Third Quarter 1999
Federal Reserve Bank of Dallas

Public and Private Partnership

Lasting Impact
Building Families and Neighborhoods

Without the efforts of Tierra del Sol Housing Corp. and local citizens, chances are good that people in Anthony, N.M., a desert colonia 20 miles north of El Paso, would live in substandard rental houses scattered haphazardly along unlit dirt roads. They would probably have no drainage, running water or sewers.

Now, through Tierra del Sol's leadership and partnership with the community, sustained efforts spanning nearly 20 years have translated into a sense of community, where families own nice houses, know their neighbors and navigate along paved streets with adequate infrastructure. They have made their yards bloom by planting flowers, shrubs and trees and erecting decorative fences. What's more, their mortgages are affordable.

Since 1980, Tierra del Sol, with help from banks and other agencies, has helped more than 300 families build their own three- and four-bedroom homes in Anthony, N.M., in a program that requires homeowners to perform 65 percent of the construction—their sweat equity. The nonprofit organization also has built 24 rental houses for rural farmworkers and many scattered-site homes. In total, almost half of the 700 to 800 houses in Anthony have come through Tierra del Sol programs.

Despite the improvements, the community is still designated a colonia, a term often associated with an unincorporated rural area with a limited tax base and little or no infrastructure. Ironically, just across the border is Anthony, Texas, an incorporated town with enough of a tax base to provide residents and businesses with complete infrastructure (see story entitled "The Two Anthonys").

In Anthony, N.M., Tierra del Sol's "self-help" houses are stark contrasts to the types of structures normally found in colonias, where most dwellings are generally constructed piecemeal without electricity, plumbing and other basic amenities. "Without Tierra del Sol, many families would not have safe and secure housing," says Dona Ana County (N.M.) Commissioner Eduardo Medina, whose district includes Anthony.

Tierra del Sol began its presence in Anthony, N.M., in the 1970s with a 109-unit subdivision completed over five years. Since that time, the organization has provided leadership in the creation of subdivisions ranging from 16 to 91 self-help houses.

In 1984, Tierra del Sol and the community took the first step toward bringing in utilities by working with a local legislator and leaders of the Anthony Water and Sanitation District.

This year, Tierra del Sol will begin another self-help subdivision with 60 houses in Anthony, N.M.

"The development of Anthony, N.M., has been a long effort by many people who have been persistent and dedicated," says Rose Garcia, Tierra del Sol's executive director. The organization's efforts have proved so successful that other housing developers are coming to the community.

Piecing Together the Puzzle
During the past 25 years, Tierra del Sol has built more than 1,200 affordable houses, not counting over 600 units of multifamily and senior housing, for low-income residents in New Mexico and Texas.

The Tierra Linda subdivision in Anthony, N.M., is a prime example of how groups and the community can unite to solve housing and infrastructure problems. Between 1992 and 1995, Tierra del Sol, the U.S. Department of Agriculture's Rural Development and the Housing Assistance Council (HAC) offered financing and technical assistance to enable 85 of the subdivision's families to build their own homes, which they bought for an average of $40,000.

The subdivision's families, a third of whom are farmworkers, earn between $9,000 and $12,000 a year, which is at or below 50 percent of the area's median income. Despite their low incomes, they still can own homes because self-help reduces labor costs and thus makes mortgages affordable. Rural Development provided $1.6 million in permanent mortgages for 40 homes, most for 33 years with interest rates ranging from 1 percent to 7.75 percent. As household income increases, the subsidy is reduced, says Linda Ledesma, a manager with Rural Development in Las Cruces, N.M.

For all the benefits, developments like Tierra Linda require a partnership among many organizations. For example, HAC, a national nonprofit intermediary that has helped build affordable housing in rural America since 1971, provides Tierra del Sol with critical predevelopment funding and loans. "HAC has a long-standing relationship with Tierra del Sol because we recognize the group's ability to get quality houses built," says John Frisk, who directs the HAC loan division.

In 1991, Las Cruces' First Federal Bank, through the Federal Home Loan Bank's Affordable Housing Program, provided $90,000 to Tierra Linda families to help with their utility connection costs.

Giving Hammers to Homeowners
Tierra del Sol seeks to empower low-income people through self-help strategies like sweat equity construction. Through the self-help program, Tierra del Sol organizes families into work groups to help build their homes. Ledesma says that sweat equity translates into more affordable loan payments, which allow people like Isabel and Socorro Bueno to buy their own home in Anthony, N.M.

