Housing starts are down one month, up the next. The trajectory of mortgage rates is higher one week and then lower the next. And while the trajectory for homeownership has turned up, the move has been small and the national rate remains well off of its peak as HousingWire reported recently.
Everyone from homebuilders to mortgage lenders and real estate professionals want to see the homeownership rate increase. These traditional pillars of the market are retooling their products and services and hoping for success. But another, often overlooked, player in the market is reconfiguring its business in order to put more wind in the sales of homeownership. I’m talking about nonprofits.
On annual basis, nonprofit housing organizations touch hundreds of thousands of potential first-time homebuyers. They do this in a variety of ways through the delivery of traditional home buyer education and financial and credit counseling, partnerships with other social service programs and increasingly as small business lenders via a growing base of community development financial institutions.
In the face of declining financial support from traditional sources that would fuel more homeownership outreach, nonprofits are making important changes to the way they operate. They’re pursuing revenue generating business models that align with their nonprofit mission to build strong communities and foster safe and stable homeownership among consumers the broader market often overlooks. In short, they’re pursuing social enterprise business models that will lift their homeownership programs and the homeownership rate.
To make lasting, significant change on a system-wide scale and reverse the decline in homeownership nonprofits need sufficient resources. Funding needs to be uninterrupted and unrestricted, so that organizations can make long-term investments in systems, human capital, and operations. Philanthropic or government funds are in constant flux. To reach a higher homeownership levels safely, nonprofits need the resources to help qualified consumers.
Operating a social enterprise model enables nonprofits to address community needs and adapt as those needs change. But this business model requires nonprofits to re-envision how they operate and shift their own organizational culture away from a ‘build and they will come’ way of thinking, to ‘let’s find ways to get more customers.’
To succeed with social enterprise, nonprofits need marketable assets, market opportunity, and organizational capacity.
Marketable assets are what the organization already has, does, or knows. This might be a product or service such as home-buyer education classes or counseling that it currently delivers for free, but where the consumer may be open to paying a fee. In a society where a common mantra is ‘you get what you pay for,’ nonprofits are beginning to charge for homebuyer education, and are seeing an increase in participation. After making an initial investment in marketing and outreach, some nonprofits are seeing greater attendance in their home buyer education classes. They’re serving more people who want to become homeowners, and generating revenue, too.
The market opportunity is all around them. Across the country, millions of people want to become homeowners, but either don’t know how or are misinformed about the process. Consider that according to the 2017 America at Home survey from NeighborWorks America, the average consumer believes that a 17 percent down payment is needed to buy a home, while a Fannie Mae survey found the average consumer believes that a 12 percent down payment is needed. Both are way over the reality of three percent.
To combat these misperception and serve consumers who can qualify for homeownership, nonprofits like The Homeownership Center in Utica New York have taken to television. Through a slickly produced commercial called, “Mom’s Basement,” this nonprofit is flipping the nonprofit script and not just building a way for consumers to become first-time homebuyers, but is marketing to a specific niche: Millennials.
Speaking of Millennials, nonprofits that are focused on increasing homeownership have their attention set on Millennials. By now the common misperception that Millennials don’t want to be homeowners has largely been put to rest, but here’s another statistic for those who may still be unsure: 71% of millennials and 71% of adults overall rank homeownership as the most or very important part of their American Dream, according to a 2017 NeighborWorks America survey.
While late to the use of technology, many nonprofits have turned the corner and are rolling out technology tools to attract and retain customers that want to become homeowners. Nonprofits serving communities as diverse as rural Vermont and the Los Angeles metro area are using targeted Facebook advertising and web ads to bring customers to their doors, literally and virtually.
As important as these changes are, probably the most important shift has come in how nonprofits have to think about why they exist. The Housing Development Fund, a CDFI based in Hartford, CT has had to have tough talks with its staff about the organization’s expanding revenue generating model. Many people join nonprofit organizations because of the social mission.
What the Housing Development Fund and dozens of nonprofits across the country have had to do is explain how the social enterprise model enables the social mission. Money doesn’t grow on trees, and the social enterprise model leads to sustainable businesses that are able to help more people get into homes that they can afford and keep.
HDF and other nonprofits have examined their hiring practices and along with looking for mission alignment, they are seeking out the kinds of skills that can make a business work and thrive. One nonprofit learned that the kinds of skills and personality that works well in retail sales also works well in a nonprofit. Why? The mindset is customer, customer… find out what the customer needs and how the organization can meet that need. That’s what is happening at nonprofits coast-to-coast and is why the emerging social and sustainable business mindset will lead to higher homeownership rates.