Foiled by "The Gap"

A good friend of ACCESS PRESS gave us a direct insight into the meaning of “The Gap” by giving us the details of her personal effort to provide an affordable home on a small scale.

This friend, who prefers to be nameless, is a tireless “do­gooder” in the best sense.  A social worker by profession, and an unstinting contributor of time and money to local and national efforts to serve humanity, she is totally unafraid of making an emotional commitment to aid individuals who need help.

Her “good idea” evolved from her professional knowledge of a young mother and her teenage son living in a substandard apartment on St.  Paul’s Lower Eastside.  The mother was slightly retarded mentally, but capable of living alone under a Section 8 subsidy (rent limited to 30% of her income from general assistance) while attending classes to improve her ability to go into competitive work.

Our friend decided to come to the aid of the mother and son and set about changing their situation.  She decided she could use Section 8 guidelines to provide a suitable home if enough equity could be raised from donations to bring the mortgage required to about $35,000.  A neat little two bedroom home was found in the Highland area of St.  Paul priced at $51,000.  Our tireless friend then set up a non-profit corporation, did the paperwork required to be recognized as a tax-exempt charity and finally raised $20,000 to fund the project.  The whole process took about two years to complete, but this is a tenacious individual.  Providing a better place for one family and a possible model for others seemed challenging, but not impossible.

The new non-profit company now owns the neat smaller two bedroom home, subject to a mortgage of $36,000.  Payments on the mortgage are $332.00 per month (the prevailing interest rates were 11%, and the bank lender was not charitable).  The payment is about $500 including non-homestead taxes and insurance.  Utilities run about $150 per month.  The plan was that St.  Paul Housing would underwrite $540 through the Section 8 program.  Our friend and her spouse agreed to pick up the shortfall until the time Section 8 payments covered costs.  Repairs and replacement of older appliances had to be funded by further donations.

Unfortunately, it isn’t working.  The tenant family proved to be unable to manage on their own, and my friend’s involvement grew.  There were housekeeping problems which deepened with time, and a decision was ultimately made to place the mother in a facility with more supervision and to find a foster home for the son.  Our friend has taken on that responsibility in her own home.

When the tenant moved out, the St.  Paul Housing Authority paid most of a $1500 redecorating bill at moving time with our friend picking up the cash difference and lots of hours of labor.  A new stove and a furnace blower amounted to $400 more which was unreimbursed.  The house remained vacant for two months.

Things look brighter now with a more self-sufficient tenant now occupying the home and the rental income at $550.  Monthly losses run about $100 plus repairs.  No plans are being made to expand the project, and plans are being made to sell the house.

The economic factors which doomed this good idea are the same ones faced by everyone involved in providing low income housing.  It is not possible to build or rehab two bedroom homes for less than $36,000 and it isn’t possible to rent them at more than $550.  There is no return on the $20,000 put into this endeavor, nor will the rent payments carry the mortgage of $36,000.  This is “the gap” and it is widening.  The social problems associated with this low income family were heavier than usual, but they are undeniably a part of the problem.  Most individual landlords would justifiably not want to be involved.

Our friend is dismayed, but not disheartened, by her experience She knows there must be solutions and will keep trying to find them.