For six straight months, the Buenos harvested chili peppers, onions and pecans in the fields all day and then logged another 30-plus hours a week, including Saturdays and Sundays, to build their home. This year, the Buenos will celebrate the 15th anniversary of owning the four-bedroom house they built through Tierra del Sol.

"We had pit latrines [at our farm rental house], but now we have indoor bathrooms in our own home," says Isabel Bueno, who lived and worked on a farm for 35 years until injuring his knee. "We had to haul our water from a pump outside the house. We are very fortunate to be living in our own house."

The Buenos say they recognize a stable home environment improved the opportunities for their children, five of whom attended college and now work in professional jobs. "We wouldn't be able to afford to rent a place as nice as this house," Isabel Bueno says. "And we know all of our neighbors because we worked side by side with them when we built our house."

The Two Anthonys
Living Side by Side

Anthony, N.M., isn't the only community benefiting from the sustained work of the Tierra del Sol Housing Corp. So is Anthony, Texas, located just across the border about 20 miles north of El Paso.

Residents in Anthony, N.M., are getting affordable housing, and Anthony, Texas, is getting a workforce made stable by that housing. In an area where the demand for a steady labor supply is exploding, businesses in Anthony, Texas, with its limited number of affordable houses, are enjoying an influx of workers from Anthony, N.M.

According to local officials, roughly 25 percent of the residents of Anthony, N.M., work across the border in El Paso or the other Anthony's cannery, manufacturing facilities, state prison, water park and other businesses. Officials in Anthony, Texas, say they will continue aggressively recruiting businesses.

And therein lies the paradoxical but symbiotic relationship between the two Anthonys, where the border between the two states represents more than just a line on a map. The majority of the area's people live in Anthony, N.M. (pop. 7,000 and growing), because property taxes are about a third of those in the Texas Anthony (pop. 3,300), according to county officials.

The residents of Anthony, N.M., want the area to stay unincorporated because of the lower property tax rates. But being unincorporated also means the community can provide nowhere near as much as the Anthony in Texas. Despite the numerous improvements in housing and infrastructure spearheaded by Tierra del Sol, Anthony, N.M., is still designated a colonia.

While most roads are paved, many have little or no lighting. Protection is provided by a volunteer fire department and an already-stretched county sheriff's department. School classrooms are bursting at the seams. In fact, County Commissioner Eduardo Medina, whose district covers Anthony, N.M., says providing safe, sanitary housing in the area is a constant struggle, one that he doesn't see ending anytime soon.

Meanwhile, the town of Anthony, Texas, is incorporated and has enough of a tax base to provide residents and businesses with water, sewer, paved and lighted streets with curbs, and full-time police and firefighters—amenities people living in a town expect.

The town's housing plan includes restrictions governing the minimum square footage on new housing and designated areas for manufactured housing. By contrast, Anthony, N.M., which relies on the county for services, became a rural zoning district as recently as 1997. In addition to gaining more local control over zoning, residents hope the zoning efforts will attract business development similar to that forming the economic base Anthony, Texas, has enjoyed.

But Rose Garcia, executive director of Tierra del Sol, says tremendous housing demands exist on both sides of the border. In the El Paso area alone, at least 30,000 additional units of affordable housing are needed. Garcia says her organization strives to balance the distribution of scarce housing resources with serving local jurisdictions. The organization's target market for the homes in Anthony, N.M., is the people who work on the farms in that area, although Tierra del Sol does not turn away people who, for example, live in Anthony, N.M., but work in the other Anthony or even El Paso.

To help alleviate the housing crunch on the Texas side, Tierra del Sol will soon start a new self-help housing development in the Westway colonia (pop. 300), three miles east of Anthony, Texas. Westway got water only two years ago, and Tierra del Sol is helping colonia leaders design a sewer system. Once the Westway development is completed, Anthony, Texas, will benefit from another source of stable workers.

Despite the differences between the two Anthonys, Art Franco, four-term mayor of Anthony, Texas, says he takes a team approach when he promotes both communities, which are linked in the minds of many local residents. "We work together on various events and projects," Franco says. "We really don't see the boundaries between the two towns."

Financial institutions in Austin are banking on a program that provides low-income families with affordable houses, helps at-risk students get diplomas and protects the planet's natural resources.

