How a New Jersey Land Bank is Converting Vacant Properties into Homes for Housing Choice Voucher (HCV) Holders

The Crisis of Affordable Homeownership

Homeownership is a proven path to building personal and generational wealth. However, communities across the United States face an intensifying housing affordability crisis, which has made homeownership increasingly out of reach. Today, low-income families find it difficult to afford even the basic entry costs of homeownership, like mortgage payments and down payments.

Nearly all communities—including those with large inventories of vacant, abandoned, and deteriorated properties—face a shortage of quality, affordable homes. At the same time, outside investors have increasingly purchased smaller residential properties. These investors target neighborhoods with lower costs of entry—often disinvested neighborhoods with high populations of Black residents. This change is exacerbating the housing affordability crisis, undermining local ownership, and reducing homeownership opportunities for low-income individuals and families.

This crisis will have lasting impacts. Wealth generated from homeownership is the single largest factor driving the wealth gap between homeowners and renters.  This divide has grown substantially over the past decade. As long as low-to-moderate income renters remain locked out of homeownership, the wealth gap will only continue to deepen.

Without public intervention, homeownership will remain out of reach for these families. While there is no shortage of policy ideas to make first-time homeownership more affordable, one long-standing public program continues to be vastly underutilized: the Department of Housing and Urban Development’s (HUD) Housing Choice Voucher (HCV) Homeownership program.

The HCV Homeownership program allows voucher holders to transition from low-income renters to first-time homeowners, applying the monthly voucher payment to a mortgage instead of rent. Of the 2.3 million HCVs nationwide, less than 10,000 vouchers are used for homeownership: less than 0.5 percent.

In Newark, New Jersey, City leaders adopted a bold strategy to leverage this severely underutilized HCV provision to make homeownership a reality for low-income residents. This program is just one part of Newark’s broader affordable housing strategy, complementing the city’s other efforts to create and preserve existing housing stock.

Newark’s HCV Homeownership Conversion Program

The success of Newark’s Housing Choice Voucher (HCV) Homeownership Conversion Program is a direct result of the vision and dedication from public and private partners across the City.

Decades of disinvestment and weak real estate markets saddled Newark with nearly two thousand vacant properties. But after the start of the COVID-19 pandemic in 2020, the real estate market appreciated rapidly. These vacant liabilities became untapped assets. City leaders in Newark recognized their portfolio of tax-foreclosed, vacant properties could be repurposed to meet a top priority: expanding affordable homeownership opportunities for residents.

The City agreed to transfer a batch of vacant, tax-foreclosed properties at no cost to the Newark Land Bank (NLB). From that inventory, NLB selected half a dozen single-family properties for a pilot of their Housing Choice Voucher Homeownership Conversion Program. The program also advanced economic development workforce development goals: NLB engaged minority-owned and local contractors and Youth Build Newark to rehabilitate the vacant properties.

How does Newark’s HCV Homeownership Conversion Program work?

Purchasers of NLB properties in the HCV Homeownership Conversion Program have a HCV through the Newark Housing Authority. These purchasers are required to complete homebuyer workshops and qualify for a mortgage. The Newark Housing Authority connects voucher holders with housing counselors at the Neighborhood Assistance Corporation of America (NACA). NACA serves as the housing counselor agency to prepare potential purchasers and as the conduit for Bank of America, the lender underwriting the mortgage. The HCV often covers nearly 80 percent of the principal and interest for the mortgage.

Once eligible residents are approved for financing and complete the required homeownership education, they can purchase the property from the Newark Land Bank.

This program requires significant subsidies to ensure the properties remain affordable for voucher holders. This funding has come from private and philanthropic loans and grants. Providing wealth-building opportunities for low-income renters has generational impacts—a large subsidy is worth the benefits.

Want to implement a Housing Choice Voucher Homeownership Conversion Program? Here are four things to get you started.

1. Check if Housing Choice Vouchers are applied to homeownership in your locality

Before building a new program, check to see if HCVs are being used for homeownership by your local housing authority or other agency responsible for overseeing the Housing Choice Voucher program in your jurisdiction. HUD’s HCV Homeownership Map is a great place to start. 

If HCVs are already being administered for homeownership, you may be able to build upon the existing program infrastructure rather than starting a new program.

2. Gather your partners.

A successful HCV homeownership program requires collaboration. The local government, housing authority, and land bank or other vacant property steward organization must work together to  leverage their expertise, networks, and resources to convert vacant properties into quality homes. Whether your housing authority already administers vouchers or your community is launching a program from scratch, partners are essential.

Key partners for a program team include:

• Local government departments responsible for publicly owned real estate
• Land banks or similar entities that can acquire, rehab, and steward vacant properties
• Public housing authorities and other agencies that manage HCV programs
• Housing counseling agencies that can prepare families for successful homeownership
• Lenders willing to align products with HUD HCV requirements
• Philanthropy and mission-driven funders to provide critical financial support and understand the program’s need for significant subsidies

3. Identify potential inventory.

Identifying vacant properties that can be used for a HCV homeownership program will not only build a supply of homes attainable to low-income residents but also help tackle long-standing issues of vacancy and neighborhood decline. Start by assessing inventories of land banks and local government departments or public entities that have ownership of vacant and underutilized properties. A property conditions survey could be a helpful tool to triage properties for the program.

If vacant properties causing significant harm are still held by private owners, work with local government departments responsible for code enforcement and delinquent tax enforcement to identify which might be eligible for transfer to a land bank or other entity that can take the lead of property stewardship and rehabilitation.

4. Identify funding.

No homeownership program can thrive without a clear funding strategy. While a housing choice voucher homeownership program yields significant benefits, it requires financial support and deep subsidies. Blending various financial sources is critical. Look for federal and state programs, local government allocations, lender products, and philanthropic grants that align with program goals.

When focused on vacant or underutilized properties, a HCV homeownership program offers multiple community benefits: It expanding the affordable housing supply, reducing harmful impacts of vacant properties, and helping close the widening wealth gap. By creating a pathway to stable homeownership, the program gives low-income families the opportunity to build equity and put down lasting roots.

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Learn more about Newark’s HCV Homeownership Conversion Program here.