PATH/HUD Demonstration Project

President Visits Oglala Lakota Housing Models

"There is no more crucial building block to a strong community and a promising future than a solid home." With those words, President Bill Clinton opened "Shared Visions: Native American Homeownership and Economic Development Summit," July 8 on the Oglala Lakota Pine Ridge Reservation in South Dakota.

The conference -- organized by the Department of Housing and Urban Development and the Oglala Lakota Nation -- prominently featured PATH advanced technologies. "Shared Visions," the first Native American housing conference to be held on a reservation, attracted hundreds of tribal representatives, lenders, executives of major corporations, home builders and housing and economic development experts from around the nation.

In his keynote address, the President announced initiatives to streamline relevant federal housing regulations and encourage housing partnerships between tribal housing authorities and federal agencies, lenders, homebuilding industry professionals and community and faith-based groups.

The President spoke from a stage surrounded by PATH assembled new and emerging technologies, products and systems that could be incorporated in the future homes to be built on reservations across the country. The technologies that the nation’s top tribal housing authorities examined included: light-weight autoclaved aerated concrete; an Energy Star refrigerator and condensing gas furnace; heat recovery ventilator; "Category 5" home wiring display; insulating concrete forms; a steel framing wall system; straw bale construction; structural insulated panels and a prototype tornado-resistant "safe room."

Prior to the keynote speech, Oglala Lakota Tribal President Harold D. Salway took President Clinton and other top federal and private sector officials on a tour of new housing being built under the direction of the HUD-sponsored Oglala Sioux Tribal Partnership for Housing, Inc.

In tackling its housing responsibilities, the Oglala Sioux Tribal Partnership for Housing, under the Shared Visions initiative, will provide Native American communities across the country with the organizational, financial and legal models for addressing their affordable housing needs.

With PATH support the Oglala Sioux Tribal Partnership for Housing has incorporated numerous building innovations into its new manufactured and modular housing. By the end of Summer 1999 the Oglala Sioux Tribal Partnership will have completed 19 three and four bedroom homes and by early 2000 it will have built 50 homes.

The technologies and building processes used in the new homes advance PATH goals of housing durability, energy efficiency and affordability. They included: advanced framing techniques: optimum value engineering; air admittance vents; flexible gas piping; high performance windows; high efficiency water heaters; high efficiency heating and ventilation equipment; ducts inside conditioned space; insulated headers; low flow plumbing fixtures; low VOC sealants, adhesives and paints; pre-finished drywall corners; unvented crawl space foundations; and xeriscaping.

The task before Native American housing authorities, such as that of the Oglala Lakota, is great. Over 40 percent of the housing on tribal lands is considered substandard -- six times the rate for the rest of the United States. On reservations, 21 percent of homes are overcrowded -- nearly 10 times the proportion elsewhere.

Although more than 700,00 Native Americans live on tribal lands, fewer than 300 conventional or government-insured mortgages have been issued to date. Lenders are often reluctant to approve mortgages for the purchase of homes on land held in trust by the federal government for tribes. Federal regulations and paperwork slow down and complicate the process of obtaining a home mortgage. Tribal families lack homeownership counseling to help them with financial planning, credit, downpayments and other issues involved in the mortgage process.

Pine Ridge’s housing situation mirrors the rest of Native America. The reservation, 120 miles southeast of Rapid City, SD, covers 4,355 square miles. More than 40 percent of the Lakota families live in substandard or overcrowded conditions. The waiting list for affordable housing is 12 years long.

Since it was created last January with a $2 million HUD seed grant, the Oglala Sioux Tribal Partnership for Housing, has begun to identify Pine Ridge families ready to buy a home, provide families with housing counseling, serve as a liaison between families and lending institutions, assist families in finding affordable homes for purchase or construction, and help them locate the best lending packages. The Oglala Sioux Tribal Partnership for Housing is helping to find or provide gap financing for families and most importantly, persuade the private sector to address real estate needs, construction development and financing on the reservation.

Pine Ridge Reservation development costs are high. Infrastructure costs -- creating water, sewer and roads -- are over $17,000 per home. Building homes or transporting manufactured homes is more expensive because of the remote location. Total development costs are over $100,000 per home.

With HUD assistance, the Oglala Sioux Tribal Partnership for Housing has attacked such problems and, in the process, gained considerable expertise in creative housing finance. In order to increase the loan amount for which each home buyer can qualify, the new housing authority has moved to lower the interest rate on the mortgages. It is using two techniques to reduce interest rates -- guarantees and mortgage revenue bonds.

Norwest Bank is originating the mortgages and packaging them into a "security." The mortgages are being guaranteed by the HUD Section 184 loan guarantee program and the "security" is being guaranteed by Ginnie Mae. The State of South Dakota Housing Development Agency is then purchasing the mortgage-backed security utilizing proceeds from the Mortgage Revenue Bond program. This arrangement is producing mortgages at a low 5.95% interest rate.

However, even with the lower interest rates, given the low incomes of tribal members, the average mortgage a buyer can afford is less than $65,000 -- nearly $40,000 short of total development costs.

To overcome this obstacle, the Oglala housing authority is working with the additional following sources:

• Federal Home Loan Bank of Des Moines Affordable Housing Program (FHLBDM) is providing almost $10,000 per home. The bank makes rural, affordable housing a priority.

• Rural Development Program of the U.S. Department of Agriculture (RDUSDA) is providing almost $10,000 per home. These funds are used specifically for installing water and sewer. To save on the costs of hiring the technical skills to oversee the design and installation of the water and sewer, the Indian Health Services is proving the design and infrastructure development oversight at no cost. In addition, the U.S. Navy Seabees are donating the labor for installing the roads.

• HUD’s Rural Housing and Economic Development Program is providing $20,000 per home. The relatively new program provides grants to innovative projects that promote development in distressed rural communities;

• HUD’s Indian Block Grant -- the Native American Housing and Self-Determination Act is providing a $2,000 grant to each home buyer to cover their down payment and closing costs;

• First National Bank of Gordon, a local bank with a long term relationship with the tribe will provide half of the "Construction Loan" at a 7% interest rate with no points or fees;

• The Enterprise Foundation, a national nonprofit financial intermediary that works with nonprofit agencies and Tribal entities to develop affordable housing, is providing the other half of the "Construction loan" at a 6% interest rate with no points or fees.

• First Nations Development Corporation, a nonprofit Native American corporation active in increasing economic activity on Tribal land has agreed to provide a 20% guarantee for financing for a special "Path to Purchase" program that will enable those not yet ready for mortgage financing to move into their home while they improve their credit.

• Foundation support, The Oglala Sioux Tribal Partnership for Housing, is also seeking $2,500 per home from Foundation support.