The Challenges of Homeownership in New Orleans | Jericho Road Episcopal Housing Initiative

Join Jericho Road on A Journey!

As we approach our 10th  Anniversary, we believe it is vital that we provide context around the challenges of homeownership in the New Orleans community and on a national level.  Through our journey of providing low-moderate income families with affordable homeownership opportunities, we have learned about many of the struggles that these families face.  Jericho Road is committed to expanding our reach by sharing information and building advocates through a series of articles.

We invite you to learn with us!

Article #1: The Challenges of Homeownership in New Orleans

by Matthew Gonzales and Peter Davis

Media outlets in New Orleans have recently been awash in articles detailing an especially dire situation regarding affordable housing in the metro area. Like a steady drumbeat, articles with titles such as “New Orleans home prices continue to skyrocket, up 14 percent last year,” and “New Orleans second worst market for renters in U.S.” reflect a growing reality that for many long-time and newly arrived New Orleans residents, the city has become too expensive.

While the average New Orleans income has grown by 43.5% in the period between 2000 and 2013, home prices have risen as much as 125% in the same period. The combination of low housing stock, skyrocketing home prices, a recent decrease in average wage, and rising rents make New Orleans one of the worst cities in the country to rent a home. According to the HousingNOLA 10 Year Strategy and Implementation Plan “more than 70% of all households pay more than one third or more of their income towards housing cost.”

For many families that are Asset Limited, Income Constrained, and Employed (ALICE), the only way to get out of the rental market and start building generational wealth is to buy a home. Homeownership has been an important vehicle in building the middle class. A home often makes up the largest part of an American family’s assets. In New Orleans black families are overrepresented in the lower wealth population. The homeownership rate among families of color has also decreased at twice the rate as it has for other families.

Over the past 10 years, Jericho Road has worked with low-moderate income working families to provide affordable housing opportunities in the Central City area of New Orleans. In our experience, ALICE families face many obstacles when trying to buy a home. Some of these obstacles include: lack of affordable homes, absence of financial literacy and insufficient access to credit.

To address these issues Jericho Road develops quality homes in Central City and makes them affordable to ALICE families. Jericho Road also offers pre-purchase counseling (Central City Homebuyer Club) to prospective homebuyers to ensure that they are able to fully understand the homebuying process, responsibilities that come with homeownership, and are able to take advantage of potential funding sources. In our experience we have found this type of guidance is necessary to ensure the success of the future homeowner.

The remaining obstacle to homeownership for low-moderate income homebuyers is access to gap financing. This is often the single greatest barrier to homeownership for ALICE families. A Soft Second Mortgage can fill the gap between what a family can afford and a home’s sale price.  Jericho Road has established The American Dream Fund to raise money for that purpose. A soft second mortgage through Jericho Road is one that accrues no interest and is forgiven after a period of 15 years. The American Dream Fund will have a long term public benefit – new homeowners will contribute to the economy of the City of New Orleans as well as the revitalization of a historic New Orleans neighborhood. In addition, it allows hard-working long-time residents of New Orleans to leave the rental market and have something to pass down to their children.