Homebuyer education is one of the cornerstones of stewardship for long-term affordable homeownership units. Community land trust (CLT) homeowners saw significantly lower default and foreclosure rates during the foreclosure crisis in part because most CLTs, 96 percent of those surveyed, require that buyers complete a homebuyer education course prior to purchasing their home.*
Similarly, the Grounded Solutions Network Stewardship Standards for Homeownership Programs* includes a standard on homebuyer education that programs both require and verify that all their buyers complete a general homebuyer education course prior to purchase.
General homebuyer education has been proven to reduce delinquency and foreclosure rates and help homebuyers succeed. This type of course is often provided by a third-party housing counseling agency.
Stable Home Ownership in a Turbulent Economy: Delinquencies and Foreclosures Remain Low in Community Land Trusts, a 2011 study by Emily Thaden* through the Lincoln Institute of Land Policy, found that foreclosure and delinquency rates for community land trust homeowners were a fraction of those in conventional homeownership. The paper concludes that while the initial affordability offered by community land trusts helped explain the low rates of delinquency and foreclosure, the CLT stewardship policies including homebuyer education also helped contribute to these positive outcomes for CLT homeowners.
There is evidence that pre-purchase homebuyer education and can help prevent foreclosures and other financial problems for first-time homebuyers. It is common for inclusionary housing programs to require homebuyer education for homebuyers prior to purchasing a program home.
Most inclusionary programs, however, do not specify who pays for the homebuyer education. In practice, this payer can be the municipality, the home buyer, or the developer. Developers marketing larger projects will often choose to help underwrite these classes even where they are not strictly required to do so. Free homebuyer classes are sometimes available from HUD-certified counseling agencies. Where classes require participants to pay a fee, the fees are generally not prohibitive for families that are otherwise in a position to buy a home.
Requirements for classes, even if they are free, can pose an additional barrier to marketing homes. For this reason, cities with inclusionary housing policies should consider providing funding to expand the availability of free classes—if they are not currently freely available—in convenient locations throughout the city. However, it may not make sense to specify this requirement in ordinance as the need for this kind of subsidy will likely change over time.
The Stewardship Standards for Homeownership Programs was developed collaboratively by a number of national organizations, practitioners, and experts for the purpose of providing an educational resource and measurable framework to help homeownership programs with long-term affordability requirements achieve excellence and maximize impact. View Standards
