Richmond Program Rehabs Blighted Houses for First-Time Buyers
Using a social impact bond, the program rehabs homes using energy-efficient materials.
Photo of Jim Becker by Lance Yamamoto
Dosia Arnold has never owned his own home. The 63-year-old Pittsburg resident and U.S. Navy retiree said difficulties in saving for a down payment, credit problems, and prohibitive Bay Area home prices all put ownership out of reach. Still, he never gave up on pursuing what he, like many, calls the American Dream. “I really want something to call my own,” he said.
Now, a new program may finally make that dream a reality. The Richmond Community Foundation’s Housing Renovation Program renovates blighted and abandoned properties and sells them to first-time homebuyers like Arnold. It also reduces monthly utility bills by rehabbing existing homes using energy-efficient materials and rebuilding teardowns to make them net-zero — meaning they produce as much energy as they consume.
Jim Becker, Richmond Community Foundation’s president and CEO, said the program could be a game-changer for those locked out of home ownership — and not just in Richmond.
“You can move people out of poverty by helping them with jobs and income but you can help families stay out of poverty by helping them build assets,” he said. “And homeownership is a good way to do that.”
The concept began to germinate in 2013, when a Richmond community survey revealed that blighted properties were one of the top concerns among citizens. “This got the city’s attention,” said Becker. At the time, he said, there were approximately 800 abandoned residential and commercial properties in Richmond, and the city was actively managing roughly 250 blighted, abandoned properties at a cost of $7,000 each per year.
Then, Becker attended a conference on new financing models for nonprofits, including “social-impact bonds,” which use private investments for projects that generate a positive social impact.
At the same time, the Richmond Community Foundation was aware that its nonprofit partners in the community had first-time homebuyers program graduates who were being outbid by all-cash buyers. “So, we talked about reclaiming boarded-up homes and rehabbing them for these first-time buyers,” Becker explained.
On June 2, 2015, the Richmond City Council approved a $3 million social-impact bond targeting the city’s abandoned properties, with the Richmond Community Foundation as the facilitator of the program. The foundation decided to use the money to not only rehab homes but to do so using energy-efficient materials. Teardown properties would be rebuilt to net-zero-energy standards. It’s part of the city’s commitment to fighting climate change. “The city is working on creating Zero Net Energy standards, and is supposed to have those done by the end of this summer,” Becker said.
Turning abandoned properties into green homes can be a lengthy process. One teardown currently being rebuilt was used as a shooting gallery and had been vacant for almost 15 years, according to Becker. It and another teardown are being rebuilt using technology from GigaCrete, which uses a super-insulated, prefabricated steel-frame construction system.
All rehabbed homes in the program also get bamboo flooring, low-VOC paint, insulated windows, and energy-efficient appliances. Solar panels are installed, and water-efficient, drought-tolerant plants and materials are used in the landscaping. So far, the Housing Renovation Program has renovated or is in the process of renovating 14 homes, and of those, six completed homes have been sold to qualified buyers. Becker said they have 2½ more years to complete 26 more homes, for a total of 40 homes.
Here’s how it works: After finished homes are put up for sale, Richmond Community Foundation notifies two local homebuyer’s programs: SparkPoint Contra Costa and Neighborhood Housing Services of Richmond. Participants in these programs are given priority to purchase the homes. Becker recommends that potential buyers check out the schools, parks, and nearby services. “We want them to like the neighborhood they would be living in,” he said. Usually, three or four people are ready to buy, and a lottery process is sometimes used to pick the homebuyer — “because we do not want head-to-head competing and bidding up the homes,” said Becker. These first-time buyers can then work with a local lender — Wells Fargo, Mechanics Bank, or Self-Help Credit Union — to try and qualify for a mortgage. The homes being rebuilt from teardowns, for example, “most likely [will be priced] in the upper-$400,000 to low-$500,000 range,” said Becker. “As we get close to completing the homes, we have several independent sources appraise the home and provide us with an estimate of a fair neighborhood price,” he explained.
The major hurdle for many is their credit score, which has been the case for Arnold. He’s now working with a Wells Fargo financial counselor. “[My score] is improving all the time,” he said. “Eventually, I can qualify for a mortgage through CalVet, and potentially through Wells Fargo.”
Although the entire social-impact bond was purchased by Mechanics Bank, Wells Fargo Bank has also invested through a grant. Becker said they also have access to EPA funds for sites that have toxic contamination issues, such as mold, asbestos, and meth. Home Depot is another partner, offering discounts to the program on materials and occasionally donating discontinued items.
Other cities and states have taken notice of the innovative program, including Oakland. “We’ve gone to Boston and done a presentation, as well as Lincoln, Nebraska, and Bridgeport, Connecticut, which is probably the furthest along in implementing something very similar,” said Becker.
The Richmond Community Foundation is also working with Contra Costa County and Supervisor John Gioia to discuss rehabbing homes in North Richmond, which, depending on the outcome of the current annexation process, may become part of the city of Richmond.
Although the Richmond program is just getting going, Becker is already looking toward the future. “Our original social-impact bond specified $3 million over five years, and of course, when you are talking about homebuilding, that is a small figure,” he said. “At the end of this bond, we’d like to get a second and longer bond, maybe $5 million or more, and we could be rehabbing four to five [tear-down] properties at any one time.”
For Dosia Arnold, who currently rents a duplex in Pittsburg and recently got engaged, his “green dream” couldn’t come true fast enough.