The EconomicsHow are the homes funded?
Habitat builds homes with volunteer labour and as much donated or cost-reduced materials as possible. Fundraising takes place to help offset expenses of materials, services and land when they are not available through donations. Financial support is received from individuals, corporations, service groups and the faith community.
Mortgage payments from current homeowners are retained by the affiliate, which holds the mortgages to fund future projects.
Average cost per square foot?
The average cost per square foot of Habitat houses in Canada is about 50 dollars. This cost reflects building materials and services only. Any costs associated with acquiring land would be in addition to this. Labour is volunteered.
What does a Habitat house cost?
Currently, a three-bedroom Habitat house in Canada costs the homeowner between $60,000 and $120,000. Prices will differ slightly depending on location and the costs of land, labour and materials. Habitat houses are affordable for low-income families because there is no profit included in the sale price and no interest is charged on the mortgage. The average length of a Habitat mortgage in Canada is 20 years.
Who holds the mortgages?
The local Habitat affiliate office holds mortgages until the mortgage is paid off.
How are donations distributed and used?
Donations, whether to a local Habitat affiliate or to the National Office, are used as designated by the donor. Gifts received by HFHC that are designated to a specific affiliate or project are forwarded to that area. Any undesignated gifts are used where needed in Canada and for administrative expenses. HFHC's audited financial statements are available upon request.
How is the selling price determined?
The selling price is computed by determining costs in two separate areas: (a) construction and (b) site acquisitions and development. Construction costs include the cost of purchased building material, the value of donated building material, contracted labour costs (or value if donated) and administration costs (at a maximum of $3,000 per house).
It is important to note that donations will vary from house to house. A major objective is to keep selling costs equitable for all families receiving comparable houses, regardless of the amount of donations for any given house.
The rule for determining the cost of site acquisition and development should be affordability to the low-income family, rather than market value. Canada Revenue Agency requires that a reasonable value for land costs be included in Habitat mortgages. The key to dealing with this issue is for affiliates to consistently apply the same method to all of their houses, so each family is treated the same.
How does Habitat for Humanity relate to government?
Habitat for Humanity does not accept government funds for the construction of new houses or the repair of existing dwellings. Habitat for Humanity does accept government funds for the acquisition of land or houses in need of rehabilitation. Habitat for Humanity also accepts government funds for streets, utilities and administrative expenses, so long as the funds have no strings attached that would violate Habitat's principles or limit its ability to proclaim its Christian witness.
How is this a hand up, not a hand out?
Habitat houses are sold to families, not given to them free of charge. In addition, families help to build their own home. By building homes at low cost, requiring very little or no down payment, and not charging interest on the mortgage, Habitat for Humanity is able to provide an opportunity, or a "hand up", to buy a home for families that would not otherwise qualify for a conventional mortgage.
The revolving fund for humanity
The homeowners' monthly mortgage payments go into a fund that is used to build more homes. The more homes that exist, the more cash flow there is available for further building. This "revolving fund for humanity" fuels exponential growth in the number of houses that are built over time.
What happens when income/financial position of families change?
The income of all Habitat homeowners is reviewed on an annual basis. If income increases, monthly mortgage payments are adjusted to remain at 25% of their monthly income. If income decreases, usually due to a temporary situation such as a job loss, similar adjustments may be made to maintain affordability during this period of decreased cash flow. Habitat for Humanity is committed to educating and supporting partner families toward successful homeownership. This commitment has resulted in a low mortgage default rate of about 1% in Canada.