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Opportunities abound as demand for housing grows

The demand for owner-occupied housing in Mississippi is expected to increase by 12,000 units per year for the next 15 years, representing a total of 181,000 homes, according to government forecasts. Renter household demand is expected to increase by 2,500 per year for a total of 38,000 over the next 15 years.

“There is a growing need for housing in Mississippi for working families,” said Dr. Ben Mokry, senior vice president of research and development with the Mississippi Home Corporation. “Community-based housing organizations are anxious to identify knowledgeable contractors and developers who are interested in providing housing for this market segment. There’s funding available for construction, mortgage financing and willing government and non-profit partners. We’re looking for private sector folks, contractors and developers, interested in providing housing to this market sector to get involved and work with us.”

Mississippi Home Corporation is a public purpose corporation whose mission is to help provide financing and services to help developers and home buyers in the affordable housing area.

The five fastest-growing areas of the state by population from 2000-2015 are expected to be the North Delta Planning and Development District (PDD) at 1.8% per year, South Mississippi PDD at 1.2% per year, the Central PDD at 1.1% per year, Three Rivers PDD at .94% per year and the Northeast PDD at .74% per year.

In Mississippi, 72% of housing is owner occupied. But with a low per capita income, and steadily increasing costs for land and building materials, there are many difficulties providing housing that working families can afford to purchase.

“It’s a challenge, no question,” Mokry said. “But there are excellent opportunities for the private sector.”

There is a mismatch between demand for and availability of housing in some areas of the state. There are not enough units in the Central Mississippi area, and there is also greater demand on the fast-growing Coast.

“Affordability is a problem down there,” Mokry said. “We have people moving into units that are too small for them, or occupying lower quality housing because that is all they can find. Rents are up. Landlords are being able to charge more because of more demand and less availability.”

Currently, the Mississippi Home Corporation is working for the Mississippi Development Authority (MDA) doing a five-year consolidated plan considering a broad range of housing needs. One issue being looked at is that large numbers of housing units each year become unavailable for one reason or another.

“Census data doesn’t tell us exactly how this housing stock becomes unoccupied,” Mokry said. “In many instances, an elderly person owns it, the family has moved away, and the person dies or moves out. The house has a low value because it hasn’t been maintained for a while. For older folks, it can be a burden to maintain the house. As they age and the house is not maintained, it then isn’t worth much on the market.”

Another common problem is with low- quality rental housing. Many privately- owned, low-income rental properties continue to be rented in substandard conditions.

“Housing out there that is starting to fall into disrepair has increased not just in Mississippi, but nationwide,” Mokry said. “The subsidized segment is generally being maintained because of government requirements. If the housing isn’t under a program such as Section 8 or the Housing Tax Credit, it isn’t regulated in any close way. Probably there is a large percentage of low-rent single family rental housing where the owners aren’t doing as much as they should to maintain it.”

Non-government housing may not always be maintained properly, although some communities have adopted habitability standards.
Between 1990-2000, Mississippi had a 25% increase in “other” housing that is vacant, i.e. abandoned, boarded up or otherwise unsuitable and empty housing. This is twice the national rate of 10.3%. Housing in this category rose from 33,000 in 1990 to 41,000 in 2000. The highest increases in vacant, non-usable housing were in the South Delta and Three Rivers PDD areas. Those increased by about 49% for the 10-year time period. Such housing increased 30% to 40% in the Central, East Central, North Central and North Delta PDDs.

Mokry said challenges with this housing stock include:

• The property is in such disrepair, it may not be worth rehabilitating. It just needs to be torn down. Is the lot worth reuse after demolition? Can the new use generate a high enough value to recoup the cost of demolition?

• Heir property with unclear title. An older person dies leaving no will or property divided equally among children who are absentee owners.

• Tracing ownership is time consuming and costly. The property is probably located in areas where property values are low. Private investors don’t bother seeking ownership because the property was low value to begin with.

• The home is probably not mortgaged, so no bank or institution has an interest in seeing that it is placed back in service.

• The property may fall into city hands due to back taxes. Cities may demolish the structure and establish a lien on property for the cost. The cost and time for clearing title and liens can make it difficult for the private sector to make a profit on a new unit there.

Mokry said opportunities for financial institutions include participating in creative combinations of loans/grants, encouraging staff to help connect lower income working families to affordable mortgage products; collaborating with housing counselors to educate potential buyers about ways to fix their credit problems and work toward qualifying; and working with nonprofits to develop a pipeline of lower income buyers.

Mississippi Home Corporation also has a risk-pooling program where lenders can participate in affordable rental housing mortgages and potentially buy securities consisting of pools of such mortgages.

Contact MBJ contributing writer Becky Gillette at bgillette@bellsouth.net.

Considerations for Investors and Developers

• Find out where such vacant units are located by checking with the county tax assessor, city/county planning offices, and the Mississippi Secretary of State’s web site of tax-forfeited lands at http://lands.sos.state.ms.us/ tfl/index.asp)

• Find out where the municipality or county is focusing development/redevelopment efforts around neighborhoods with potential vacant properties. Look for properties bordering these areas or between target area and existing more vibrant areas.

• If the community doesn’t have a development plan, talk to the mayor or council members about where such strategies might start. In smaller towns, working along a strategically selected street could be profitable. Small town officials often don’t have the knowledge or time to develop a strategy. A private investor can become a valued asset to local officials.

• Identify non-profit housing development organizations working in the community, county, or neighboring county. These entities work with potential home buyers, may have grant funds for principal reduction. These organizations also have working knowledge of local real estate and can help identify potential properties. Nonprofits have advantages in gaining access to tax foreclosed or abandoned properties in some circumstances. Nonprofits are usually eager to make connections with skilled developers and contractors who can work with them to develop rental or owner occupied housing.

• Develop a working knowledge of the finance programs available. Mississippi Home Corporation (www.mshomecorp.com) has site acquisition, site development, and construction financing available for affordable housing. The corporation also has mortgage financing which homebuyers can access through the corporation’s network of participating lenders. MHC also provides technical assistance to developers and nonprofits in developing financial packages to undertake housing development. MHC sponsors a statewide housing conference (January 12-14, 2005 in Biloxi) that provides much information on available financing tools and strategies as well as an opportunity to network with individuals involved in housing in Mississippi.

• MDA (www.mississippi.org) has funding to assist housing for low-income households which can be accessed through a city, county, or non-profit organizations.

• The Federal Home Loan Banks of Dallas (www.fhlb.com), Atlanta or Cincinnati www.fhlbcin.com) have programs to help finance owner or rental housing. Their programs are accessed through their member banks.

• The U.S. Department of Agriculture, Rural Housing Service (http://www.rurdev.usda.gov/rhs/index.html) and the U.S. Department of Housing and Urban Development (www.hud.gov) have excellent web sites that describe their financing programs.

• FannieMae (www.fanniemae.com) and Freddie Mac (www.freddiemac.com), have products targeted to the affordable housing market accessible through their lender networks.

About Becky Gillette

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