Property that is no longer being maintained by its owners and is either vacant or not lawfully occupied. Some jurisdictions limit the term to properties that have gone through a legal proceeding confirming their failure to pay back property taxes.
A mortgage loan subject to changes in interest rates during the course of the loan term. When rates change, adjustable-rate mortgage (ARM) monthly payments increase or decrease at intervals determined by the lender. The change in monthly-payment amount, however, is usually subject to a cap. In hybrid ARMs, the interest rate is fixed for a period of time -- often, 3, 5, 7, or 10 years -- and then coverts to an adjustable rate thereafter.
An affordability covenant is a legally binding clause to a deed that specifies that the property will remain affordable by setting certain terms and conditions related to its long-term use. An affordability covenant may restrict to whom a rental unit is rented and at what level or to whom and at what price a for-sale unit will be sold. These guidelines are typically put in place to preserve the affordability of homes financed with substantial government subsidies for future residents.
There is no single definition of affordable housing. The Getting Started section of HousingPolicy.org (Foreclosure-Response.org's sister site) reviews various approaches to defining affordable housing. Click here to go to HousingPolicy.org's Getting Started Q&A on this topic.
Funding allocations made on a regular basis by a committee or other authorizing body. The level of appropriations made available to federal , state or local agencies for housing and related programs may vary from year to year on the basis of other urgent budget needs and/or political shifts. In contrast, dedicated funding sources generally guarantee that all revenue from a specified source will be available for use by a designated program or entity.
The area median income (AMI) is a statistic generated by the U.S. Department of Housing and Urban Development (HUD) for purposes of determining the eligibility of applicants for certain federal housing programs. HUD determines AMI on an annual basis for each metropolitan area and non-metropolitan county, making adjustments for household size and other factors. Different housing programs use different percentages of AMI -- such as 30 percent of AMI or 80 percent of AMI -- as maximum income limits for admission. Many state and localities have adopted HUD's income limits for their own programs, or use a variation on the HUD limits -- for example, 120 percent of AMI.
Click here to leave this site and access the latest HUD income limits and AMI levels for your community.
Below-market is a general term that refers to housing that rents or sells for less than prevailing market levels. In some cases, below-market housing is used synonymously with affordable housing. In other cases, below-market housing is targeted at moderate-income families with somewhat higher incomes than those served by federal affordable housing programs. Generally, housing can be offered at below-market levels only with a public subsidy or with a public concession such as density bonuses or reduced-cost publicly-owned land.
A clear title is a signal that a property can be purchased without worrying about old liens or owners coming back to assert claims to the property. This status is also referred to as an "insurable title," since the property owner can get title insurance to protect against losses if there was an error in checking the title history; and as a "marketable title," since having a clear title facilitates marketing and selling a property.
A Federal program created under the Housing and Community Development Act of 1974. This program (often known as CDBG) provides annual grants on a formula basis to states and larger cities and urban counties to be used for a wide range of community development activities directed toward neighborhood revitalization, economic development, affordable housing and improved community facilities and services.
Community land trusts are a form of shared equity homeownership designed to ensure that homes made affordable through public or philanthropic subsidies remain affordable over the long-term. Under the traditional community land trust model, a nonprofit community land trust is established to own the land on which homes are situated. The trust then sells the physical structures to home purchasers for an affordable price, along with a long-term lease on the land. When the home is sold, it must be sold an affordable price to a qualifying homebuyer.
In the context of housing policy, a covenant is an agreement that restricts the ways in which a home may be rented and/or sold. In the past, so-called "restrictive covenants" were used to limit the potential buyers of homes to members of specified racial or religious groups. Today, however, affordability covenants are used to ensure that homes made affordable through public subsidies remain affordable to future renters or homebuyers.
A credit and debt profile assesses the financial history of an individual, business, jurisdiction or other entity. Lenders often require a credit and debt profile of their borrowers to assess their credit worthiness and establish loan terms and interest rates for a home mortgage.
The debt to equity ratio is a financial ratio used to determine whether a government agency, business, household, or other entity can safely borrow over long periods of time. The ratio is calculated by dividing an entity's outstanding debt by the amount of equity it holds. A high debt to equity ratio may indicate that an entity is financing its growth with debt. For government agencies, debt to equity ratio is important because it will determine whether it has a strong or weak bond rating.
Restrictions or limitations on the use of property, as noted in a deed. Deed restrictions are one mechanism for maintaining the long-term affordability of a home with a significant public subsidy.
Demand-side housing policies address housing affordability challenges by increasing individuals' purchasing power. For example, the federal government provides Section 8 housing choice vouchers to individual households to enable them to afford the costs of private-market rental homes. Supply-side policies, by contrast, seek to directly expand the supply of affordable homes -- usually through subsidies to enable developers to build or rehabilitate affordable homes.
The economic principle that as the scale of production increases, the cost of producing each additional unit decreases, leading to a lower average cost per unit. This principle helps explain, for instance, some of the costs advantages of manufactured homes and larger builders.
Right of a government agency to take private property for a public purpose. Fair compensation must be paid to the owner whose property is taken.
As used in the housing context, an escrow account is a separate account into which the lender puts a portion of each monthly mortgage payment. An escrow account provides the funds needed for such recurring expenses as property taxes, homeowners insurance, mortgage insurance, etc. Requiring families to make monthly payments into an escrow account to cover these expenses is generally viewed as a desirable practice that helps families manage their housing costs by spreading the payments for these expenses throughout the year.
