When seeking new applicants, experienced mutual self-help groups will advertise in local media. Smaller organizations will focus on print media such as local and regional newspapers, with an occasional advertisement on a local radio station. Larger organizations, like LCCAC, will prepare short commercials for broadcast on local or public television stations. Another good strategy for reaching low-income applicants is distribution of program brochures to local service agencies and community associations, like Head Start programs or Parent-Teacher Associations. When expanding to a new area, an experienced self-group might take the time to distribute brochures and flyers door-to-door in low-income neighborhoods near the proposed project location. Some groups also hold informational meetings in the project communities, speaking at churches, colleges, community organizations or factories. These meetings also serve the purpose of informing neighbors about the upcoming project and responding to their concerns. Whatever outreach efforts are pursued, once a self-help organization has established itself in its service area, word-of-mouth becomes the most frequently cited reason by applicants for their knowledge of the program.

Organizations respond to local opposition in a variety of ways, depending on the dynamics of the community environment and past experience with NIMBY resistance. SCH has adopted a strategy of having a significant community contribution to the project planning process in order to reduce neighbors' concerns about proposed projects. LCCAC will not generally hold open community forums, since it is too hard in a large gathering to educate those in attendance about the self-help process. Instead, LCCAC staff work with local officials in the planning process, and through their involvement reduce community concerns about projects. LCCAC also produces photographs and architectural renderings of the homes they will build, and local officials may then share these with concerned residents. Often, when neighbors see the quality of the homes being built, they will support the project. SEWHC will send staff to meet with individual neighbors who voice concerns about a nearby self-help development, and they also bring with them materials to show the neighbors the appearance of the self-help homes. SEWHC staff also encourage their self-help clients to introduce themselves to neighbors while they are building. In many cases, through these introductions and by observing the hard work and dedication of the building groups, neighbors quickly appreciate the presence of the self-help participants. Finally, when HIP has encountered strong neighborhood opposition to a project proposal, it will seek sites elsewhere. Much of HIP's success rests with its good relations with city and county officials in its service area, and generating undue conflict among residents makes it more difficult for HIP to produce units. In most cases, HIP selects areas to build where the self-help homes will contribute greatly to the quality of the neighborhood, and concerns are usually very limited. Once construction begins, neighbors in most cases are pleased with the new additions to their area.

In order to qualify for a Section 502 Self-Help Loan, an applicant must be without decent, safe and sanitary housing. The applicant must be unable to obtain decent housing with his or her own resources or through any other lender on reasonable terms. He or she must be a citizen of the United States, an alien admitted for permanent residence, or an alien on indefinite parole (legally admitted for an indefinite period of time, although not necessarily permanently).

In order to qualify for a Section 502 loan, an applicant must have an adequate, dependable income to meet family living expenses, taxes, insurance and debt retirement on the housing loan. If the applicant's income is insufficient, another party may co-sign. RHS will consider income insufficient when principal, interest, taxes and insurance (PITI) exceeds 29 percent of repayment income for those below 50 percent of median, or 33 percent for those below 80 percent of median, or when total debt exceeds 41 percent of income. If an applicant shows evidence of poor credit history, he or she will not qualify for a loan. Evidence of poor credit history includes two debt payments more than 30 days late within the last 12 months, a foreclosure within the last 36 months, two or more rental payments more than 30 days late within the last two years, or outstanding collection accounts with a record of irregular payment and no satisfactory arrangements for repayment. Other similar criteria also figure into determining the credit-worthiness of Section 502 applicants.⁶

Most experienced self-help groups have many households on their waiting lists who would otherwise make good self-help candidates, but have credit and debt problems that disqualify them for a Section 502 loan. Most self-help programs therefore have some credit counseling.component of their training which is made available to all applicants, so that households on the waiting list may correct credit problems and qualify for the self-help program at a later date.

HIP serves Florida households between 50 and 80 percent of area median income, with at least 40 percent very low-income households as clients. The majority of households are headed by an individual between 20 and 30 years old, with an average of five children per household. The majority of clients are farmworkers, with most clients African-American or Latino. Staff did not have specific data, but a "sizable minority" of clients are single-parent, female-headed households.

Approximately 40 percent of SEWHC's clients in Wisconsin are very low-income households, and 60 percent are low-income. The group's urban program will serve clients with income at or above the area median. Approximately 45 percent of clients are Latino, 45 percent white, and 10 percent Asian or Native American. About one-third of households are single-parent, female-headed households, with only a few two-parent households in the program without children. Over half of the heads of households are under 30 years old, about 20 percent are between 30 and 39, 20 percent between 40 and 49, and only 5 percent older than 50. Most of the households served are farmworkers.

The average income of the Washington households served by LCCAC is below 50 percent of the area median. According to LCCAC staff, there is an average of at least one elderly household and two Latino households for each building group of eight families. A small number of households are recent Russian immigrants, and approximately 60 to 65 percent of all client households are white. About 95 percent of households have children, and about 50 percent of these are single-parent, female-headed households. In the last two years, only about 25 percent of new participants have been female-headed households. Although LCCAC did not have specific data, staff note that many of the clients served by the organization are farmworkers.

SCH serves an average income level of 62 percent of area median income in its California service area. Approximately 47 percent of their clients are Latino, 4 percent Asian-American, with a few African-American and Native American participants. The remainder of the clients are white. The majority of SCH's clients are farmworkers.

While the rural and urban self-help programs of these organizations do not serve the poorest of the poor in their service areas, each program serves a substantial number of households with incomes below 50 percent of the area median. Between the sweat equity savings, mortgage subsidies and downpayment assistance, these programs build homes affordable to all but the poorest clients.

