Press Release: Special Rural Housing Loan Program Not Equitable

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Session:
State Capitol, Room 508
Juneau, AK 99801-1182
Phone: (907) 465-3892
Fax: (907) 465-6595

Interim:
716 W 4th Avenue, Suite 400
Anchorage, AK 99501-2133
Phone: (907) 269-0234
Fax: (907) 269-0238

For Immediate Release: February 5, 2001

Contact: Senator Dave Donley at (907) 465-3892

(JUNEAU) -- Senator Dave Donley (R-Anchorage) announced on Friday that additional information from the Legislative Audit Division indicates larger problems exist in the Housing Assistance Loan Fund (HALF) program than were originally suspected.

"In a January 22, 2001 press release I announced that the HALF program has outlived its usefulness," said Donley. "This new information makes me even more convinced that the program should be eliminated."

The Housing Assistance Loan Fund (HALF) provides housing loans at 1 percent below market rates and was designed to help overcome certain barriers to home ownership in rural Alaska, such as high construction costs and a lack of private financing services. According to the legislative auditors, in the last 20 years most of these barriers have been removed. Other programs and private entities have moved in to meet the needs of rural homeowners. The HALF program no longer accomplishes what it set out to do.

There are no income restrictions on HALF programs. In FY'98 and 99 these subsidized HALF loans were made to 166 borrowers with annual incomes over $100,000. 74% of HALF loans made during this period were to borrowers in areas where home construction costs are less than in the Anchorage area.

During FY'98 and 99 there were 1,026 HALF loans made. Of those, 14.5% were made for amounts above $200,000. The average price of a home receiving a HALF loan was $167,000. 11 HALF loans were for amounts greater than $300,000, the highest loan being for $400,000.

"It is clearly not good public policy to have a program that rewards rich and well off people in low cost construction areas," said Donley. "Providing special below market subsidized mortgages is worth tens of thousands of dollars to borrowers who don't need the subsidy while denying such a subsidy to other less well off Alaskans is unfair discrimination."

The recent legislative audit report indicated that "most barriers to home ownership financing have been overcome by changes in the private and governmental sectors…." Elimination of the HALF 1% subsidy could increase AHFC earnings by approximately $540,000 in the first year, according to the report.

"If the HALF program is eliminated, over a half-million dollars a year in additional AHFC earnings could be made available to help balance the state fiscal gap," said Donley.

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Attachments:

Past Press Release: Legislative Audit Recommends Changes to Special Rural Housing Loans., 01-22-01
Alaska House Finance Corporation Loan Programs -- See the Rural Initiative Housing Program, Rural Non-Owner-Occupied Loan Programs, and Rural Owner-Occupied Loan Program listings.
Housing Assistance Loan Fund Audit Report

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