The flip side of Habitat for Humanity

Habitat for Humanity International has been known for its mission to provide new homes for the poor ever since former President Carter, its most famous volunteer, grabbed work gloves and hammer in the 1980s to help build dwellings in struggling communities.

These days, Habitat is renovating the way it does business because of the mortgage meltdown, in which loose lending standards left thousands of foreclosed properties sitting vacant in the very neighborhoods the group aims to revitalize. Habitat is increasingly acquiring foreclosures, renovating them and selling them to needy families, providing zero-interest loans when they don’t qualify for a mortgage. Called the Neighborhood Revitalization Initiative, the program is Habitat’s attempt to address the national foreclosure crisis.

“We have, for most of our existence, really focused on new construction,” said Mark Andrews, Habitat’s senior director of U.S. operations. “But it’s becoming more and more clear to us on a national scale that new construction isn’t always the best fit.”

In the Los Angeles area, the new strategy has become a way for Habitat to keep from losing money on the homes it builds given the precipitous decline in property values.

Although building a new home may cost the group $250,000 to $300,000 -- including the price of land, permits, streets, sidewalks, utilities and construction -- the finished product might appraise for considerably less, said Erin Rank, president and chief executive of Habitat for Humanity, Greater Los Angeles. On the other hand, the group can buy a home for less than $200,000 and break even after putting about $40,000 worth of repairs into it.

The program has brought Claudia Maria Velasquez, 34, and her truck-driver husband, Jose Javier Velasquez, 36, to the threshold of homeownership. The couple now live in a cramped, one-bedroom apartment that they share with their sons Brian Javier, 6, and Michael Alexander, 5, who is autistic.

The crowding makes life difficult, Claudia Velasquez said. There is little space for the two boys. Michael escapes and tries to run into the busy street. A Mexican bar across from the apartment hosts mariachi groups that wail loudly well into the night, waking the family. Until recently, squatters in an abandoned home near them stole electricity from the couple’s apartment building. That ended when the home burned.

Their new life will be a substantial change, Claudia said.

On a recent Sunday, the two Velasquez children roamed freely in the gated yard of what will be the couple’s new abode in Lynwood. Michael screamed, at times seemingly out of frustration. His brother rode an aluminum scooter on the sidewalk nearby.

“It is really for them,” Claudia said, speaking in Spanish as she looked longingly toward the house. “Now, we are going to have a real dining room table,” she said.

“You guys suffered a lot in that little apartment for some time,” said Javier Quezada, the couple’s Realtor, who was standing nearby.

“Yes, we suffered very much,” Claudia said.

The two struggled to find a home for the right price for months despite having saved $12,000 for a down payment and what Quezada said was decent credit.

Unfortunately, for low-income families, even deeply discounted foreclosures are out of reach because of competition from more prosperous first-time buyers and investors. “If it wasn’t for this program, they wouldn’t qualify for something like this,” Quezada said. “Someone like them wouldn’t stand a chance to an all-cash offer.”

The home, which was bought out of foreclosure by Habitat, will cost the couple $208,000. In order to afford the property, Habitat arranged for the couple to receive a $65,000 silent loan through the city of Lynwood. (A silent loan, repaid only when the property is sold or refinanced, is often offered by cities and other local governments to facilitate affordable housing.) They will get a traditional loan for the rest.

The couple put in 125 hours working construction sites and other jobs for Habitat to qualify to buy the home.

Habitat for Humanity, Greater Los Angeles, aims to buy and renovate 20 properties during the fiscal year ending June 30. Rank said she sees the new availability of bank-owned properties as a way to preserve the group’s mission despite sagging donations from traditional donors, including banks, builders and the entertainment industry.

“We have a heavy investment in these communities, and we don’t want to see the families fall down again because of a high number of foreclosed homes sitting boarded up and vacant in their neighborhoods,” Rank said. “Right now it is really hard for low-income buyers to get a loan on properties, so Habitat is the builder and the lender, and we lend at zero interest.”

The group also is relying more heavily on government funding than in the past -- specifically on the federal Neighborhood Stabilization Program, which allocates money to local governments to buy and fix up foreclosed homes. The stimulus legislation passed this year added $2 billion to the program, run by the Department of Housing and Urban Development. That money will be awarded before the end of the year. Habitat for Humanity, Greater Los Angeles, has applied for $30 million of that money.