An Overview of Marketing and Selling Affordable Homes

Challenges in Marketing and Selling Affordable Homes

Each neighborhood’s housing stock has a life cycle, from new construction through a few generations of occupants, and then to either reinvention or obsolescence. At points along the way, every home needs maintenance and repair, as well as updates, to remain relevant to the latest generation of homebuyers. Unfortunately, not every home enjoys the sustained market demand and benevolent ownership that would assure its value as an investment worth maintaining.

A home in declining physical condition affects others nearby, dragging down the neighborhood’s quality of life. For the average homebuyer, the cost of restoring declining homes to safe and attractive conditions may be too high relative to their market value. However, such homes can become pivotal investments for nonprofits or local governments – or even neighbors or private but socially minded developers – who are interested in stabilizing and revitalizing the neighborhood.

Acquisition-rehab and -resale has been a strategy in neighborhood revitalization for decades. Similarly, scattered-site vacant lots or larger tracts of carefully assembled parcels may be targeted for the construction of new homes meant to breathe life into the neighborhood by attracting committed homeowners into quality affordable housing.

When a nonprofit or local government acquires a home, it is more than a routine transaction among hundreds in a community’s annual turnover. These acquisitions are meant to be catalytic investments in neighborhoods that are typically less-than-first-choice places in their larger real estate markets. The newly rehabbed or constructed homes are intended to be safe and attractive, inspire confidence in the neighborhood’s future, contribute to the tax rolls, lift the values of homes around them, repel crime and encourage other investments. But to accomplish all of these objectives, the homes must be sold to neighborhood-friendly, mortgage-ready occupants, who probably have their choice of many homes in many neighborhoods.

In recent years, the number of vacant and abandoned properties has skyrocketed as a result of the foreclosure crisis. The preponderance of vacant properties has had disastrous effects on many communities, including loss of property values, increased crime and vandalism, strained municipal services and negative impacts on children and families. As the market became glutted with homes, the credit market also tightened, exacerbating further the gap between homes for sale and buyers able to purchase them. Not in decades has it been harder to sell a home, or more important to the quality of life in neighborhoods to do so.

Rental and lease-purchase housing development can also be very useful strategies for stabilization and the provision of affordable housing for households that are not ready for or interested in purchase, or in neighborhoods that are not yet stable enough to attract owner-occupant purchasers. To learn more about these strategies, see the Scattered Site Rental Toolkit  at www.StableCommunities.org, and HUD’s Lease-Purchase Toolkit at the Neighborhood Stabilization Resource Exchange.

The U.S. Department of Housing and Urban Development’s Neighborhood Stabilization Program (NSP), begun as part of the 2007 federal stimulus package, has provided nearly $7 billion so far to local governments and nonprofits. NSP funding fosters the redevelopment of thousands of properties to stabilize neighborhoods hit hard by foreclosure. In response to NSP and other funding opportunities, many nonprofit, government and other developers ramped up their capacity to acquire, rehab and resell foreclosed and abandoned homes, and to construct new homes where others had been demolished. The learning curve has been steep and rapid due to the situation’s urgency.

In spite of the challenges, NSP grantees and other nonprofit housing developers have successfully increased their capacity to acquire and rehab foreclosed and vacant properties and to construct new affordable homes. While no one thought it would be easy to sell the redeveloped and newly constructed homes, few expected the market to be as challenging as it has been.

Despite quality construction and significant financial subsidies, affordable homes can be challenging to sell because there are so many others on the market, they are often in transitional neighborhoods near additional vacant homes, and so many fewer first-time buyers can qualify for a mortgage in today’s conservative lending market.

In this environment, selling a home can be hard, even with subsidies, homebuyer education and preparation and quality rehab. Marketing and selling these homes successfully requires thoughtfulness, planning and creativity.