A signed agreement should be in place with the homeowner that clearly outlines: • the exact nature of the work that will be undertaken • the cost of such work • the sweat equity requirements • the amount the homeowner will be expected to pay • the terms by which that payment will be made. • Sample Homeowner Agreement for Owner-Occupied Work

32. My.Habitat Resources • Pricing and Payment for Repairs page: http://my.habitat.org/kc/page-detail/3e36e/Pricing-and-Payment-for-Repairs-page

33. Contact Information • SaraBeth Sellers, ABWK Program Specialist • 1-800-422-4828 x 5060 • ssellers@habitat.org • ABWK@habitat.org