Each group profiled in this report has far more applicants than they can serve with their current resources. In each case, it often takes up to two years from the time a household applies to a self-help program to the time they are notified of an opening with a building group. Each group also admits many households to their waiting list that do not meet all of the eligibility criteria for program participation. Sometimes this is because the household's income is too low, but most often it is because the household has credit problems. Each group has some training or counseling mechanism in place to advise applicants about improving their incomes or correcting problems with their credit.

There are different ways that waiting lists can be managed. One approach is to have a single pool of applicants, with clients selected from the top of the waiting list until enough qualified applicants are selected to fill a building group. Another approach is to allow applicants to state preferences for different areas they would like to build their homes. A separate waiting list is maintained for each area in the self-help group's service region, and when a project is proposed for a particular area, clients are selected from that area's waiting list. Another approach is used by SCH, which maintains a single waiting list, but selects clients for available building slots by lottery. Since SCH has a large backlog of applicants, SCH staff feel that a lottery is the fairest way to select program participants.

HFHI affiliates pursue many of the same outreach strategies as mutual self-help groups, advertising in local media or attending meetings of church organizations. However, HFHI affiliates have a different structure in place for selecting clients. Each HFHI affiliate has a local committee composed of community volunteers. The committee interviews and screens prospective clients, and then selects participants through deliberations.

Staff at each self-help organization emphasized the importance of continuing to generate interest in their self-help programs, thereby maintaining sizable waiting lists. Each group estimated that approximately 10 applicants are required to secure one qualified household. For example, if applicants are selected off waiting lists but have not yet corrected credit deficiencies, then they must be passed over and another candidate selected. If the waiting lists do not have enough households, it becomes more difficult to secure program participants who will meet RHS and urban self-help program eligibility criteria. According to staff at each organization, credit problems are the most common cause of ineligibility.

In the self-help development process, preconstruction training is the stage which varies the most from one organization to another. Preconstruction training may include review of loan applications and builder's agreements, credit counseling and homebuyer education, training in construction skills, and others areas of training pertinent to helping self-help clients become homeowners. The content of preconstruction training will vary from one organization to another, depending on the type of construction being done, the local construction regulations, the training needs of typical applicants in the area, and the organization's financial and staff resources. Preconstruction is most often carried out or overseen by group coordinators, the staff in a self-help organization that are responsible for recruiting participants, managing waiting lists, providing education concerning the program and loan documents, and sometimes managing family building accounts.

Preconstruction training generally takes three to six weeks prior to the start of house construction, depending on the program. LCCAC is the only group profiled that provides extensive training in construction skills during the preconstruction stage. HIP, SEWHC and SCH do most of their construction skills training at the job site once building has begun, providing on-the-job training throughout the construction stage.

Every self-help organization will have to spend time reviewing program requirements and loan documents with members of the self-help group. In the case of Section 502 loans, participants will also have to meet with RD staff, usually once as part of the loan application process, once to close the loan, and once upon completion of the home. Every self-help program will also spend a considerable amount of time reviewing expectations and responsibilities for the construction stage. RHS requires that the Section 523 grantees submit a sample "membership agreement," also called a "builder's agreement" in many self-help programs. The builder's agreement functions as a contract between the self-help organization and the client, and specifies all of the conditions of program participation covered in preconstruction workshops. Beyond these topics in common, however, self-help organizations must tailor their training to local conditions, the needs of clients and the specifics details of each self-help program.

Many self-help organizations will use the preconstruction phase to form a self-help association among group participants. This is a step recommended by RHS, although it is not a requirement. A self-help association will elect officers and sign a group agreement, sometimes included with each household's builder's agreement and sometimes as a separate document. The association provides a formal structure for participants to give input on the self-help process and progress toward their goals. It also provides a formal framework for resolving disputes within the group. Finally, the association will often carry on as a homeowners association after the families have moved into their completed homes. SCH is the only group covered that establishes formal self-help associations among its clients, although the other groups establish such things as grievance procedures and mechanisms for client feedback as part of the builder's agreements participants must sign.

HIP's preconstruction training places a very heavy emphasis on homebuyer education and credit counseling. Extensive homebuyer education allows HIP to help income-eligible households take care of credit deficiencies that would disqualify a family from participation. More important, though, is the role of early and ongoing counseling in improving household budgeting skills, and thereby reducing mortgage delinquency and the threat of loan default. HIP's homebuyer counseling program requires households to create savings plans, and counseling continues periodically during the construction phase and after homes have been completed. Clients are counseled concerning credit, budgeting, mortgage default, tax exemption, and insurance. They also receive instruction concerning home maintenance, interior and exterior decorating, and good neighbor relations. HIP documents a default rate of less than 5 percent for households who have completed its homeownership counseling program. HIP is certified by HUD as a homeownership counseling organization.

HFHI affiliates provide preconstruction training through their local committees. Often, a committee will appoint family liaisons to befriend client households and provide advice during difficult times. The committee, in conjunction with the affiliate director or volunteer coordinator, will also instruct clients in the responsibilities of program participation. Construction skills training is also provided to community volunteers who will be working on the Habitat for Humanity home. Clients who will contribute to house construction will also attend these classes. Some HFHI affiliates have organized classes on such topics as budgeting and home maintenance, or on building self-esteem. Smaller affiliates that cannot provide organized classes may find local professionals, such as money-managers, to volunteer their time and counsel HFHI clients.⁷

To adequately prepare clients, every self-help program should provide training which covers the general self-help process, project budgets, loan documents, and household financial responsibilities under the terms of the program. In addition, programs which have participants performing a substantial amount of skilled carpentry work will usually benefit by including extensive construction skills training during the preconstruction phase. Homebuyer and credit counseling is a component of most preconstruction training, and can preempt many potential problems such as poor credit performance and mortgage default after the homes have been completed. Each self-help group should consider the most likely problems that may arise for its clients, and the most complicated aspects of its self-help program, and design training workshops to address these concerns. The more care an organization takes in planning training for its clients, the more manageable are the problems that will inevitably arise over the course of construction.

