The Magazine

Jimmy Carter's Favorite Charity

A wildly expensive way to help small numbers of the non-poor.

Jun 13, 2005, Vol. 10, No. 37 • By PHILIP CHALK
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AN ORGANIZATION THAT NORMALLY WELCOMES press coverage of its bustling worksites and sweating volunteers, Habitat for Humanity has spent recent months in the awkward role of media target. News reports have tracked every move in a seedy executive-suite scandal that led to the January firing of the 29-year-old nonprofit's founder and president Millard Fuller over accusations of sexual harassment.

It wasn't the first time Fuller's hand had been slapped. When charges of unwelcome kissing and groping of female employees reached the organization's board in the early '90s, the evangelically-aligned group's most prominent supporter, former president Jimmy Carter, intervened on behalf of Fuller--a wealthy Georgian who was inspired to eliminate "poverty housing" while living in a commune in the 1970s. When the most recent charges arose, Carter again intervened, but this time the board ignored him and sent Fuller packing.

The matter now appears closed, despite lingering protests by volunteers and a legal spat over Fuller's effort to launch a new, similarly named organization. Habitat looks likely to retain its high-profile reputation as a cost-effective charitable endeavor, providing low-cost housing to America's homeless and poor.

Except that it isn't, and it doesn't. The hundreds of millions of dollars that Habitat raises and spends each year in this country--including large amounts from the federal government, philanthropic foundations, and corporate sponsors such as the Lowe's chain of hardware stores--benefit a relatively tiny number of people whose incomes are usually well above poverty levels. (The group builds about 6,000 houses a year.)

Habitat doesn't just give away houses. Beneficiaries first make a down payment of $500-$1,000 and commit to several hundred hours of work on their new homes alongside Habitat's trademark army of volunteers. A local, independently incorporated Habitat affiliate then typically provides a 20-year, interest-free mortgage and collects a monthly payment in the range of $250 to $300. The mortgage note is held by the affiliate, which usually retains a right of first refusal should the homeowner want or need to sell the property.

Though some numbers that might be used to evaluate Habitat's overall cost-effectiveness--total volunteer hours on-site or aggregated homeowner financial data, for instance--can be hard to come by, one number features prominently in Habitat's marketing: two. That is the officially reported percentage of Habitat homeowners who default on their loans and on whose houses the organization's local affiliates foreclose. To keep that number low, affiliates often offer financial-crisis services, but what they mainly do is look for candidates who are unlikely to default--candidates, in effect, who aren't that poor.

The Habitat affiliate in Coachella Valley, California, for instance, builds two houses that come with $80,000 mortgages each year and hasn't had a single foreclosure since its founding in the early 1990s, according to spokesperson Adrienne Kinsey. How? "Well, we do credit checks--we don't want someone who's going to default. I just tell [candidates] that they have to be able to make their mortgage payments," she says.

As do all Habitat affiliates, Kinsey's group looks for both an ability to pay and a need--in other words, a minimum and a maximum family income. In Coachella Valley, that means a range of $24,435 to $32,580 for a family of four. That range varies notably across the country, with the affiliate in Davidson, North Carolina, for instance, requiring incomes between $20,125 and $38,500.

Such incomes don't make for Forbes-list candidates, but neither do they constitute poverty. In 2004, the Poverty Threshold of the federal Bureau of the Census--the income level below which a family of four is considered impoverished--was just under $19,500. The sample Habitat requirements cited above miss it entirely, and the highest income allowed for a family of four--$38,500--actually exceeds 40 percent of U.S. households.

For a comparative measure, consider the Department of Housing and Urban Development's requirements for the main federal housing-subsidy program "Section 8," which dictate that most beneficiaries must have incomes lower than 30 percent of the median income for their area. By contrast, the Davidson, N.C., Habitat affiliate requires that candidates have incomes higher than 35 percent of the local median income. (God pity the households with incomes between 30 and 35 percent of the median: too rich for the federal subsidy; too poor for Habitat.)