By Luke Capizzo,
MCUL Communications Specialist
Former President Jimmy Carter (center) declared Benton Harbor one of his Habitat for Humanity "blitz builds" in 2005 due to the poor condition of the city and the negative media attention from the 2003 riots.
Credit unions work hard to improve the lives of people in their communities, but United FCU has seen the need for something more in their city of Benton Harbor. The credit union is playing an integral role in creating the foundation for a revitalized city through an initiative designed to increase homeownership.
While many programs designed to achieve this sort of goal fail due to a lack of ongoing support, a more holistic approach, such as the partnership in which United FCU is involved, can provide the resources to avoid many of the potential pitfalls.
For much of the 20th century Benton Harbor was a prosperous city and a popular tourist destination, but beginning in the 1960s, it began to decline. Similar to the problems facing a number of Michigan cities from this period to present day, industry struggled and the inner-city area began to decay as jobs were lost and residents moved away. In 1986 Benton Harbor became the focus of state government attention and was designated an “Enterprise Zone,” the equivalent of a “Renaissance Zone” today. This initiative was designed primarily to lure businesses to the area with lower taxes and other incentives.
Unfortunately, high levels of poverty and a low homeownership rate have kept Benton Harbor neighborhoods from growing into stable communities, despite assistance from the Federal Housing Administration and many local organizations. Riots in 1996 and 2003 have contributed to its negative reputation. Homeownership rates are around 30 percent in the city, while they are above 75 percent for the rest of the state.
“If we tell people how to become homeowners, that’s great, but they also need to understand how to maintain homeownership,” says David Stelter, Real Estate Manager for United FCU. “Many earlier programs have failed when people don’t know how to take care of the homes and don’t have the resources to make repairs.”
The Housing and Home Ownership Consortium, including United FCU, has targeted a vulnerable population – those with incomes too high to qualify for a Habitat for Humanity program, but too low for conventional FHA financing. The consortium brings together the work of community development organizations including the Council for World Class Communities, Benton Harbor Revitalization and the Michigan State Housing Development Authority in order to provide the variety of support needed to improve the economic situation of homeowners.
“We believe that credit unions can make a difference in this community in ways that no other organization can,” says Gary Easterling, President and CEO of United FCU. “The loans serve as the lynchpin of this program and we are happy to be able to provide them to the hard-working, dedicated individuals in need of a ladder to climb toward financial stability.”
According to Stelter, the consortium looks, on average, for $40,000 houses and performs $40,000 worth of work to get them to a near-new condition. With $5,000 down payment assistance for the city and matching funds from the Federal Home Loan Bank of Indianapolis’s Homeownership Opportunities Program (HOP), United FCU makes $50,000 loans.
First, Benton Harbor Revitalization acquires unwanted homes and MSHDA refurbishes them. Then prospective owners, who already have completed extensive financial education training, are matched with houses that fit within their budgets and fulfill their needs. Federal HUD funding helps with the down payments, and the credit union provides the mortgage.
Community buy-in is crucial for the project to succeed, and local organizations work with the homeowners after they have moved in to help them with repairs and other needs.
“Programs with similar goals have failed Benton Harbor in the past because they did not have enough community buy-in,” says Stelter. “We’ve made sure to partner with local community organizations so that the program makes grassroots connections and grows with the input of the neighborhoods we’re serving.”
Such neighborhoods have a low homeownership rate, due in part to low household income: Benton Harbor’s average $17,500, while neighboring St. Joseph has an average income of $37,000. The income level makes it difficult for many to save enough to make a down payment on a house, so they are stuck in the cycle of renting and unable to build wealth.
The lack of ownership means residents are less invested in the maintenance of property and the overall quality of life in the neighborhoods. The program focuses on specific pockets of development in order to make a greater impact on the quality of that particular area – rather than have the program’s community benefits diluted by the motivated new homeowners living among renters.
Such foresight shows what credit unions can accomplish by marshalling the resources around them and investing in the communities they serve. Michigan’s future is closely intertwined with the ability of its cities to maintain vibrant communities in the face of a negative economic climate, and the work of United FCU is helping to lay the groundwork for a more populous and attractive Benton Harbor area.
Credit unions can make a difference in the lives of their members, if only by recognizing the needs in the community they have a unique ability to fill. Acts of service will strengthen the bonds between credit unions and their members and show community leaders the benefits of non-profit financial institutions.