First-time home buyers banked on D.C. aid. Then the city changed the rules.

Six years ago, as Alfred Swailes was entering retirement, he started to think: Would he ever be able to own a home in the city where he spent his whole life?

Swailes, a former salesman who advocates for small Black-owned businesses, was living mostly on Social Security. In his native D.C., where homes were going for well upward of half a million dollars, owning didn’t seem possible — unless, Swailes learned, he could qualify for D.C.’s Home Purchase Assistance Program (HPAP).

The program is intended to significantly boost the purchasing power of very-low-to-moderate-income residents who would otherwise not be able to get a mortgage — a priority of Mayor Muriel E. Bowser (D), who has sought to lift Black homeownership in a city that has been entrenched with wealth inequality along racial lines for generations.

“Without this program, everything is out of my reach,” said Swailes, 67, who qualified for just over $200,000 in HPAP aid, the maximum under enhanced aid that Bowser rolled out last year.

But now D.C. officials have pulled the rug out from under Swailes and an untold number of low-income residents in his situation: After abruptly running out of money for HPAP over the summer, D.C. officials changed the rules of the program. They have capped the amount of assistance available for each applicant at 30 percent of a home’s purchase price so that the money can be spread across more people — but that also can effectively exclude some of the lowest-income residents who need the most help.

The changes have blindsided longtime D.C. natives who were depending on HPAP as their only opportunity for homeownership, including some like Swailes who had active contracts at the time the rules changed and who no longer qualify for the loans they had lined up.

For Swailes, this means probably losing out on a one-bedroom condo he found in August.

He was approved for a roughly $70,000 loan on the $267,000 home in September, anticipating his HPAP assistance would fill the gap. In October, the rule change significantly reduced the maximum aid available to Swailes, from roughly $200,000 to roughly $80,000 for a home of that price.

“They have left a lot of people out who really need the program — and the reason is they are able to help more people by getting rid of the lower-income people,” Swailes said. When he called to ask for help, he told officials, “I thought that was the main purpose for having a program like this.”

In an email to The Washington Post from Department of Housing and Community Development (DHCD) spokeswoman Pamela Hillsman, the agency defended the changes, noting that HPAP, as gap financing, is not intended as a first mortgage and that “a homebuyer who is ready to purchase should be able to qualify for a traditional first trust mortgage under the new criteria.” The agency noted that demand in the program has not slowed and many first-time home buyers are still able to leverage HPAP under the new criteria.

“The reality is that rising interest rates have made it more difficult for prospective homebuyers regardless of income level to purchase homes, thus increasing the demand for limited HPAP resources,” the statement said. “The pace of HPAP purchases has not slowed since the new criteria was put in place, showing that there is still an overwhelming demand for new homebuyers in HPAP’s qualified income ranges to purchase homes in the District — and DHCD is charged with administering HPAP resources as efficiently as possible to help create as many first time homebuyers as possible through the program.”

D.C. Council member Robert C. White Jr. (D-At Large) said he understood the agency was trying to preserve limited funds but did not think it was fair to “change the rules of the game in the middle of the game” for those who had a certain set of expectations under the previous criteria. He said that he is in talks with the agency and that if officials do not act to rectify the situation, he is considering bringing emergency legislation to address it. He said he would seek to either eliminate the new restriction or “grandfather in” people like Swailes who were eligible for HPAP before the new rules upended their housing hunt.

“The administration made changes that will overwhelmingly impact Black, lower-income and disabled residents whose only hope of homeownership would be through HPAP,” White said. “And in a time where we are supposed to be focusing on displacement and Black homeownership, this is a devastating blow to residents.”

HPAP has had a tumultuous year. Starting in October 2022, as mortgage rates and inflation soared, Bowser increased the amount of down payment assistance available through HPAP from a maximum of $80,000 to $202,000, with deferred repayment of the loan and no interest, plus help with closing costs.

But there was one hitch: The $26.2 million budget for HPAP had not increased to match the significant increase in available aid.

As demand swelled, it became clear that the funding was not nearly enough, requiring the DHCD to reprogram tens of millions of dollars to give HPAP up to $67 million. The agency noted in its statement that officials “tirelessly worked” to try to meet the demand and locate more funds.

Even still, HPAP participants were notified by late June that the program ran out of money. The program had assisted a record roughly 470 new homeowners, more than 300 of whom were Black, according to DHCD data — but an untold number were stuck in limbo, like Swailes. Deals were put on hold until Oct. 1, the start of the 2024 fiscal year. And already, just two months later, the program shows signs of the same strains that caused the agency to halt it in June: As of Nov. 22, $17.3 million of the budgeted $26.2 million is already reserved.