VII.  THE CONSTRUCTION PROCESS

In the case of tracking labor contributions by ranking tasks, if all of these tasks are completed, and the full complement of points earned, self-help clients will have performed no less than the required 65 percent labor contribution. Points accrued roughly correspond to the hours required to perform the task and task difficulty. For example, HIP clients earn a maximum of 8 points for assisting with pouring of the footings, foundations and columns, work which involves substantial digging and heavy lifting, but only one point for assisting with installation of cabinets and counter tops, a less rigorous task in the building process.

An important feature of job site organization is the group's time sheet, which may be kept by the construction supervisor or by an individual selected by the self-help association. The time sheet may track the hours that group members work, or their labor contribution to particular tasks for purposes of crediting labor contribution points. Whoever keeps the time sheet, however, it is the construction supervisor's responsibility to verify that each member of the group has contributed a fair amount of work, and to intervene if a household becomes delinquent in meeting its labor contribution. The most common disputes at the job site often involve conflicts over how much labor has been contributed by each household.

Most self-help organizations accept the assistance of volunteer labor. In the vast majority of cases, volunteers are family and friends of the participants. Occasionally, a church or civic organization will contribute labor to a self-help building group. There are a number of ways in which self-help organizations may credit participants for the contributions of volunteer labor.

SCH requires each household to contribute at least 40 hours of "productive labor" each week. The construction supervisor determines whether or not a household has contributed productive labor. No credit is given for less than two hours worked on any given day. No children under 16 years old are permitted at the work site. In a two-parent household, the applicant and spouse are each required to work a minimum of 12 hours per week. In a single-parent household, the head of the household must work at least 15 hours. Each household may have as many as three volunteers, who must be signed up with the construction supervisor for accident insurance purposes. Only the hours of two volunteers can be credited to a household toward meeting a day's work requirement.

LCCAC also requires specified hours by the head of each household, with the remainder of the household's contribution provided by friends, family or volunteers. Any number of volunteers may assist a client household, but they must sign up with the construction supervisor in advance so that a work schedule may be prepared. The volunteer hours are credited to the household that recruited them, but the head of the household must still put in the minimum hours required each week. In addition, volunteers must be at least 16 years old and provide their own tools. Occasionally, volunteer from a church or civic organization help at building sites, and if this occurs their hours are divided up among all the households in the self-help building group.

In addition to receiving volunteer help from churches and civic organizations, HIP will use labor provided by a local youth service organization which provides at-risk youth the opportunity to develop job skills in structured and supervised environment. HIP will also use labor from individuals that the courts and prisons require to do community service. SEWHC encourages participating households to recruit volunteers, primarily family and friends. The hours worked by the volunteers are credited to the household that recruited them, although there are no separate records to distinguish volunteer labor from that of the self-help clients.

HFHI affiliates require their clients to contribute 300 hours of labor. Most often, the clients will contribute the labor to construction of their future home. However, in many cases clients may contribute some labor to their homes, and then donate labor to the construction of other HFHI houses in the area. If the client household members are elderly or have disabilities, the HFHI affiliate may instead require the household to contribute volunteer labor to other kinds of jobs, such as doing office work for the affiliate or helping to raise donations.

HFHI affiliates rely very heavily upon volunteer labor, and HFHI has developed sophisticated training for volunteer coordinators so that affiliates may most efficiently use the volunteers at their disposal. The emphasis on managing volunteers at the job site is to coordinate the work of groups with different skill levels. HFHI affiliates have a volunteer application which is used to rank volunteers by skill level. Volunteers may be skilled professionals with the ability to oversee the work of others, semi-skilled workers who can take responsibility for their own work and tools, and unskilled workers who can perform basic tasks with supervision or provide basic labor in assisting skilled workers. HFHI also classifies tasks according to the skill mix of volunteers necessary to carry them out. For example, laying brick is a skilled task that can be done with two professionals and one semi-skilled volunteer. Unskilled volunteers would add to the work time for the task, and increase the risk that it would not be performed properly. On the other hand, landscaping is a task that could be done effectively by five unskilled workers under the supervision of one semi-skilled volunteer. HFHI affiliate directors and volunteer coordinators carefully lay out a work plan according to the availability of volunteers of different skill levels. In this way, skilled professionals are present for complicated tasks, and on days when basic labor is required, large numbers of unskilled volunteers will be present.⁸

The role played by volunteer labor in the construction process is one of the most significant differences between the non-owner volunteer model exemplified by HFHI and the mutual self-help model. In most cases, volunteer labor is an extremely small fraction of the labor that goes into the construction of mutual self-help homes, with the exception of labor contributions by family and friends. Since households need to contribute at least 65 percent of the labor needed to construct their homes, volunteers from charitable and religious organizations generally play a smaller role at self-help developments. However, volunteer labor contributions and support often give participating households an important morale boost or the opportunity to take part of a day off to tend to family business. Ultimately, though, it is the self-help clients who primarily build the houses in their free time.

Each group interviewed emphasized similar qualities sought in their construction supervisors. Obviously, a self-help construction supervisor needs to have basic construction skills and knowledge of the construction process. However, most experienced self-help organizations place more emphasis on the interpersonal skills of their construction supervisors. This position requires an individual who can resolve group conflicts quickly and fairly, and retain the respect of the group members. In addition, the difficulty of constructing homes while working full-time jobs demoralizes even the most enthusiastic self-help clients. The construction supervisor must be able to motivate participants constantly over a long and difficult building period.

