DESCRIPTION OF THE STRATEGY
Instead of making outright grants of funds for lead hazard control projects, jurisdictions can make loans through a revolving loan fund that recycles the original pool of funds. Loans can be amortized or repayment deferred until the property is sold or refinanced. Financing terms can be indexed according to income so that the lowest income homeowners can access funds at very low and even no interest. Permanent revolving funds can be capitalized using an appropriation from the jurisdiction’s general fund, a federal grant, or designating the receipts from a specific tax or fee, so that such monies are continuously reserved for a specified purpose.
Lead hazards are controlled, and the property is cleared by certified personnel.
Reduction in lead-poisoned children.
The unit is safe for future occupants.
Scope of Potential Impact
City - or - County - Wide
Banks and other Lending Institutions
One full-time person in the assigned agency is needed to set up the program. This includes developing program procedures and guidelines, preparing marketing materials, and establishing agreements with program partners such as health departments, lenders, and community-based organizations. A key policy issue is whether the agency administering the loan fund will manage the program or rely on other partners (banks, community-based nonprofit organizations, etc.) to perform outreach, prepare and process applications, and service the loans. If all work is done in-house, the staffing requirements will vary substantially depending on the volume of loans and the way the program is designed.
Other resource requirements:
Program brochures, manuals, operating procedures for lending programs.
There needs to be institutional capacity to make and/or service real estate loans, including knowledge of the industry and experience with lending programs. Ideally, the program is managed by a housing agency that has a track record with other financing mechanisms. Legislative authority and appropriations must create and fund the program; authority to use repayments for additional loans distinguishes revolving funds from one-time appropriations. Capacity to assist owners with applications is important and can be provided by community-based nonprofit organizations, city/county/state staff, or lenders.
A revolving fund must initially be capitalized by designated funds. Annual or regular additions to the fund may be critical to create stability, meet growing demand, and assure continuation of the fund. Fees to process and service the loan and the cost of outreach need to be factored into the plan.
A revolving loan fund can be established at any time.
Excellent if the institutional capacity is in place.
Making loans to low-income owners and/or investors in property rented to low-income families is often not a profitable venture. Financial institutions are experienced and efficient in processing loans; however, a bank will probably need an incentive such as a fee unless it is willing to do the work to maintain or improve its Community Reinvestment Act (CRA) rating.
Capacity must also be established to get referrals or generate applications, assist owners with the application process, qualify applicants, and prepare complete applications for whomever processes the application. A state or local agency may be well served by relying on community-based organizations (CBOs) to reach and encourage applications from the owners of highest-risk properties.