Marketing Advice from Experienced Affordable Housing Developers

Partnerships are Key for Chattanooga NSP

In nonprofit housing circles, the partnership theme comes up again and again, and for good reason. Solid local partnerships help to create program stability and efficiency. During stressful economic times, partnerships are particularly helpful as funding limitations keep individual agencies from fully meeting their goals. So often, strong partnerships are the only way to get things done.

In Chattanooga it’s no different, and several years ago three entities that were all working in three neighborhoods east of downtown united to form a partnership called 3East Tomorrow (also called 3East). When the city of Chattanooga received Neighborhood Stabilization Program (NSP) funds (federal funding to address abandonment and foreclosure), the three members of 3EastTomorrow – Community Impact of Chattanooga, The Lyndhurst Foundation and Chattanooga Neighborhood Enterprise – decided to apply for funds together, and their partnership was selected as one of four recipients.

In addition to its focus on affordable housing, 3East strives to use its housing development funds to strengthen neighborhood revitalization activities and expand green building practices. The partnership’s objective is to leverage the work being done in these neighborhoods and maximize funding opportunities through its multi-layered goal.

3East Homes and Buyers

In 3East’s three targeted areas, development usually clusters two or more houses on the same street in each neighborhood. This approach is meant to boost the community overall. Simply put, 3East believes that putting one good house on a bad street doesn’t work.

The first neighborhood that 3East targeted through NSP was Bushtown, where partners decided to cluster development. There, 3East built 12 new, green homes all on the same street: North Holly. The second targeted neighborhood was Glenwood, where one renovated two-bedroom home has been completed. Orchard Knob was the third neighborhood where 3East completed 12 homes: four renovations and eight new construction. In each of these areas the market demand has been very slow, except for the homes developed by 3East.

All homes have many green features, such as windows positioned to maximize natural lighting, ENERGY STAR appliances, water efficiency systems, insulation, thermal barriers and more, and meet a green building standard that is exclusive to Chattanooga called Better Built Chattanooga (betterbuiltchattanooga.org). All homes have front porches and landscaping, and most have three bedrooms because that’s what is most popular in the area. Listing prices for these homes range from $74,000 to $139,000.

When developing its building strategy, 3East considered a variety of factors. The goal was to provide the highest quality product possible – like any traditional developer would – with the funding available and within the NSP framework. The 3East partners wanted to produce homes that fit into local neighborhood designs, plus incorporate their green building goals.

Buyers of NSP homes must be earning at or below 120 percent of the area median income, and make the home their primary residence. They may receive up to $35,000 in down payment assistance in the form of a forgivable second mortgage. All buyers are required to attend an eight-hour homebuyer class at the NeighborWorks affiliate, Chattanooga Neighborhood Enterprise. 3East does not have specific target markets, but reaches out to eligible buyers through local schools, employers and real estate agencies.

Marketing Team

To help develop and execute a clear plan to sell the homes, 3East hired a marketing consultant for urban neighborhoods, Donna C. Williams. Ms. Williams leads the marketing effort and conducts most marketing tasks, but also brainstorms strategies with 3East partners at weekly staff meetings. In addition, three Realtors from different brokerages work closely with 3East to promote NSP homes. Though not officially on the 3East marketing team, these Realtors are instrumental when it comes to sales and marketing and bringing in prospective buyers.

Market Research

Rather than conducting formal market research to inform its development and marketing tactics, 3East partners simply reviewed what they already knew from working in the targeted neighborhoods. The marketing consultant also provided valuable insights gained from previous work for programs such as HOPE VI (a HUD program geared toward revitalizing distressed public housing) that was applicable to the new marketing goals. MLS data was used to identify several points of interest, including the average number of days that homes were on the market, list prices versus sales prices, the need for down payment and closing cost assistance, and general demographic data on the neighborhood population.