LCCAC staff noted that they can always upgrade the construction skills of a supervisor, but that it is difficult to teach the interpersonal skills and patience needed for working with a self-help building group. Each self-help organization also noted that in many cases, construction supervisors who have worked exclusively with for-profit contractors often do not work out very well. These individuals are used to focusing only on building-related problems, and often have difficulty maintaining patience with self-help workers that need a significant amount of training and supervision. Almost all experienced self-help organizations have at least some construction supervisors who are graduates of the self-help program. These individuals are ideal for the position because they have developed the necessary construction skills through building their own homes and are familiar with the self-help aspects of the organization's program. They have gone through the process themselves, and are therefore able to preempt many potential problems.before they arise. They also offer an example to participants of what can be accomplished if they complete the program.

The most common construction tasks that must be contracted out include excavation, pouring foundations, hanging drywall, plumbing, and electrical work. LCCAC's construction process is very typical of many self-help organizations, and SEWHC also practices construction in a similar manner in Wisconsin. In Washington, LCCAC uses subcontractors for excavation, electrical work, plumbing, floor covering, hanging drywall, mounting gutters and downspouts, and hydro seeding. Self-help participants assist some of the subcontractors in their work. For example, self-help workers may dig ditches for plumbers to lay pipes or carry materials for the drywall hangers. The self-help clients perform the remainder of the construction work, including framing the house, roofing, finish carpentry and installing counters and cabinets. The construction supervisor establishes what tasks will be completed and which houses need to be worked on each week. LCCAC construction supervisors will train all participants in new tasks, closely supervise the task the first time it is performed, and then allow participants to perform the task on other houses at the site with only limited supervision. Construction supervisors are still responsible for inspecting all work, and if it is not done properly, will require participants to tear it down and do it again. The construction supervisors improve the efficiency of the construction process by developing jigs which outline cutting patterns and other construction aids at the job site. This minimizes waste of materials and improves the accuracy of measuring and cutting materials.

In California, SCH has developed an interesting innovation on the standard organization of self-help construction. SCH uses subcontractors to pour the foundations, install plumbing and electrical wiring, hang drywall and construct the roofing on two-story houses. Self-help participants work on framing, painting, trimming, cleaning the site, putting up roofs on one-story houses, hanging doors and windows, landscaping, and sometimes installing cabinets. SCH's innovation on the process used by groups like LCCAC is a modification of the organization of construction used by many for-profit developers of large subdivisions. Called a "staged construction approach," it mirrors the efficiency of a factory organization of work, where tasks are made routine by specialization and repetition. The self-help building group is broken up into small teams. The first team is trained by the construction supervisor to perform a specific task on one house, performs the task with direct supervision on the next house, and then continues without supervision until the task has been completed on every house in the group. Another small team is then trained to perform the next logical step in the construction process, and they follow close behind the work of the first team. If subcontractors are at the site, the self-help teams avoid those units at which the professionals are working, and rotate back to them when the professionals have moved on to another unit. This organization of labor increases efficiency of construction, by allowing the construction supervisor to provide full training for each task but set work groups to a variety of tasks at once.

HIP practices an interesting and effective variation of the standard mutual self-help construction model. The first distinction between HIP's construction process and groups like LCCAC, SEWHC and SCH, is that HIP builds concrete block houses instead of frame houses. Concrete block construction is the most common practice in central Florida, owing to the high cost of lumber and the need to build houses that can withstand hurricanes. In HIP's construction model, almost all of the skilled construction tasks are performed by subcontractors. Self-help participants primarily function as the unskilled labor assisting the professional construction workers. Part of the reason for this is that many of the tasks involved in building concrete block homes are complicated and costly if not done correctly the first time. If a self-help group does a poor job putting together a wall frame, the frame can be torn apart and much of the material reused to build another frame. If a concrete block wall is not laid correctly, the wall must be torn down and rebuilt with new materials. Additionally, the prevalence of hurricane damage in the area has led to rather strict building codes and construction trades licensing regulations in Florida. It would be too costly for HIP to license all of its construction supervisors in the various construction trades needed to complete a house, and the organization would still need to negotiate with licensing boards in order to allow unlicensed self-help participants to perform skilled tasks even under the direction of a licensed construction supervisor.

HIP uses subcontractors for pouring the driveways and foundation slabs, concrete block work, plumbing, electrical work, hanging drywall, installing heating and air conditioning, roofing and cabinet work. Self-help participants perform the unskilled labor of house construction, such as carrying concrete blocks for the masons, digging ditches for laying pipe, carrying shingles for roofers, and cleaning up the job site. Other tasks performed by self-help households are painting, landscaping and putting down flooring. Normally, HIP does not have self-help participants use heavy tools, like power saws, that might cause serious injury. Even though HIP clients perform very little of the skilled labor in home construction, they still contribute at least 65 percent of the labor necessary to build their houses. The advantages of HIP's model are incredible efficiency of production and low overhead for preconstruction training. Since clients do not need to learn complex construction skills, HIP does not need to invest in extensive building skills training prior to construction. Additionally, because of the reliance on skilled construction professionals at the job sites, HIP is able to produce a large volume of houses. HIP is currently producing over 100 homes per year. The limitation to this method is that self-help participants are not as likely to acquire construction skills that may translate into employment opportunities and reduced maintenance costs on their homes. The organization has addressed this concern by providing a.home maintenance workshop as part of preconstruction training, and assisting former self-help clients who express an interest in entering one of the building trades.

