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.)

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.

One answer, of course, is that a do-it-yourself homebuilding empire is curiously appealing to donors. Habitat's volunteer carpenters, for instance, also write a large portion of the checks received, and for them, says sociologist Baggett, building houses on the other side of the tracks looks good and feels good. The real draw isn't the eventual homeowner--it's the fleeting intimacy of a 21st-century barn raising in which volunteers can "rub shoulders and swing hammers and have a sense of community," as he puts it. "Feeling good and feeling right--and that's more valuable to a lot of Americans than the work they're actually volunteering to do."

The public face of Habitat for Humanity is one of energetic warmheartedness with a touch of glitz--earnest staff, busy volunteers, enthusiastic celebrities from Oprah to Jack Kemp. But seen up close, Habitat for Humanity looks more like a wildly expensive means of aiding a misrepresented clientele.

Perhaps, then, change at the top is well timed. With vision and tough choices, Millard Fuller's successor may be able to restore a focus on Americans in the bottom fifth of household incomes, and develop or expand more cost-effective programs for higher-risk clients. The odds for such a transformation are probably slim, however. After all, the chair of the search committee is none other than Jimmy Carter.

Philip Chalk is The Weekly Standard's production director.

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