Assistance provided to help struggling homeowners avoid a foreclosure and possibly retain their home. Foreclosure prevention programs often include counseling and financial assistance. Click here to learn more.
Green building refers to a set of building design and construction practices that seek to reduce a building's environmental impacts by improving energy efficiency and indoor air quality, reducing water use and consumption, choosing sustainable building materials, and situating the home in a manner that takes advantage of sunlight and other natural amenities.
Established by Congress in 1990, this federal program is designed to expand the supply of decent affordable housing for low- and very low-income families and individuals. HOME funds are provided each year by HUD to states and localities, which determine how the funds are spent. HOME funds may be used for: tenant-based rental assistance; assistance to homebuyers; property acquisition; new construction; rehabilitation; site improvements; demolition; relocation; and administrative costs.
An organization whose work focuses in whole or in part on providing homeownership education and counseling. Click here to learn more about homeownership counseling at our sister site HousingPolicy.org.
Land banks are governmental or quasi-governmental entities dedicated to assembling properties -- particularly vacant, abandoned, tax-delinquent, or foreclosed properties -- and putting them to productive use. Land bank authorities acquire or facilitate the acquisition of properties, hold and manage properties as needed, and dispose of properties in coordination with city planners and in accordance with local priorities for land use.
Click here for information on how land banks help convert foreclosed properties to productive use.
In this shared equity homeownership arrangement, households buy a "share" in the cooperative and in return receive the right to occupy one unit and share in decision-making for the development. Share prices are set by a formula specifically designed to keep membership affordable for future purchasers.
The mortgage interest deduction is a tax break for homeowners. Homeowners with deductions that are large enough to warrant itemizing can deduct the amount of interest on their mortgage when they file their taxes. The mortgage interest deduction is the largest subsidy for housing in the United States.
The process of renovating and restoring older or deteriorating properties.
A provision in a land sale agreement mandating that the land will revert back to public ownership if not used in accordance with the terms of the agreement.
A form of financial assistance for homeownership, in which the homebuyer must repay the original loan amount plus some percentage of the home price appreciation in lieu of interest. This approach helps to reduce the need for new subsidy monies to help future homebuyers as housing costs increase. Shared appreciation loans are often structured as a silent second mortgage that does not need to be repaid until the home is sold.
An approach to homeownership that balances ongoing housing affordability and individual asset accumulation. Under shared equity, a public or philanthropic entity provides funding to help a family purchase a home. In return, the entity shares in any home price appreciation that occurs while the family lives there, preserving the buying power of the subsidy in the face of rising home prices, and allowing an initial investment in homeownership to help one generation of homeowners after another. In some forms of shared equity, such as community land trusts, the public's share of appreciation stays in the home, enabling it to be sold for an affordable price. In other forms, such as shared appreciation mortgages, the public's share of appreciation is used to give a larger loan to the next homebuyer to make a home of their choice affordable.
An important technique for making homeownership affordable while recycling public dollars, a silent second mortgage is a secondary home loan issued by a home-buying program to supplement a family's primary mortgage that does not need to be repaid until the home is resold (or in some cases, refinanced). Because no payments are due on the loan until the home is resold or refinanced, it has the same effect as a grant on housing affordability for a purchaser. But because the loan is repaid upon resale, the funds can be recycled to help the next homebuyer. When used as part of a shared equity strategy, silent second mortgages are known as shared appreciation loans.
Broadly speaking, smart growth refers to a set of development principles that link environmental, social, and economic objectives together to create vibrant, safe, and healthy places to live. Smart growth development generally seeks to takes advantage of existing infrastructure to preserve farmland and open space; encourages multi-modal transportation options by concentrating development around public transit corridors; integrates housing and other land uses together; and provides a range of choices in the development of the built environment to promote affordability.
A cost to the developer of a property that is indirect (i.e. not related to land or materials). Examples include architect and legal fees, insurance payments, and property taxes. Lengthy review and permitting processes can significantly increase development time, leading to substantial increases in a project's soft costs that reduce housing affordability.
Subprime mortgages are made to borrowers with poor credit histories who do not qualify for prime interest rates. To compensate for the increased credit risk, subprime lenders charge a higher rate of interest.
Supply-side housing policies seek to increase the supply of affordable homes. Government agencies may either add to the housing stock directly, such as by building public housing, or may provide incentives for private developers to produce more homes -- for example, through the low-income housing tax credit. Efforts to reduce regulatory barriers to the development or rehabilitation of housing also operate on the supply-side of the equation; such efforts promote housing affordability by freeing the market to better respond to increases in housing demand.
A property for which property taxes and/or municipal bills are severely past due.
Transit-oriented development is the creation of mixed-use development centered around a public transit hub to maximize the number of people who can utilize public transportation services to meet their daily travel needs. For more information, visit the Center for Transit-Oriented Development website.
In general, a weak market is one in which the number of sellers is greater than the number of buyers. In the housing context, weak-market cities may have falling or depressed home values and, in some cases, property abandonment.
Workforce housing is housing for the occupations needed in every community, including teachers, nurses, police officers, fire fighters and many other critical workers.