At least for the groups profiled in this report, different climates have only minimal impact on the development process. In central Florida, concrete block homes are the most common housing form because of their structural integrity, an important feature in a region that experiences seasonal hurricanes. In Wisconsin and Washington, building groups will still work through the winter months, although these groups do proceed more slowly than those which build during the spring and summer.

Each of the self-help organizations profiled here plans for approximately one month of construction time per house, although staff at each organization note that occasionally delays are caused by bad weather. In many cases, however, motivated self-help work groups will complete their homes in less time. For example, LCCAC generally uses building groups of eight households, but the average time for completion of eight houses is six to seven months. HIP's process is somewhat faster, owing to its reliance on more contracted labor. HIP building groups of eight households typically take five to six months to complete their homes.

Challenges at the Self-Help Construction Site

The most common challenge that self-help organizations face during the construction phase of development is group conflict. Group conflict may arise from a variety of causes, usually having to do with members of the group feeling that one household is not contributing enough labor or that one household is working on its own house to the exclusion of others in the group. Regardless of the origin of a group conflict, however, an experienced self-help organization will have procedures in place to resolve disputes or remove households from the program in cases of nonparticipation.

Since RHS requires a self-help organization to develop a builder's agreement that specifies the terms of program participation, any self-help group that receives Section 523 administrative funds must have procedures in place for addressing grievances and managing cases where a client must be terminated from the program. However, groups are given a wide degree of latitude in establishing their dispute resolution and program termination procedures.

In Wisconsin, SEWHC staff cite group conflict as a recurring issue at job sites. In general, SEWHC first makes efforts to maintain the authority of the staff, particularly group workers and the construction supervisor. In cases where a household is not contributing enough hours of labor, the organization will step in and try to address the cause of absenteeism. For example, SEWHC might arrange for child care so that a single parent may be free to work at the job site. SEWHC also makes sure that all group members are present for demonstrations of construction skills, so that every group member is able to participate in each building task. Small disputes are resolved by informal mediation, usually on the part of the construction supervisor. If a dispute escalates, SEWHC will first try to work out a problem at the job site, as described. If this does not resolve the problem and a household repeatedly misses its work obligation, SEWHC begins a formal procedure to remove the problem household from the program. At this point, the Executive Director begins formal mediation with the household. If this step should fail, the household is removed from the program in a process that also requires a vote by the self-help group. The removal of a household from the program has only occurred twice. SEWHC staff emphasize to clients that it is possible to lose their homes for noncompliance with the work agreement, and that this motivates participants to work out disputes quickly.

SCH's builder's agreement establishes a grievance procedure for resolving complaints at the job site. It stipulates that complaints will be resolved by the construction supervisor, and that in inter-family disputes, the president of the self-help association will also be involved in mediating between the parties. If necessary, a group meeting will be called to address the problem. A common source of disputes is group members feeling that one family is working on their home to the exclusion of other houses at the job site. Typically, the group will adjust the work schedule through the mediation process to reduce the work on that one house and add labor hours to the other homes that are less complete.

SCH also has a formal grievance procedure in cases where a household fails to meet its labor obligations. If a household falls 15 hours behind its minimum required work hours, SCH notifies the family in writing that they are in jeopardy of losing their home and defaulting on the membership and builder's agreement, and request from that family written notification as to its reasons for falling behind. If the household falls behind by 40 hours without justifiable cause, the self-help group members may, by a majority vote, request that future assistance for the household's home be withheld until the household brings its hours up to date or makes some other arrangement satisfactory to both the self-help group and SCH. If a household falls 60 hours behind and does not make efforts to correct the situation, the self-help group may, by a two-thirds majority vote, request that SCH expel the family from the program and find a suitable replacement household. SCH has found it to be extremely rare that a family must be terminated from the program, and since it carefully reviews the terms of the builder's agreement with every participant, problems have rarely reached the stage of expulsion.

Sometimes, unexpected hardships may force a family to curtail or scale back its labor contribution to the construction process. A medical emergency or death in the family may make it difficult for a household to contribute the labor hours required under its builder's agreement. Staff at SCH describe this kind of situation, where the head of a household had a heart attack at the job site and passed away. The household was given some time to mourn their loss, but their labor contribution was missed by the other group members at the job site. The construction supervisor held a discussion with the family, and they expressed a great desire to see the project through. They were able to work out a schedule to complete their labor contribution and help the group finish all of the homes. SCH staff note that this process was eased by provisions included in the organization's builder's agreement, which includes a statement of the expectations and procedures in place should unexpected family hardships arise during the construction process. .Since each household was aware of these provisions governing family emergencies, it was easier for the organization to adjust work schedules to accommodate family needs.

LCCAC has had to address a problem that may be easily overlooked by a self-help organization. Many of LCCAC's clients have limited math skills. Many of its clients were also raised in other countries where the metric standard of measurement is used instead of the English standard of feet and inches. LCCAC has found that many self-help participants express a reluctance to perform the measurement calculations necessary at the job site. The organization has addressed this problem by providing remedial math instruction as part of its preconstruction training, and devoting training time in the use of tape measures at the work site.

Every experienced self-help organization notes that maintaining the motivation of the self-help work groups is the most common and persistent challenge once construction has begun. This is an issue that is usually best addressed by the construction supervisor, since he or she is the organization's representative at the job site and has contact with the self-help group on a day-to-day basis. For this reason, it is very important that newer self-help organizations seek candidates for construction supervisor positions that have strong interpersonal skills.

