A CDFI Solution For Tribal Housing Problems


A CDFI Solution For Tribal Housing Problems WORD ON THE STREET: Recently, our country has gone through an economic downturn that many have described as the worst recession since World War II. This economic reality is greatly magnified in Indian communities. The national unemployment rate peaked at an alarming rate of nearly 10% and still hovers around 8%. The rate in tribal communities is 49%; the highest unemployment rates are on the Plains reservations, where the average rate is 77%.

Because of the remote locations of many reservations, there is a lack of basic infrastructure, and economic development prospects are difficult to identify and even more difficult to pursue. As a result, the poverty rate in Indian Country is exceedingly high at 28.4%, nearly three times the national average. These employment and economic development challenges exacerbate the housing situation in Indian Country.

According to the 2000 U.S. Census, nearly 12% of Native American households lack plumbing compared to 1.2% of the general U.S. population. According to 2002 statistics, 90,000 Indian families are homeless or under-housed. On tribal lands, 28% of Indian households were found to be overcrowded or lacking adequate plumbing and kitchen facilities. The national average is 5.4% when structures that lack heating and electrical equipment are included.

Seventy percent of the existing housing stock in Indian Country is in need of upgrades and repairs, many of them extensive. Less than half of all reservation homes are connected to water sanitation facilities.

There is consensus in Congress, the federal government, tribal leaders and tribal organizations that there is a severe housing shortage in tribal communities; that many homes are, as a result, overcrowded; that many of the existing homes are in need of repairs, some of them substantial; that many homes lack basic amenities that many of us take for granted, such as complete kitchens and plumbing; and that at least 250,000 new housing units are needed in Indian Country.

These issues are further complicated by the status of Indian lands, which are held in trust or restricted-fee status by the United States for the benefit of the tribes or their members.

As a result, private financial institutions are leery of lending for new construction or home improvements. Private investment, therefore, in real estate in Indian Country is virtually nonexistent, with tribes almost entirely dependent on the federal government for financial support in meeting their growing housing needs.

Increasingly, tribal housing programs are exploring the advantages of instituting and working with Native Community Development Financial Institutions (Native CDFIs) in an effort to leverage resources for homeownership. Native CDFIs were created when the Community Development Banking and Financial Institutions Act of 1994 established the CDFI Fund, whose purpose is to promote economic revitalization and community development through investment and assistance to fund-certified CDFIs. The fund offers grants, loans, equity investments and other forms of assistance on a matching funds basis.

CDFIs are administered by the U.S. Treasury Department. These Native CDFIs must demonstrate their independence from tribal government and inclusion of the tribal target population on its board of directors to obtain funding from the fund. This structure is intended to ensure separation between tribal politics and sound lending practices.

CDFIs may also attract financial support from banks and other lenders and are especially conducive to tribal housing programs that focus on homeownership loans. It is the goal of most Native CDFIs to bring in funding from various sources to lend back to tribal community members at favorable rates or provide the necessary financial education and credit counseling to increase tribal members' access to lending products.

Native CDFIs not only help to boost homeownership through providing loan products and other services, but they also provide tribal members with the knowledge and skills in building productive financial opportunities.

Case study: New Mexico Native CDFIs

In New Mexico, 10.7% of the population is identified as American Indian and/or
Alaska Native (AI/AN), making it the third highest AI/AN populated state proportionate to the rest of the state's population. Out of the 12 certified CDFIs in the state, there are four Native CDFIs that provide varied services to the tribal communities of Laguna Pueblo, Ohkay Owingeh, Isleta Pueblo and the Navajo communities near Gallup, N.M. They provide mixed lending products, such as home mortgage loans, home rehabilitation loans, and construction lending. In addition, they provide homeownership education, financial education, and credit counseling and repair.

The financing of the Native CDFIs are diverse and underscore the multifaceted contribution from various funding sources to meet the housing needs in the New Mexico tribal communities. Three of the New Mexico Native CDFIs receive direct funding from their respective tribally designated housing entities, two CDFIs receive funding from the New Mexico Mortgage Finance Authority (a state agency) and two CDFIs receive funding from nonprofit entities. Tiwa Lending Services (TLS) receives direct funding from the Pueblo of Isleta, which transferred its home loan portfolio and tribal funds to TLS.

Case Study: Ho-Chunk Community Development Corp.

The Ho-Chunk Community Development Corp. (HCCDC) is an emerging CDFI, and was formed by and partners with the Winnebago Tribe and its entities. The mission of the HCCDC is to raise the socioeconomic and educational levels of Native American communities and the people of Thurston County, Neb.

A goal of the HCCDC is to decrease substandard housing, increase housing opportunity, increase clients' ability to access housing and increase capital available locally. The Winnebago Reservation lacks affordable housing, and tribal members who are able to afford a mortgage are forced to live elsewhere. Other tribal members lack the funds for the initial down payment to purchase a home.

Using the Winnebago Tribe's other private subsidiary, Ho-Chunk Inc., the HCCDC and the Winnebago Tribe have worked together to develop a Housing Down Payment Assistance Program that provides a significant portion of a standard down payment for a new homeowner. The homeowner is required to go through a special financial and homeownership education course and must meet other criteria to qualify.

In 2010, Ho-Chunk Inc. and the Winnebago Tribe authorized a $1 million Housing Stimulus Program to set aside Ho-Chunk Inc. dividends and other tax revenues to offer $50,000 in down payment assistance to up to 20 new homeowners who build a home on the Winnebago reservation. Through these combined efforts, housing on their reservation is more affordable, and tribal members can start building the traditional wealth that other non-Native homeowners have gained.

Beyond their down payment assistance program, the HCCDC has invested in Ho-Chunk Village, a modern comprehensive subdivision that incorporates their traditional village design. The village will provide both commercial and residential development with a senior-living housing project, private homes, a 20-unit apartment complex and 10 unit townhouses. On the commercial side, the village will include a commercial office building, laser art panels, veteran's park, sculpture garden, theater, playground and public-use building. Beyond creating the needed affordable housing opportunities, the development of the Ho-Chunk Village is raising the tribal economy and creating much-needed jobs.

Given the funding constraints in the tribal housing arena and the need to not only maintain existing units, but also keep up with growing tribal populations and meet the tremendous existing housing backlog, tribes have, out of necessity, been very creative in developing partnerships and crafting innovative solutions to meet their unique housing needs and expand community development.

Cheryl A. Causley is chairwoman of the National American Indian Housing Council, based in Sault Sainte Marie, Mich. This article is adapted and edited from testimony delivered on April 10 before the U.S. Senate Committee on Indian Affairs. The original text is online.

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