Asked whether the new criteria will be permanent or temporary, the email from Hillsman noted, “DHCD will continue to closely monitor program and market trends and to work closely with stakeholders throughout the community to ensure that the program continues to meet its mission and the needs of HPAP homebuyers.”

Eliana Golding, a housing analyst with the D.C. Fiscal Policy Institute, said the Bowser administration should have been able to anticipate that more than doubling homeownership aid for eligible families last year, ahead of a tough budget season, would create problems. Instead, she said, the administration ended up “overpromising,” having a “tangible impact on those residents’ lives” when the program couldn’t deliver as they expected.

“I think the administration has the information they need, and they just didn’t fund the program appropriately,” she said.

The abrupt halt in HPAP funds in June left participants and real estate agents flustered as they tried to salvage their deals.

Carmellita Turner, a real estate agent with Sampson Properties who was assisting an HPAP participant, said she helped her client close on a deal in late June , on a house priced at over $400,000 that depended on roughly $140,000 in HPAP financial aid.

Yet that day, her client, a single mom who is a rank-and-file employee in D.C. government, learned that the HPAP funds were not available. After saving for years to afford a home and finally having it within reach, Turner said, the news devastated her client, who had to contend with losing her “dream home” just after locking it down.

“For someone to expect a low-to-moderate-income first-time home buyer to understand how to navigate these waters is absolutely illogical,” Turner said of the whiplash they experienced from D.C. government.

By a stroke of luck, the home was still available when D.C. reopened HPAP assistance in October. HPAP’s new rules shaved off about $43,000 in financial assistance for Turner’s client, but Turner said she still was able to move forward with the lender.

She finally closed on the house the evening before Thanksgiving.

Others were not as lucky.

Real estate agent Sam Pastore said that since last year, his clients, a couple on fixed income, have been under contract for three separate homes while trying to use their HPAP assistance — only for all three contracts to fall apart.

It’s, unfortunately, the “quintessential HPAP story,” Pastore said: “They started with really high hopes, but at this point, it’s actually been more detrimental to them than it has helped them.”

His client, William Smith, who worked for the National Park Service for 33 years before retiring last year after an injury, said he had his eye on HPAP as a way to finally attain homeownership in his golden years. He envisioned having the grandchildren over for backyard barbecues. He thought he and his wife would feel more at peace. “Happy wife, happy life,” he said.

But by now, he said, he feels like HPAP “sold him another dream — a bad dream.”

The first home deal fell through last year because the rowhouse property had a basement apartment that made it ineligible for HPAP. So they found a new home that didn’t. But as Smith went back and forth with paperwork over his income — which changed after he started receiving disability — that’s when the program ran out of money, costing them the opportunity, he said.

In the meantime, they searched for a third home, hoping to be able to lock it down as soon as the HPAP money came back online in October.

Instead, the rules changed and now the couple doesn’t qualify for the loan they need anymore.

“That really sent me over the edge,” Smith said, “because I’ve been trying for this before they made them changes. It really threw me for a loop, because I’m like, ‘Man, I’m already there.’”

The couple had qualified for the maximum aid under Bowser’s expanded assistance, $202,000, which they hoped to put toward the $420,000 home in Southeast Washington. A loan from a private lender would make up the difference, amounting to a $1,700 monthly mortgage and interest payment. But the HPAP cap at 30 percent of the purchase price means the couple would need a roughly $300,000 loan, which Pastore said is out of reach.

“If their goal was not to spend the money, it’s definitely working,” Pastore said, referring to DHCD.

DHCD noted that HPAP applicants receive “Notice of Eligibility” paperwork, which outlines what assistance they qualify for, but said that it “is not an approval letter nor a commitment to lend” and that no deals are final until they are approved through HPAP.

Swailes and Smith now say they are both asking DHCD to make an exception, each still holding on to their contracts. They say they have been told they will not receive exceptions, something neither can accept after expending so much energy over the past few years. (DHCD did not address a question about whether or how exceptions would be made, saying participants should consult other housing counseling services through DHCD.)

In Swailes’s case, the condo he found was only at an affordable price to begin with because it was part of D.C.’s Inclusionary Zoning, which sets aside affordable units in new developments. To get an opportunity to purchase one of those condos, thousands of applicants enter a lottery. Swailes had waited six years before the opportunity came, he said.

Now, he thought, if he could no longer afford a condo intentionally set aside to be affordable, and he couldn’t get help in a homeownership program intentionally created for people like him, what else could he do?

“They have to understand these are real people they hurt,” he said.

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