How Does Habitat for
Humanity Work?

Through volunteer labour, efficient management and tax-deductible donations of money and materials, Habitat for Humanity builds simple, decent homes with the help of the homeowner (partner) families. Habitat for Humanity homes are sold to partner families at no profit and financed with affordable, no-interest mortgages. The homeowners’ monthly mortgage payments go into a revolving fund, which is used to build more homes.

Habitat for Humanity is not a give-away program. In addition to mortgage payments, each homeowner invests hundreds of hours of their own labour, called “sweat equity”, into the building of their home and the homes of others.

Payment Cycle

How are the homes built?

Through volunteer labour, efficient management and tax-deductible donations of money and materials, Habitat for Humanity builds simple, decent homes with the help of the homeowner. Habitat for Humanity homes follow standardized design criteria that maintain the “simple and decent” archetype.

Most Habitat for Humanity projects are single dwellings or semi-detached homes, but Habitat for Humanity is expanding its build projects and may include restoration and refurbishments, condominiums and town home style projects in the future.

Who qualifies for a home?

The three criteria to qualify for a Habitat for Humanity home are (1) need for affordable housing, (2) ability to repay a Habitat for Humanity mortgage and (3) willingness to partner with Habitat for Humanity.

Need for affordable housing is defined by a family income that is below the government-set Low Income Cut-Off (poverty line) for their particular region, and existing living conditions that are inadequate in terms of structure, cost, safety or size. The ratio of shelter expense to total income is also factored.

Ability to repay a Habitat for Humanity mortgage requires that the family has a stable income sufficient to cover the monthly mortgage payments and other expenses that come with home ownership.

Homeowners must demonstrate a willingness to partner with Habitat for Humanity by contributing 500 hours of volunteer labor (“sweat equity”) towards the building of their home.

How are the homes funded?

Habitat for Humanity builds homes with volunteer labour and as much donated or cost-reduced material as possible. Fundraising takes place to help offset expenses of materials, services and land when they are not available through donations. Financial support is received from individuals, corporations, service groups and the faith community.

Mortgage payments from current homeowners are retained by the affiliate, which holds the mortgages, to fund future projects.

How is this a hand up, not a hand out?

Habitat for Humanity houses are sold to families, not given to them free of charge. In addition, families help to build their own home.

By building homes at low cost, requiring very little or no down payment, and not charging interest on the mortgage, Habitat for Humanity is able to provide an opportunity, or a “hand up”, to buy a home for families that would not otherwise qualify for a conventional mortgage.

The revolving fund for humanity…

The homeowners’ monthly mortgage payments go into a fund that is used to build more homes. The more homes that exist, the more cash flow there is available for further building. This “revolving fund for humanity” fuels exponential growth in the number of houses that are built over time.

 

 

Build-Buy-Reinvest Cycle