One final construction challenge involves building two-story as opposed to one-story houses. Consensus is divided among experienced self-help organizations as to the level of difficulty in building two-story houses. SCH, SEWHC and LCCAC self-help groups build two-story or split-level homes. RD has been reluctant in the past to support two-story development, because of potential hazards of participants working at heights and the possibility that the construction process will become too complex to finish the homes in a timely fashion. However, each of these groups has adjusted its construction process to accommodate multi-story construction. LCCAC staff feel strongly that two-story homes fill a number of important needs for their clients. LCCAC has not experienced an increase in construction time, and construction costs are reduced compared to building a single-story house with the same square footage. Two-story houses provide maximum square footage while occupying a smaller amount of space on the lot. Since they have a smaller "footprint" on the lot, LCCAC is able to build on smaller lots, which allows more homes to be built at less cost. Self-help clients benefit by adding another dimension to their construction experience, and they receive a greater return on their investment since two-story homes have greater resale value in this area of southern Washington. LCCAC does not require any participant to do roof work on any home if physical considerations or a fear of heights pose problems for a self-help client.

Construction Financing and Permanent Financing

Under the RHS Section 502 Self-Help Loan program, self-help participants close on their loans before construction begins. These funds are then usually kept in a checking account managed by the self-help organization, with each client household having its own account. As funds are needed to purchase building materials or pay subcontractors, they are drawn down from the family accounts. Program participants may have their mortgage payments deferred until completion of the house. Once clients occupy their new homes, they begin making mortgage payments and the self-help organization no longer manages their accounts. At this point, the Section 502 loan serves as the permanent financing.

HFHI has standard mortgage terms used by all of its affiliates. The standard loan terms call for 0 percent interest on a 20-year loan. HFHI loans require a 1 percent downpayment and the first year's insurance, which typically amounts to approximately $400 to $600 up front for the client household. There is no application fee or origination fee. However, HFHI affiliates work closely with their clients to develop a budget and save the money so that it will be available upon completion of the house. HFHI frequently provides the mortgages itself, although some local affiliates have worked with state agencies and local lenders to provide mortgages under the terms required by HFHI.

Urban self-help programs with non-RHS financing often need to make different financing arrangements to cover construction costs. In most cases, a separate construction loan must be secured, which is then paid off once clients close on their mortgages. Affordability is often enhanced through downpayment assistance, mortgage write-downs or second mortgages.

LCCAC's urban program is financed by a consortium of six banks active in southern Washington. One bank provides the construction loans to LCCAC, and all six banks divide responsibility for the mortgage financing. The self-help clients receive a purchase and sale agreement prior to the start of construction, stating the price and loan terms the bank has agreed to provide. LCCAC draws down funds from the construction loans to pay for materials, subcontractors and other construction expenses. Upon completion of the houses, LCCAC sells the homes to the self-help clients, financed by the client mortgages. The Federal Home Loan Bank of Seattle and the Washington Housing Trust Fund provide mortgage write-down funds to increase the affordability of the homes. These funds constitute second mortgages. As long as the clients occupy the homes for a specified period, the mortgage write-downs are forgiven. The mortgage write-downs are repayable upon change of use, sale or refinance of the property before the use restrictions have expired. Banks in the consortium contribute to affordability by reducing points at closing.

SCH's urban self-help program relies on construction financing from Wells Fargo Bank and Bank of America, which provide loans with favorable terms to SCH. Costs are lowered by indirectly reducing land costs under the City of Gilroy's growth control requirements and obtaining CDBG funds for infrastructure development. The developer's fee and sale of below-market rate contractor-built homes makes the self-help units less costly for families. Self-help clients do not close on their mortgage loans until completion of the houses. Permanent mortgage financing is provided by the California Housing Finance Agency (CHFA). CHFA periodically floats a special bond issue, the proceeds of which are used to provide mortgages at 5 percent interest for affordable single-family housing to experienced nonprofit developers. The clients must also save for a downpayment at the time of loan closing. Finally, the City of Gilroy holds a soft second mortgage on the self-help units in the amount of the difference between the actual cost of the homes and the market value. Resale restrictions are attached to the second mortgages, where low-income families must remain in the homes for 30 years before the second mortgages are forgiven. If the family sells the home to another low-income household, the use restrictions are transferred to the new owner. If the home is sold to a borrower who is not income-eligible, the second mortgage must be paid off. This arrangement helps Gilroy maintain the stock of available affordable housing.

SEWHC's urban self-help program, called the "Pilot Program," makes self-help houses affordable by providing downpayment assistance. General Electric Mortgage Insurance Company (GE) guarantees the mortgages. Three area banks provide construction financing to SEWHC and the permanent mortgages for the clients. GE and the banks credit 800 hours of self-help labor, or 400 hours of rehabilitation work, as the equivalent of a 10 percent cash downpayment. After the labor is completed, SEWHC deeds the homes to the self-help clients.

These programs provide just a few examples of how alternative financing and innovative partnerships can support self-help housing development. They allow self-help organizations to expand their services to areas not served by RHS. These programs also tap into state and private sector financial resources at a time when demand is growing and resources shrinking in the RHS Section 502 program.

VIII. BUILDING ON EXPERIENCE: OBSERVATIONS AND SUGGESTIONS
Self-Help Organizations

Experienced self-help organizations have a number of suggestions of benefit to newer organizations, and a wide variety of ideas concerning creative ways to use federal and state programs more effectively. In addition, their experiences suggest a number of points to consider when forging partnerships with local governments and private lenders, and developing innovative financing mechanisms for self-help housing.

Dedicated staff that work as a team are critical to the success of a self-help program. Housing development is a difficult and complex undertaking, and training and supervising inexperienced self-help clients adds yet another layer of complexity to the process. Recruiting staff with strong interpersonal skills and problem-solving abilities appears the most successful personnel strategy. SCH has taken this concept quite far, instituting a consensus decision-making process that fosters input from all of the self-help staff. Self-help program staff certainly need some degree of expertise in their program areas. Group coordinators need familiarity with the funding sources they will manage for their clients and construction supervisors must have expertise in building. Nonetheless, self-help staff must be flexible, able to adjust to the changing needs of their clients and the increasing complexities of securing financing, obtaining land, and building homes.

