Seattle Hometown Home Loan Program

Gary Clark
Housing Planner and Project Manager, City of Seattle

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The Problem

Seattle is an hourglass-shaped city of 565,000, surrounded on the sides by bodies of water, on the top by the suburban city of Shoreline, and on the south by a large industrial area, including Boeing Airfield and Boeing’s commercial airplane headquarters. Residential growth through annexation is not a possibility.

Seattle is also a largely built-out city that has experienced steady population growth throughout the past decade. Demand for more housing has been met through “in-fill” development and increasing density. However, increased demand has also brought rising rents and home prices. An analysis of calendar-year 2000 home sales within the Seattle city limits, conducted by the city’s Office of Housing, shows that the average sales price for single-family homes was $332,000; for condominiums and townhouses, $245,000; and the average for all sales, $310,000. These prices (and comparably high rents) make Seattle one of the more expensive urban housing markets in North America.

Seattle’s homeownership rate has suffered as a result, declining from 48.9 percent in 1990 to 48.4 percent in 2000, according to U.S. Census figures. This rate does compare favorably with those of many other central cities around the United States (see table 1). By contrast, the homeownership rate in the suburban cities in King County, Washington (surrounding Seattle), is generally much closer to the national homeownership rate of 67 percent. Seattle’s 20-year Comprehensive Plan, adopted in 1995, calls for gradually closing the gap between the in-city homeownership rate and that in the surrounding suburban communities.

The Solution

The Seattle Hometown Home Loan Program is a key approach to helping Seattle achieve the long-term goal of increasing homeownership rates. The Hometown Home Loan Program is an employer-assisted housing program offering reduced-cost, in-city home mortgages to employees of the City of Seattle and nearly a dozen other public and private employers in the city.

The Seattle Hometown Home Loan Program was started by the city’s Office of Housing as a way to encourage more city employees to become homeowners within Seattle. The program became an employee benefit for all City of Seattle employees, both union and non-union, full-time or part-time, including elected officials, via an ordinance adopted by the City Council and signed by the Mayor in September 1996. The program proved popular with city employees and, beginning in 1997, the Office of Housing initiated efforts to expand the program to employees of other public and private agencies based in Seattle. The program has continued to expand in 2001, and well over 1,000 Hometown home loans have been closed so far.

Seattle initially developed the Hometown Home Loan Program as an employee benefit for municipal government staff. It specifically wanted to find ways to encourage more City of Seattle employees, especially police, fire and other emergency response personnel, to live in the city. City leaders recognized that if there were more housing opportunities for them in the city, these personnel would then be more readily available in the event of a major earthquake, fire, or other disaster. Having more city staff, especially police, living in city neighborhoods would enhance major city policy initiatives around community policing and neighborhood-based planning that were begun in the mid-1990s and continue today. To date, 118 of the 456 city employees who have purchased homes through the program are members of the police and fire departments. (The city workforce of full-time employees is approximately 9,800, of whom about 2,500 are in police and fire.) Of the 456 city employee purchasers, 324 have been first-time buyers and fairly new to city employment. Planners had anticipated the program would be particularly helpful to relatively new employees.

The rapidly growing Seattle metropolitan region is also committed to controlling suburban sprawl, long distance automobile commuting, and the resultant environmental degradation. Higher density urban development in Seattle and other regional employment centers is our solution, and expansion of the Hometown Program to include other major Seattle-based employers is part of our strategy for achieving this goal. The remaining 600-plus home purchasers to date have been employees of these other participating employers.

Following the KISS “keep it simple” principle, the Office of Housing developed the program concept as an administratively streamlined, easy-to-understand, voluntary employee benefit option that would not primarily rely on city resources for downpayment assistance or other forms of government subsidy. The program is not limited to first-time buyers, and there are no income or re-sale restrictions. The one hard and fast rule is that homes purchased must be primary residences located within the Seattle city limits.

After developing the program concept, the Office of Housing requested proposals from local lenders, asking them what they would provide our employees, and how they would provide it, in exchange for the city facilitating marketing access to its workforce on a regular basis.1 HomeStreet Bank, a Seattle-based lender was selected, and the city and HomeStreet signed a Memorandum of Agreement (MOA) in 1996. This MOA became the model for the subsequent agreements signed between other Seattle employers, the city, and the bank.

The Hometown Program offers a 50 percent reduction in the standard loan origination fee of 1.0 percent. It offers discounts on all non-federally regulated closing costs associated with home purchase or refinance. Participating real estate agents also offer reductions in their fees. All reductions are taken from the daily price quotes (bank’s cost of funds reports), and most importantly, the common lending industry practice of “overage” is prohibited for Hometown loans.2 The Seattle Hometown Home Loan Program is currently available to employees of the City of Seattle, Seattle School District, Seattle Housing Authority, the two major universities and two major hospitals, among others. Fred Hutchinson Cancer Research Center joined the program in April 2001, and several other large private employers are considering joining the program as well. It should be noted that participating Seattle firms do not generally have a big problem recruiting or retaining employees, except to the extent the high cost of housing has become a deterrent. Seattle’s geographically restricted program is our attempt to address this issue in an effective and cost-conscious manner.

