by Brian Birk

Created on: September 16, 2008

How much do Habitat for Humanity homeowners have to pay for their Habitat for Humanity homes? That is a question that I have answered many times. The homes are not provided free of charge.

I serve on my local Habitat for Humanity affiliate board of directors. Quite often I end up explaining that Habitat for Humanity homeowners pay for their homes and then I explain how much homeowners pay for their homes.

Here is my oversimplified answer. Volunteers provide the labor to build the house. Volunteers do not get paid for their work and homeowners do not pay Habitat for their labor. Habitat purchases the building materials, and the homeowners pay Habitat for the cost of the materials in their home. Habitat for Humanity does not make a profit.

Habitat for Humanity homeowners are low income people. They are generally do not qualify for home loans from banks and are not able to pay cash for their home. Habitat for Humanity provides the homeowner family with a loan for the cost of the home. In other words Habitat acts as the bank. The difference between a Habitat for Humanity loan and a bank loan is the interest rate. Habitat loans the homeowners money at zero percent interest. Bank interest rates are higher.

Low income people are able to purchase Habitat for Humanity homes because they don't have to pay for labor and because of the zero percent interest rate.

Habitat for Humanity homeowners are required to contribute some of the labor for the construction of their home. Their labor contributions are called sweat equity. The time and effort they contribute on the construction of their homes is a price the homeowners pay.

That is the oversimplified version of the costs. The complete story is a bit more complicated.

One complication is that not all of the labor is volunteer labor. Where I live there is a requirement that the electrical work be done by a licensed electrician. There is also a requirement that the plumbing work be done by a licensed plumber. Habitat generally has to pay the people who provide licensed professional labor, and those costs are passed on to the homeowner.

Another complication is the purchase of the lot and the site preparation. Some lots are given to the affiliate and others must be purchased. Some lots require more fill work or excavation than others. Our affiliate has decided to charge a fixed rate for the lot and the site preparation no matter how much it costs the affiliate for those things.

A further complication is the use of two mortgages.

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