Give the 64 members of Austin's American Institute for Learning (AIL) enough steel, straw waste and plastic soda bottles and they will build some of the city's sturdiest, most energy-efficient houses. Through an innovative program, called YouthBuild, that takes a holistic approach to making at-risk people self-sufficient, the members will build at least 20 of these environmentally friendly houses this year. Since 1996, 56 units have been completed under this program, using environmentally sound materials and building techniques.

"This is an excellent opportunity to provide financial and technical assistance to a program that is definitely benefiting families and at-risk youth in our market," says Linda Walker, vice president of Guaranty Federal Bank, one of several financial institutions providing mortgage loans for the homes.

Preparing Young People for Life

The agency is dedicated to giving high school dropouts and other underserved youth aged 17 to 25 educational and job training opportunities. AIL provides its members an opportunity to earn high school diplomas or GEDs while preparing for employment, advanced training or higher education. For a minimal living stipend, health insurance and other benefits, the members/builders attend general studies, construction and leadership classes and perform community service. Upon graduation from the 12-month program, each member receives a $4,700 college scholarship from AmeriCorps.p

The houses, which take four to six months to complete, sell for about $64,000 to families with incomes at or below 50 percent of Austin's median income. Guaranty Federal originates mortgage loans to qualified borrowers and, through the Federal Home Loan Bank's Affordable Housing Program, provides $3,200 toward the down payment and closing costs, as well as $1,600 to defray a portion of the slightly higher costs of green construction. Customers at other mortgage companies can get down payment assistance from the Texas Department of Housing and Community Affairs (TDHCA) and the city of Austin.

Going "Green"

Not only do families get affordable homes, they also pay less for utilities because of the environmental "green" materials and building techniques. Utility bills for the program's pilot three-bedroom house were as much as 40 percent lower than for neighboring houses built at the same time.

During construction, members use 19 recycled or engineered products rather than traditional materials. For example, steel studs—not wooden ones—produced from recycled materials are used in interior and exterior walls. The members also use a new product, made from straw waste, for non-load-bearing interior walls. The building material was developed through a cooperative effort with ranchers in the Texas Panhandle, who sell straw waste from their wheat fields as a cash crop. The straw is compressed between drywall paper as an alternative to traditional stick-framed walls. The installation process reduces labor costs by combining the framing and drywalling steps.

Also, instead of composition or wood shingles, the houses have recycled metal roofs—more expensive to install but lasting a lifetime. What's more, plastic soda bottles that would have packed landfills are collected weekly in Austin's recycling program, shredded and reprocessed into tough carpeting for the houses.

In addition to the Federal Home Loan Bank, funding for the YouthBuild program comes from foundations and corporations, AmeriCorps, TDHCA, the U.S. Department of Housing and Urban Development and the city of Austin.

AIL provides leadership and administers funding from TDHCA for building programs similar to YouthBuild in Brownsville, Levelland, Oltan, New Waverly, San Antonio and Harlingen under the Texas YouthWorks program. Program leaders say their comprehensive approach brings the goals of affordable housing, education for at-risk people and environmentally sensitive construction methods under one roof—a roof that, like the metal one, can last a lifetime.

For more information, contact the American Institute for Learning, (512) 472-3395.

Improving Rural Housing
A Conversation with Moises Loza, Executive Director, Housing Assistance Council

The Housing Assistance Council (HAC), a national nonprofit organization, has been helping local organizations build affordable housing in rural America since 1971. Perspectives asked Moises Loza to discuss rural housing needs as well as resources HAC provides to rural housing development partners.

Based on HAC's research, what is the state of rural housing in Texas, New Mexico and Louisiana?

The most serious rural housing problems in these three states are housing affordability and the special needs of three significant areas: colonias, Indian Country and the Lower Mississippi Delta region.

Housing affordability—the gap between income and housing cost—is a notable and growing problem in both rural and urban areas throughout the United States. Rural Texas, New Mexico and Louisiana are no exception. HAC's analysis of census data has found that more than one-fifth of rural households in each of these states pay more than 30 percent of their income for housing. Rural homes are also disproportionately likely to suffer quality problems such as incomplete plumbing. This is most evident in New Mexico, where rural areas contain only 28 percent of all housing units but 85 percent of the homes that lack complete plumbing. In Louisiana and Texas, rural homes are about twice as likely as urban units to lack complete plumbing.

