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Financial incentives for Winnebago homebuyers

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WINNEBAGO, Neb. - When down payments are the biggest stumbling block for first-time homebuyers on reservations, a Nebraska tribe has implemented several innovative solutions for appropriating assistance.

Spurred on by economic growth and a pressing need for more housing, the Winnebagos have plans to build 180 new units by the end of the decade including a 70-home development specifically for low-income families. Since the tribe commissioned a survey in 1996 that counted 508 residential dwellings on the reservation, it was concluded that if 200 more residences were built, they would all be filled immediately.

"We've documented this better than most tribes because we're small and because we work really hard at compiling and tracking ourselves," said Donna Vandall, a counselor in the Homebuyer Education Program (HEP) for the village of 2,000.

For new units between one and five bedrooms in size there are 122 families on the Winnebago Housing Authority's waiting list. Most of those households fall under the category of "low income" a definition based on earning 80 percent of the area's median income which for northeastern Nebraska is an amount below $43,500 annually for a family of four. Vandall estimates two working parents on the reservation earn on average a combined $32,000 or approximately $8/hour full-time.

Once financial need is determined, the tribe offers a $5,000 grant towards the down payment on a home. To qualify, applicants are required to complete the 40-hour HEP that includes eight hours of budget preparation. Since the program started in 1999, 92 applicants have successfully completed the course that's designed to turn traditional apartment renters into savvy homeowners under Vandall's tutelage.

"There is lots of money but the (money) management is bad, "Vandall said about how it is possible, even with a lower salary, to maintain a mortgage.

Besides the $5,000 grant, two methods exist for eligible Winnebagans to get into new homes. One involves a self-help program where homeowners, in a group of 10, build their own units while the other uses a tax credit devised by the Internal Revenue Service involving contractors.

Those who have construction skills have the chance to invest 750 hours over a two-year period in building their house under a plan by the U.S. Department of Agriculture's Rural Development. The benefit is saving the expense of a contractor that usually adds 35 - 45 percent in costs of a new home in labor. Once the 10 houses are completed, these lower-income families can individually apply for a 30-year mortgage that will run between 1 and 2 percent annually.

Within the Thunder Way development in the south end of town, initially a dozen homes of three and four bedrooms will be constructed with mortgages of $350 - $400 per month. Contractors extend their money, in terms of labor and materials, up front in return for tax breaks in the future. Of their monthly payments, tenants will have $50 set aside by the Housing Authority to be used as another lump payment after 15 years, an amount of $9,000.

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Should however financial circumstances change whereby these homeowners earn significantly more money after moving in, they would be expected to leave these residences. This rule is enforced strictly by the IRS explained Winnebago Housing and Development Commission's (WHDC) Executive Director Norma Stealer.

"It may seem hard-hearted but it's designed for the needy," Stealer said of the tax credit. "It's expected (then) they can afford to do what they can."

She pointed out the irony that by moving up in tax brackets, these homeowners would then again be facing the existing housing shortage.

When the vast majority of tribes benefited from the 1998 Native American Housing and Self-Determination Act (NAHASDA), the Winnebago's Housing Authority required some creative maneuvering to obtain this federal money. Because the village was established in the 1950s in an experiment to move Indians from federal to state jurisdiction, the 170 homes operated by Winnebago itself didn't qualify for funding under this act by Housing and Urban Development (HUD). Thus the WHDC was formed by incorporating members of the Housing Authority and tribal council that eventually permitted the village to collect $1 million annually, about half of which is allocated to new housing.

However, without spending the money hastily, the community watched as other tribes also facing their own housing shortages, ventured too quickly into the market. With the pressure of selling the homes, those reservations sold their units to non-Indians thereby defeating the purpose of these programs.

Winnebago instead opted for a slower, more secure path. Thunder Way has its site graded with water and sewer lines in place, a cost of about $17,000 per home that won't be included in the price for lower-income families.

"We laid the foundation without jeopardizing any future funding or resources by building from within," said Vandall. Homes within this area will be 1,000 to 1,500 square feet costing approximately $100,000.

Besides the Housing Authority's plan, Winnebago is also experiencing a boom in its north end. Ho-Chunk Incorporated, a separate entity of the tribe, is a for-profit economic development cooperative. Two years ago, a 40-acre parcel was purchased with the intent of creating Ho-Chunk Village, a multi-use property for commercial, industrial and residential purposes.

Over the next five to seven years, 110 units including town homes, duplexes and apartments will be constructed although it's only projected that between eight and 14 homes and one 6 - 8 apartment unit will be built by 2005. In addition to the Housing Authority's grant, Ho-Chunk Community Development Corporation (HCCDC), a non-profit entity, is offering first-time homebuyers a separate $15,000 loan, regardless of their income status, pending completion of the HEP. Recipients are not even required to use the money towards a new house within the village."We want people to build houses and we shouldn't tell them where or how they should build," said Don French, Housing Manager for HCCDC. This 10-year loan, he added, is forgivable once the homebuyer lives in the new house for a decade.