Marketing Message

For its new homes, 3East Tomorrow’s marketing message is broad-based. It highlights that NSP homes are new, green, urban and affordable. The green building practices used in construction are emphasized through its tagline “Go Green in 3East,” in addition to the home’s energy efficiency status, environmental benefits, urban convenience and lower utility bills. Down-payment and closing cost assistance is also promoted in marketing materials. Promotional fliers include color photos of homes for sale along with the address, number of bedrooms, listing price and amount of available down-payment assistance. The message on the fliers is simple: “great location, unique value, high quality and vibrant community.”

Ultimately, 3East’s advertising goal is to push potential customers toward its website: www.3easttomorrow.com to learn about its programs and homes for sale. In addition, 3East partners promote home sales through presentations at neighborhood association events, schools and local employers. 3East also hosts open houses, visits brokerages to educate real estate agents and connects with local lender events.

Available Financing

3East has worked closely with a local lender, BB&T, to help buyers tap into its Community Housing Incentive Program (CHIP). CHIP provides up to 100 percent financing when NSP purchase assistance is used, plus waives private mortgage insurance and allows alternative methods of showing creditworthiness, such as on-time utility payments. The Tennessee Valley Credit Union also has a portfolio product that works well with 3East’s program. Typically, buyer eligibility problems are related to credit issues, so mortgage programs that allow alternative credit histories are vital. For developers, 3East provides up to $40,000 in no-interest, no-payment loans that must be repaid when the property is sold.

Pricing Strategy

To determine the sales prices of NSP homes, 3East considers several factors. Affordability is important, but prices must also be consistent with similar houses in nearby neighborhoods. 3East does not use comparable sales from the neighborhood where the house is located because the new homes are in much better condition than the existing stock and local prices are depressed. Developers are authorized to reduce prices if the homes do not sell, but so far have not needed to.

Evaluation Strategy

To evaluate its marketing success, 3East staff simply pay attention to what works and what doesn’t. For example, after advertising in an alternative newspaper, 3East decided that this method of outreach was not drawing enough customers and not worth the investment. 3East also changed the words “homebuyer incentive” in its marketing materials to “down payment assistance,” which seemed to resonate better with buyers. Marketing strategies are regularly discussed at staff meetings, and the marketing consultant provides a report that lists the marketing activities conducted each month and the cost of each activity.

Lessons Learned

  • Provide good customer service. Some buyers care about affordable housing programs, but many will go to a different lender if it means they can jump through fewer hoops. Because the NSP program process is intricate, agencies must sweeten the deal and have a strategy to attract and retain potential buyers. Strong customer support and service is critical. Having a financial incentive – such as down payment and closing cost assistance – also helps.
  • Create professional-looking materials that are clear and precise. Buyers are drawn to professional-looking products, and they will take the program seriously if they see marketing materials of comparable quality to those of other professional programs.
  • Include pictures. New or renovated homes are especially attractive to potential buyers, and photos can sometimes sell the properties better than fancy wording. Take professional-grade photographs on sunny days and include pictures in marketing materials.
  • Develop a strong marketing team with a clearly defined role and develop a plan that is easy to follow. Pay attention to whether or not marketing tactics are working and if they aren’t, change them.
  • Stay in touch with others who are working with NSP or other development programs and explore their strategies. Peer learning is beneficial, so get connected and find ways to share ideas.
  • Work closely with real estate agents in the neighborhood and keep them updated on development goals and progress. They know local markets and are often the first point of contact for potential buyers.
  • Use basic language to describe program products and benefits. Make sure your message is clear and to the point.
  • Don’t put a house on the market that’s not marketable. Know what buyers want and consider that in your development plans.
  • Find opportunities to increase your organization’s presence in the neighborhood. 3East estimates that for every 100 people who inquire about homes for sale, approximately 5 percent close. For this reason, it’s important that you reach as many people as possible. 3East has sponsored events for groups such as the local environmental project Green Space, plus threw a block party for residents to thank them for their patience while dealing with construction. Find interesting and innovative ways to connect with your target markets.

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