The most successful self-help organizations all have strong preconstruction training programs. The more resources and effort are invested in education prior to building, the more prepared clients will be for the rigors of the process. Strong training programs also promote household success after program graduation. HIP staff feel that the organization's ongoing homebuyer and credit counseling has significantly helped clients avoid mortgage delinquency. LCCAC's extensive construction skills training has led many of its program graduates into better-paying careers in the building trades.

Having a clearly stated, encompassing builder's agreement is important to resolving client disputes throughout the self-help development process. No document can cover every possible contingency that might arise over the course of construction, but having expectations established, rules and conditions clearly stated, and a grievance procedure outlined can preempt many problems that may arise once participants begin building their homes. SCH has revised and updated its builder's agreement on occasion to reflect lessons the organization has learned about client needs. Every experienced self-help group emphasizes the importance of the agreement and the conditions it sets out for becoming a homeowner.

Self-help organizations can improve their capacity by cultivating long-term, positive relationships with local government officials. HIP's experience illustrates what can be accomplished by developing partnerships between the self-help group and officials in city and county government. These relationships can ease the process of obtaining land, building permits, and zoning variances. Local officials are often in a position to support development work with CDBG funds, or funding received through the state. The support of local officials also contributes to the positive reputation a self-help organization needs to develop in the community. Each community is different, so it is important to get to know officials personally. As HIP staff note, this establishes a development environment where cooperation and partnerships are the norm, so the organization is "not always fighting a battle."

Establishing a revolving loan fund for land acquisition and predevelopment activities can also greatly improve a self-help organization's capacity. Even if the fund is small, it can be used to secure one more lot in a scattered site project or cover the cost of a design change required through the local plan approval process. Seed money from a revolving loan fund can also be used to leverage other funding sources, or to obtain an option on a piece of land until acquisition financing is secured. Even if an organization does not choose to create a revolving loan fund, it should maintain a contingency fund to cover unexpected costs over the course of development. Environmental hazards discovered during an environmental review, construction delays caused by bad weather or problems securing zoning variances, or increases in the cost of building materials can increase the cost of a project significantly and reduce the affordability of the self-help homes. A contingency fund allows the organization to mitigate many of the risks of development, and maintain an efficient and cost-effective building schedule.

There are a variety of other measures that may improve a self-help organization's program performance. Increasing the number of bilingual staff can improve outreach and training. Recruiting a staff member with public relations experience will contribute to marketing the group's self-help program and seeking grant support. Most self-help groups perform some level of homebuyer counseling during preconstruction training, and many counsel program graduates on an informal basis when the former clients may be having difficulties. However, instituting formal follow-up counseling for program graduates may significantly reduce delinquency and default rates among self-help homeowners. HIP, for example, is considering extending its homebuyer counseling program in this fashion.

Local, State, and Federal Government Support

Most established self-help organizations have far more applicants than can be served with their resources. The Section 502 Self-Help Loan program is highly regarded by all experienced self-help groups for two primary reasons. The program's financing structure makes the loan funds available for construction, so that a self-help organization does not have to secure construction loans with interest due, thereby driving up the cost of the homes. The Section 502 program is also highly regarded because no downpayment is required and the mortgage interest subsidy makes homes affordable even for very low-income households. Continued and expanded funding for the Section 502 Self-Help Loan program is a priority for self-help organizations at all levels of experience.

Federal and state affordable housing programs have assisted millions of poor Americans obtain safe, decent, affordable housing. Programs supporting mutual self-help housing have not only benefitted clients, but also the communities in which the homes are built. Experienced self-help developers often note the lack of public awareness concerning the availability of these programs and their positive impact on communities around the country. Many self-help groups favor stronger publicity efforts by the federal government and their state agencies on the benefits of self-help housing in particular and the contributions of affordable housing programs in general to community well-being.

Given the trend toward devolution of programs, experienced self-help groups are more frequently seeking partnerships with state and local governments. There are a variety of initiatives that could be undertaken at these levels of government that would provide a great deal of support for self-help housing development.

Many states have programs administered by state housing finance agencies or state housing trust funds that provide funding to local government or qualified nonprofit developers for land acquisition and infrastructure development. However, since acquisition and predevelopment are the most risky stages of the development process, innovative efforts to support these activities would help self-help groups serve a larger number of households. For example, HIP has received land donated by Orange County. However, state incentives to local governments to support these kinds of gifts would foster stronger relationships between local government and self-help organizations, would put vacant land to productive use, and would support affordable housing development with very small capital investments. Downpayment assistance is another form of subsidy that often helps make homes affordable to low-income households, even in the absence of the more substantial mortgage subsidies found in the RHS Section 502 program. Local government support of state downpayment assistance programs, or efforts by local government to spur the investment of private lenders in a local or regional program, would be of great value to many self-help organizations.

A problem faced by self-help groups around the country, but especially in areas experiencing heavy growth, is rising impact fees required by local governments. Staff at the organizations profiled here expressed support for efforts by city or county governments to reduce impact fees on projects providing housing for low- and very low-income households.

