Charity Joins Top Home Builders’ Ranks

By Dawn Wotapka

East Patchogue, NY (July 10, 2010)- A dozen female
volunteers gathered recently in this blue-collar Long Island town, enduring the
heat to help form the entryway of an 1,100-square foot home for Cheri Sabolenko
and her two young children. The Sabolenko house will soon join more than 5,000
other homes expected to be built, repaired and rehabilitated in the U.S. this
year by a well-known addition to the upper echelon of America’s largest home
builders: the nonprofit group Habitat for Humanity International.


As the housing and financial crisis struck several years
ago, the large publicly traded builders, including D.R. Horton Inc. and KB
Home, pulled back. But Habitat kept building. “We’re a lot less tied to
the market as a whole,” said Mark Andrews, Habitat’s senior director for
U.S. operations. “We’ve been able to keep chugging along at a pretty solid
pace.” As a result, Habitat, a Christian group founded 34 years ago in
Americus, Ga., around a philosophy of constructing and rehabilitating homes for
low-income families, was recently ranked as one of the nation’s top 10 builders
for the first time in a closely watched industry list compiled by Builder
Magazine. Habitat was ranked eighth, based on the number of homes sold and
closed, placing it above Ryland Group Inc. and behind Hovnanian Enterprises
Inc.

Habitat’s closings, which include new homes and rehabs,
were down 3% to 5,294 in 2009. Ryland’s tumbled 30%, while Hovnanian’s sank
50%. Of course, this year’s top 10 appearance could be a one-time event. The
nation’s public home builders, itching for recovery, have been ramping up
construction. Habitat, meanwhile, is giving more attention to acquiring and
rehabilitating vacant, foreclosed homes and making them available for sale. In
June, Wells Fargo announced an $8 million contribution to Habitat, which said
the funds will help its neighborhood rehabilitation program. Last year, Habitat
completed 710 rehabs, a count that should increase this year, while its new-build
count could fall by about 8%, the group estimates.

Habitat’s ability to out-build some of the nation’s
largest corporations partly reflects the insatiable demand for affordable
housing in a nation where more than a quarter of the population can’t afford a
median-priced home in their area. And Habitat has some advantages by being a
nonprofit. It receives donated building products and relies heavily on
volunteers for construction. It can have just one paid staffer on a build site.
“Habitat works because they have a very clear mission with a niche in the
market,” said Ghebre Selassie Mehreteab, an affordable housing adviser
near Philadelphia. Plus “the volunteers are not only given tasks, but they
are seeing the tangible results of their work. That’s very hard to beat.”

The recession has hurt Habitat’s finances. The group laid
off 8% of its corporate staff last year, and its cash donations declined 9%
from a year earlier to $171.8 million. And Habitat faces some of the same
challenges as for-profit companies. Some of the 226 homes it built in New
Orleans after Hurricane Katrina in 2005 might contain drywall imported from
China. The problematic drywall emits a foul odor, corrodes wiring and causes
appliances to fail. The only solution is to remove the drywall, an expensive
procedure. Habitat’s New Orleans chapter promised to “resolve
this issue as quickly as possible.”

Meanwhile, late payments and foreclosures are a threat
for Habitat homes, although the problems aren’t nearly as severe as they are
nationwide. That is partly because the terms of Habitat loans are so
attractive; homeowners receive mortgages with 0% interest rates on homes that
are sold at cost. Habitat keeps most of the mortgages it originates, so when
trouble strikes, homeowners know where to turn. Habitat says its foreclosure
rate is less than 2%. Taking back a home is “always our last
solution,” said Mary Kay O’Rourke, president of Habitat’s operation in
Jacksonville, Fla., which goes by the name HabiJax. The group tries solutions
ranging from suspending payments for the unemployed to tapping local-agency
funds to make owners current. Of the 1,500 loans HabiJax holds, 10 are in the
foreclosure pipeline.

If all goes as planned, Ms. Sabolenko will move into her
new three-bedroom, $85,000 home on a shaded corner lot by October. The home
will have one bathroom and a dishwasher. Ms. Sabolenko is typical of Habitat
homeowners. She is a divorced mother working two jobs. She has a stable income
but earns less than the area’s median income and doesn’t have enough money for
a down payment. She and her children live with her mother. Ms. Sabolenko is
putting in hundreds of hours of “sweat equity” the group requires,
working on Habitat projects.

“I want to show my children that hard work and
seeking to better your life can bring positive results,” she said in a
note left for volunteers at her construction site. “I want to cry for joy
and happiness.”

Related Resource:

Wall Street Journal-Charity Joins Ranks of Top Home
Builders