Affordability and quality are problems in the special-needs areas as well, complicated by infrastructure issues and other factors unique to each area. For example, research—including studies by HAC and the Dallas Fed—describes the colonias as lacking basic amenities such as water and sewage systems, decent housing, paved roads and standard mortgage financing. These small unincorporated communities along the U.S.-Mexican border in Texas and New Mexico (as well as Arizona and California) are occupied by mostly Hispanic residents, many of whom have very low incomes. By one calculation, the average annual income for colonia households in Texas is less than $7,000. Nevertheless, many families in the colonias own their homes, although their ownership relies on a contract for deed system, which allows the seller to retain title until the debt is fully paid and to repossess the property for even a single missed payment.

Special needs are also evident for Native Americans, who make up 9 percent of New Mexico's population. More than half New Mexico's Native American rural residents have below-poverty incomes, and 34 percent—one of every three—of their homes lack complete plumbing, according to HAC's census data analysis. The ownership structure of reservation land makes standard housing finance difficult, although for different reasons than in colonias: most Native American land is held in trust, so it cannot be transferred to non-Indian ownership. Lenders are understandably reluctant to provide mortgages for property on which they cannot foreclose.

Like Indian Country, the Lower Mississippi Delta region is historically disadvantaged. Poverty rates in the Delta, which includes a large part of Louisiana, have exceeded the national rate for decades and are almost unbelievably high for some of the population. Sixty-five percent of African-American children under 5 years old living in nonmetropolitan parts of the Delta are poor. Like colonias residents and Native Americans, rural Delta residents live in inadequate housing far too often and cannot obtain enough mortgage credit.

What resources can HAC provide to help bank and nonprofit partnerships develop affordable housing in rural areas?

In its 29th year in the affordable rural housing business, HAC has a great deal to offer, including special initiatives targeted to the colonias, Indian Country and the Lower Mississippi Delta.

One HAC resource is loans. Since its creation the organization has been making low-cost, short-term seed loans to local affordable rural housing developers for predevelopment costs such as site acquisition and environmental testing. More products have been added over time, including letters of credit and compensating deposits to provide security for local lenders. More recently HAC has begun offering construction loans, as well as loans to local or regional entities for relending to individuals. Where a commercial lender and HAC are using the same property as collateral, HAC may take a second position to enhance the lender's security.

HAC's technical assistance (TA) may be less visible, but it is extremely useful. Staff can do everything from listing potential funding sources in a brief phone call, to helping a local organization put together funding applications, to negotiating ways for banks, nonprofits and other players to work together. The costs of HAC's TA are covered by the organization's funding sources. Assistance is not restricted to any specific set of recipients among the many who strive to meet rural low-income housing needs.

Much of HAC's TA is provided through its four regional offices, whose staffs are particularly knowledgeable about their areas' needs and resources.

HAC also provides periodic regional training sessions and sponsors a national conference every few years. Several training sessions will be scheduled in the colonias region during the next two years. The next conference is being planned for late 2000.

HAC provides additional resources in the form of research and publications. Other information services include the HAC News, which is issued every two weeks, free of charge, and provides news about funding, programs, research findings and the like. Rural Voices is a quarterly magazine, also free, with longer articles on rural housing and development topics. HAC's Rural Resource Center provides an extensive library of published materials. The organization's web site helps make all this information more widely available.

What strategies can be used to increase affordable housing in rural communities?

Successful strategies begin in the communities. Local residents know their needs and how to meet them. Others, such as HAC, can help build local capacity to develop housing and can provide the funding, but success is always driven by local organizations.

Years ago, fewer nonlocal entities were involved. Rural housing development relied heavily on a single funding source: the Farmers Home Administration (FmHA) of the U.S. Department of Agriculture (USDA), which offered programs now administered by the USDA's Rural Housing Service (RHS) and Rural Development. While these programs are still essential, their funding has been greatly reduced, and, at the same time, new sources have appeared.

In 1999, therefore, the most important strategies are partnerships, community involvement and technical assistance, so that all parties can work together productively. One constant across all efforts remains the need for housing subsidy. Affordable housing is possible when assistance or strategies are present to close the gap between the cost of decent housing and the ability to pay for it.

Can you provide some examples?

