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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What's going on here? Jerome Baggett, a sociologist at the Jesuit School of Theology at Berkeley, California, who has written on Habitat's field work and volunteer culture, puts it simply: Habitat is limiting its risk by "partnering with people with higher and higher and higher incomes." Baggett says he admires Habitat's esprit de corps and its ability to get wealthier Americans "off their couches and swinging hammers," but it remains the case that Habitat's massive charitable enterprise benefits families that "would otherwise be middle-income in a few years anyway." Indeed, many beneficiaries already have incomes high enough to qualify for conventional mortgages from ordinary lenders.

Seen in this light, Habitat's basic sales pitch for its U.S. fundraising efforts begins to look misleading. The section of its website entitled "Why Habitat for Humanity Is Needed," for instance, begins with the sobering announcement that "millions of Americans face a housing crisis. In fact, 5.1 million American families have 'worst-case' housing needs." That may be, but how many of those 5.1 million families--about 4.5 percent of the U.S. total--is Habitat likely to help, given that it serves those above the bottom 20 percent in household income? A good guess: hardly any. Habitat talks about America's poor and homeless but lays out its money up the block.

THAT HABITAT'S BENEFITS regularly fall to those other than the homeless and the poor is just one criticism leveled by Baggett, who complains also about the paternalism of Habitat towards its homeowners, including criticism of new owners who speak publicly of their plans to move beyond their Habitat home or who "don't act poor or grateful enough." The Habitat affiliates' right of first refusal, for example, which allows it to buy a house offered for sale during the lifespan of the mortgage for no more than its original cost, can be used to prevent homeowners from realizing gains until their mortgage is fully paid. But if a house does rise in value, the homeowner is on the hook for the higher property taxes, which quickly can surpass the modest mortgage payment. Not surprisingly, a number of Habitat homeowners each year chafe at the restrictions, deed their houses back to affiliates, and walk away.

Still, for argument's sake, let's say that Habitat supporters--a list that includes taxpayers by means of some $14.7 million in HUD grants in 2004--actually do want a charity that provides America's not-quite-poor and almost-middle-income with deeply subsidized mortgages and a little well-intended condescension. Surely Habitat is at least a cost-effective way to do that, right?

Think again. Representatives at Habitat's international headquarters in Georgia will say only that its houses typically sell for $49 per square foot; many local affiliates will admit freely that construction costs can run tens of thousands of dollars more than the sale price reflects. Appropriately calculated, Habitat's typical per-square-foot construction cost is likely closer to, if not even higher than, that of private-sector, entry-level homebuilders--volunteers and donations notwithstanding.

More to the point: Is Habitat for Humanity's basic model of building and holding notes on houses an effective use of its donors' money? This year, Habitat's international organization and its affiliates worldwide will report revenues of almost a billion dollars, making it one of the largest U.S.-based charities. Habitat declines to release aggregated figures on its expenditures, but a conservative estimate for last year, for example, would be to divide $600 million by the 6,000 houses built here. That produces this staggering--and probably understated--result: Each year, Habitat offices spend or commit some $100,000 per beneficiary family in the United States.

What other ostensibly poverty-oriented charity comes anywhere close to that? For that kind of money, scores of thousands of lower-income Americans could be led by counselors through a thorough rehabilitation of their credit profile or even receive outright grants to use as housing down payments with conventional lenders. Far more genuinely poor Americans could be helped to stay in homes they already own; thousands more apartment-or rowhouse-owners could receive funds and volunteer assistance renovating their existing properties.

In other words, why does Habitat for Humanity persist, at such great expense and limitation, in supporting its own alternative to the extremely efficient and highly accessible private housing and financial markets? It is as if Fuller, back in his '70s-hippie-commune days, acted instead on an urge to help educate people by building his own colossal, tuition-subsidized K-through-college complex in the woods of rural Georgia.