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THE LEASE PURCHASE PROGRAM

CHN is in its 20th year of producing affordable housing under our scattered site Lease Purchase program, the oldest and largest in the country. CHN's Lease Purchase program offers very low-income families an opportunity to eventually own their home, while at the same time salvaging single-family houses that are badly in need of fundamental repair. The program is financed through the syndication of Low Income Housing Tax Credits resulting in a 72% equity contribution, leveraging 28% in private and public investment. The program is specifically designed to keep monthly payments as low as possible through reduced first mortgage rates and soft second funds contributed by the City of Cleveland, and the State of Ohio. Short of public housing, CHN offers families on public assistance the most affordable rent - $274 on average - that they are likely to find. Comparable rents on the private market average $400 to $625 per month.

The Lease Purchase program was created as a comprehensive approach in offering stable, decent, affordable housing and the opportunity of homeownership to families living in poverty. Overall, 79% of the families in the Lease Purchase program are African-American (14% are Hispanic, 6% are Caucasian), 82% are female-headed households, and the average income of program families is about $17,000 a year. After a comprehensive screening process, a Lease Purchase family is selected for each property as it is nearing completion. Lease-purchasers and other tenants pay rent in the range of $250-$440 per month, depending on the size and product type of the house.

The Lease Purchase program is also a strategy for strengthening deteriorating inner-city real estate markets where the full cost of renovating an aging housing stock cannot be supported within the constraints of these markets. Because the financing structure of the Lease Purchase program is not dependent on these constraints, it is an ideal "first investment" vehicle for declining markets. In most "Lease Purchase" markets private investments have indeed followed CHN's lead; there are a number of markets that have strengthened to the point where the lease purchase model has been displaced altogether in favor of conventional sale products.

The Lease Purchase program was created in response to the affordable housing and capital development needs expressed by CHN's member CDCs. Based on our experience and the input of our member CDCs, beginning in 1994 CHN significantly increased the resources available for the development of new Lease Purchase projects. These additional resources have been targeted to a more comprehensive, sustainable rehabilitation that now includes vinyl siding and replacement windows on every Lease Purchase house developed, and 90+ furnaces. Additional resources were also added to strengthen the replacement and capital reserves available to the partnership over the 15-year life of the project.

The new construction of Lease Purchase homes is another program innovation that was incorporated based on the needs of our member CDCs. Faced with the prevalence of scattered site, vacant parcels of land left by the demolition of completely deteriorated structures, the CDCs were seeking an in-fill new construction product. In 1994 CHN responded with a product that was designed to fit the varying character of each member neighborhood. Under the auspices of the Lease Purchase program, CHN was able to provide an affordable new construction product that has immediately built the market value of the adjacent older homes.

To date, CHN has completed the acquisition and rehabilitation or construction of over 1,900 units through the Lease Purchase program. CHN controls each partnership by acting as the General Partner through a subsidiary corporation known as Houseco. Under IRS regulations, properties financed by the Tax Credit must remain as rental housing for 15 years. Therefore, Lease Purchase families must wait the full 15 years before exercising their option to own their home.

CHN's most recently financed project is Cleveland Housing Network Limited Partnership XVIII, a $10 million, 82 unit project that involves the acquisition, rehabilitation and lease-option of 61 formerly vacant and abandoned homes, and the new construction of 21 scattered site homes in various Cleveland neighborhoods. Financial capital for the project comes from a wide range of public and private sources. The City of Cleveland provides both interim and permanent debt through HOME and Community Development Block Grant funds, as well as weatherization funds. The State of Ohio allocates Low Income Housing Tax Credits, and energy conservation and other grants for the project.

KeyBank, Key Community Development Corporation, and the Enterprise Foundation provide private construction financing. Charter One Bank and Enterprise Social Investment Corporation provide private permanent financing. The Federal Home Loan Bank of Cincinnati and the Ohio Community Development Finance Fund provide interest rate subsidies for the project. The Enterprise Foundation continues to support CHN by providing a flexible line of working capital. Equity investment for CHN's recent projects comes from predominantly Cleveland based corporations and is organized by the Enterprise Social Investment Corporation, and the National Equity Fund - tax syndicators affiliated with the Enterprise Foundation and Local Initiatives Support Corporation (LISC) respectively. Charter One Savings Bank and the Ohio Housing Finance Agency provide a "bridge loan" covering multi-year equity pay-ins from corporate investors.

Since 1981, CHN's Lease Purchase program has generated more than $108 million in direct capital investment in Cleveland's neighborhoods, producing 1,900 homes for the lease purchase program.

The key to the program's success is a combination of significant capital investment, affordability, services provided to encourage greater resident self-sufficiency, strategic financing, and CHN's innovative lease purchase model.

Significant Capital Investment

CHN's Lease Purchase program has generated more than $100 million in direct capital investment in Cleveland's neighborhoods, producing the rehabilitation of 1,700 rehabilitated scattered site homes, and the new construction of more than 150 houses. Each home is extensively rehabilitated with a strong emphasis on durability and quality. The Lease Purchase program works to strengthen deteriorating inner-city real estate markets where the full cost of renovating an aging housing stock cannot usually be supported.

Affordability

Short of public housing, CHN offers families the most affordable rent ($250/month) that they are likely to find. Comparable rents on the private market average $400 to $625 per month.

Strategic Financing

CHN was the first program of its kind to link the Low Income Housing Tax Credit with a lease to purchase option, and continues as one of the nation's most deeply income targeted programs (without significant rent subsidies) operated by a non-profit.

Innovative Lease Purchase Model

A comprehensive approach in offering stable, decent, affordable housing, the Lease Purchase program also offers an asset-building opportunity to families living in poverty. Residents have the option to purchase their homes for approximately one-third of market value following the 15-year rental term. In 1999, the Affordable Housing Tax Credit Coalition awarded CHN's Lease Purchase program its 1999 Award of Excellence.

For more information about how to rent a Lease Purchase house, please call Brenda Hussein-Bey at (216) 574-7120, ext. 160.

If you have a house located in the City of Cleveland that you would like to sell or donate to CHN, please call Ken Tench, (216) 574-7120 ext.232