One excellent model is the Tierra Linda subdivision developed by Tierra del Sol Housing Corp. and Housing and Economic Rural Opportunity (see cover story). HAC is proud to have worked with Tierra del Sol since the mid-1970s. In 1991 a HAC loan matched Affordable Housing Program funding for acquisition and development of the site for Tierra Linda's first 45 lots. In 1994 a second HAC loan helped develop 40 more lots for Phase II. While there is sometimes a tendency to look for "innovative" solutions, Tierra Linda is an example of a time-tested model in rural areas—self-help subdivision development—that has succeeded in the colonias, the Delta and many other rural places. It involves a combination of actors from all levels: HAC, a national intermediary; the USDA, which provided administrative funding and low-interest mortgages; local banks that provided down payment assistance grants from the Federal Home Loan Bank; local nonprofits that managed the development process; local contractors; and the homebuyers themselves, who provided much of the labor in the construction of their homes.

In other situations, some of the same partners can be effective in different ways. In the Texas colonias, for example, replacing existing contracts for deed with traditional mortgages can increase the security of residents' ownership while at the same time provide them with funds for repairs and renovations. One good example of this strategy is occurring in El Paso County, where the state of Texas has provided more than $1 million for such loans in colonias with access to public water. HAC is working with several local partners to establish a similar program for people living in colonias without public water systems. Again, a partnership is involved. The work of managing the loans, counseling the families, inspecting the renovations and converting the deeds will be divided among the county's Community Development Department, AYUDA Inc., the El Paso Collaborative and the Cooperative Extension Service of Texas A&M University. To reduce costs, residents will help rehabilitate their own homes.

Joint efforts are important in providing housing credit in Indian Country as well. For example, lenders can feel safe about loans on Indian lands by obtaining federal loan guarantees from programs such as the Department of Housing and Urban Development's Section 184 program.

RHS/Rural Development loans also can be made more accessible on reservations and in other special-needs areas, partly through educational efforts. For example, for several years HAC has worked in the Northwest with Native American housing organizations and Rural Development staff, providing outreach, technical assistance and training so local packagers can help residents apply for Rural Development loans and Rural Development staff can understand the needs and underwrite the loans. The Northwest Areas Foundation supported this project in its early years, and the USDA funds it now. It provides a model that can be repeated in other rural places and with other populations; recently two colonias in Texas have been added.

A different kind of assistance to local organizations—technology—is one of several tactics now being used in the Lower Mississippi Delta. As one of more than 30 organizations and government entities participating in a regional strategy called the Delta Compact, HAC has received funding from the Fannie Mae Foundation and the USDA for a Delta technology project. This effort involves assessing the computer needs of 24 local nonprofits, then providing them with hardware and Internet training.

While of course I am deeply committed to HAC's work, it is also true that HAC could not accomplish anything without local housing organizations. In reality, HAC's role is to provide whatever resources help rural communities help themselves.

For more information, contact HAC at (202) 842-8600 or www.ruralhome.org [off-site].

Did You Know...?

Brownsville Nonprofit Receives Award

The Community Development Corporation of Brownsville (CDCB) has received the Fannie Mae Foundation's Maxwell Award of Excellence for its Colonia Redevelopment Program. CDCB created the program to help families replace their dilapidated homes in the colonias of Cameron and Willacy counties for as little as $83.33 a month. CDCB designs the new homes, secures the financing, services the loans and supervises the contractors. To date, 98 homes are either completed or under construction.

1998 HMDA, CRA Data Online

The data on 1998 mortgage lending activity required by the Home Mortgage Disclosure Act (HMDA) and data on small farm and community development lending required by the Community Reinvestment Act are available on the Federal Financial Institutions Examination Council web sites www.ffiec.gov/hmda/ [off-site] and www.ffiec.gov/cra/ [off-site].

About Banking and Community Perspectives Perspectives Federal Reserve Bank of Dallas Community Affairs Office P.O. Box 655906 Dallas, Texas 75265-5906 Gloria Vasquez Brown Vice President Nancy C. Vickrey Assistant Vice President and Community Affairs Officer Ariel D. Cisneros Senior Community Affairs Advisor Shelia M. Watson Community Affairs Advisor Bobbie K. Salgado Houston Branch Community and Public Affairs Advisor Toby Cook Community Affairs Specialist The views expressed are those of the authors and should not be attributed to the Federal Reserve Bank of Dallas or the Federal Reserve System. Articles may be reprinted on the condition that the source is credited and a copy is provided to the Community Affairs Office.