Many established groups have developed urban self-help programs in order to create financing mechanisms that provide an alternative funding source to the RHS Section 502 Self-Help Loan program. While these groups have pursued these initiatives in order to serve clients outside of RD service areas, the other major impetus has been to maintain self-help production in an environment where demand for the Section 502 loans far outstrips the program's funding. In every case detailed in this report, staff noted that the private lenders investing in their self-help programs cited compliance with the Community Reinvestment Act (CRA) as a major incentive for their participation. Small banks, however, have less detailed CRA examination requirements, and are often the only lending institutions in many rural areas where self-help groups are active. These self-help groups feel strongly that CRA should be maintained, or even strengthened and expanded to prompt greater involvement of smaller local lenders. Bank mergers pose a related challenge to self-help organizations that have developed alternative financing mechanisms under urban self-help programs. If a local bank has invested in an organization's self-help program, there is no certainty that after a merger the parent bank will continue to invest in self-help housing. While there is no particular solution to this issue, it is one that concerns self-help groups that have invested much of their financial and staff resources into the development of relationships with private lenders.

IX. THE COMMUNITY IMPACT OF SELF-HELP HOUSING
Benefits to Self-Help Clients

The mutual self-help development process has a significant impact on the lives of participants. Staff at self-help organizations around the country consistently observe how the self-help process has increased the self-esteem of clients. For many program graduates, this is the largest undertaking they have attempted in their lives. Self-help staff report that many clients, seeing their success in building their own homes, have gone back to school to improve their job prospects or opened businesses of their own.

The training required to construct self-help homes gives program participants solid skills in the building trades. A large number of clients formerly employed in low-wage jobs such as service work or farm work are able to obtain employment in one of the building trades at much higher rates of pay. LCCAC has used subcontractors who are former self-help clients, with at least one case where the organization assisted the individual in obtaining a contractor's license through instruction and referrals. One of HIP's former clients has established his own electrician's business, and trains and hires low-income youth from his neighborhood. Most established self-help organizations actively seek to fill construction supervisor and group coordinator positions with former clients. This offers program graduates an excellent opportunity to use their newly developed skills and share their experience with incoming clients. Self-help groups will also often make job referrals to local builders for program graduates, or help them obtain licenses in the skilled building trades.

In addition to using the construction skills gained in the self-help process to secure better employment, these skills also reduce the long-term costs of homeownership for program graduates. They have the ability to perform most of their home maintenance labor themselves, and are able to make substantial renovations to their homes with only limited assistance from family and friends. This helps them improve the value of their property and save money as they improve the quality of their living environment.

Anecdotally, the self-esteem fostered in program participants has an impact on their children. Self-help staff observe that the children of self-help clients tend to do better in school. Having a stable and safe home environment has contributed to their school performance, and it is likely that their parents' rising expectations upon completion of their homes provides some inspiration as well.

Finally, homeownership offers an opportunity for these low- and very low-income households to build assets that may support retirement or their children's educations. Self-help participants have the opportunity to build equity in their homes, a financial resource that can help them weather hard times or provide a springboard for their children's future. There are limitations to using equity in this fashion in cases where a subsidy must be recaptured upon refinancing or sale of the home. However, once a household has met use restrictions for second mortgages or refinanced the home with a private lender and paid off RHS mortgage subsidy, the household may then use equity in the home to seek home equity loans or other related financial resources. Even when a household has not paid off subsidy, and therefore cannot use the equity in the home, a record of making timely payments over many years may convince a bank the client is a good risk for other kinds of loans, such a loan to establish a small business. Self-help programs therefore offer low-income households the chance to access the same kind of financial resources available to middle-class homeowners.

Benefits to the Community

Mutual self-help programs contribute significantly to local economies. Building single-family, owner-occupied homes improves a city's or county's tax base, especially when an organization's subdivision development creates entirely new neighborhoods. In most cases, the high quality of self-help homes increases property values in the areas surrounding the development. This too increases the local tax base, and provides greater home value for neighbors of a self-help project.

Self-help organizations also contribute directly to local economies in a variety of ways. As part of the development process, these groups must pay for permits and impact fees, generating revenue for local governments. Larger organizations provide a number of employment opportunities, with many of these positions occupied by individuals who are former low-income self-help clients. Self-help groups also must hire subcontractors, which also supports a community's job base. While most self-help organizations need to secure bids for their building materials in order to reduce costs, many also strive to purchase their materials from local suppliers whenever possible. In the cases of groups like LCCAC, HIP, SCH and SEWHC, which are among the largest builders in their regions, this practice has a substantial and positive economic impact.

Self-help housing development also may contribute to the realization of community growth plans. A city or county may wish to revitalize a blighted area, or extend infrastructure to areas of future residential and commercial growth. Supporting an affordable homeownership project may allow the local government to utilize CDBG and other community development funding sources. The self-help development will often serve as the anchor for future growth initiatives.

Self-help groups make very good neighbors. The bonds formed while building each other's homes often carries on after the houses have been completed. It is quite common for a self-help group to take the lead in establishing a neighborhood organization that works to maintain the quality of life in a community. These groups provide input to local officials on neighborhood infrastructure needs and on proposals for development in adjoining areas. Self-help homeowners have often inspired neighbors to improve their own homes. One self-help participant in Winlock, Washington, observed that the self-help homeowners in her subdivision have an informal competition to see who can make the nicest improvements to their property. Self-help developments also can improve blighted areas plagued by crime and drugs. Self-help clients have invested a considerable amount of sweat and money in their homes, and are generally quite vigilant about potential problems in their neighborhoods. HIP staff have observed that drug pushers no longer frequent many of the areas where the organization has built homes. In addition, many self-help clients become more involved in community organizations. Their experience in building the own homes has given them the motivation to contribute to the well-being of their communities, and the experience necessary to carry through the challenges of serving other families in need.

The mutual self-help process empowers its clients and improves communities. It has played an important role in providing affordable housing opportunities to a large number of low- and very low-income households. Along most measures, the self-help process has improved the prospects for program graduates. The mutual self-help process provides the means for families to build something tangible for themselves and realize one of the key components of the American Dream, owning their own homes.