Costs and Benefits

From the beginning, the city’s intent has been the establishment of an in-city homebuyer assistance program with a private lender partner that minimizes city operating expenses and administrative overhead. Start-up and ongoing costs have been limited to a portion of the Office of Housing Project Coordinator’s time. Some office clerical and public information staff support is sometimes also needed, mainly for Hometown press events involving the Mayor. This mainly involves scheduling the Mayor and drafting city press releases, part of the public information officer’s normal duties. These Hometown-related expenses amount to $10,000 to $15,000 per year. The amount of the Project Coordinator’s staff time required varies from a few hours a week to up to nearly half-time, depending on the level of expansion activity and follow-up at any given time. On an annual basis, the program represents about one-quarter of the coordinator’s workload, or about $15,000 per year. This activity is part of the Project Coordinator’s ongoing job description and does not require any special appropriation. There are no capital costs involved. The city also incurs none of the expense of the reduced closing costs, nor of hosting special promotional events or for marketing materials. By agreement, those costs are covered by our partners.

HomeStreet Bank has established a special Hometown Lending Center headed by a Senior Vice President and staffed with salaried, not commissioned, loan officers, whose sole responsibility is to work the Hometown Loan Program.3 The agreement by the lender to establish this dedicated office is critical to the long-term success of the Hometown Program and is not something all lenders would agree to do.

Benefits to the city greatly outweigh the relatively minimal administrative costs. The most obvious benefit is the 1,000-plus loans closed in the city to date—on average, 250 to 300 loans per year, with genuine savings to borrowers, but without a dime of direct city subsidy. This stands in contrast to most other employer-assisted housing models, which usually call for some form of direct employer contribution, such as downpayment assistance, interest rate buy-downs, etc. These more typical forms of employer-assisted housing can add substantially to the cost and complexity of providing the benefit. Another benefit—albeit long-term—is the benefit derived from slowing suburban sprawl by getting more Seattle workers to live closer to their in-city jobs.

Savings to borrowers over the life of the program have ranged between $1,200 and $1,700 for most borrowers. Of course, the larger the mortgage amount, the greater the savings; a few loans have been in the million-dollar range, while others have been barely $100,000. Whatever the amount, these cost savings are equivalent to cash-in-the-bank personal savings or government downpayment assistance. With more than 1,000 employee home loans closed as of July 2001, this conservatively equates to total cost savings to borrowers ranging from $1.2 to $1.7 million.

In the Seattle market, it is nearly impossible to purchase anything in any condition for less than $150,000. As shown in table 2, the savings at this purchase price would be nearly $1,200 (assuming a 97 percent loan to value (LTV), as most people in this price range make small down payments).

The average purchase price for a home purchased in Seattle is around $310,000. The average LTV at this price range is 75 percent, meaning that the typical loan would be $232,000. The savings on this loan amount would be just over $1,700, as shown in table 3.

This is the basis for estimating savings to range from $1,200 to $1,700. See table 4 for another example.


Lack of clearly defined program goals, and knowing how you want or need to achieve them, can be the biggest initial obstacle to overcome. Another obstacle may be lack of knowledge about the lending process, such as the practice of “overage” described earlier. Agreement to prohibit this all-too-common mortgage industry practice is critical to achieving real savings for borrowers and offering a genuine benefit. Lenders will also need to see the potential for a significant volume of loan closings to offset the reduced fees; small employers may be less able to negotiate a significant package of fee reductions without offering some form of employer subsidy as well.

Finally, large national lenders with corporate headquarters located in some other part of the country may be less flexible in responding to local requests for proposals. Seattle is fortunate in that our lender partner, HomeStreet Bank, is a major residential lender in the northwest, but is headquartered in downtown Seattle just blocks from City Hall. It is also privately held and not subject to merger, buyout, or takeover by out-of-state lenders. Local control has meant local flexibility in working with the city’s requests. This prominent local lender option may not be available in all areas.

On the city side, program monitoring, outreach to new employers, help with marketing and flexible, proactive problem-solving are critical, ongoing concerns that require sustained commitment.

Potential for Replication

The basic program model is easily replicable if a similar commitment exists from both the public and private partners. So far, the Hometown Program model has been adopted by Snohomish County in Washington State and by Portland, Oregon, and Honolulu, Hawaii. We have also received inquiries about the program from other parts of the country. The biggest obstacle to replication could be negotiating the program’s full implementation with one or more local lenders, with a clear agreement to insure savings from normal rates and charges.

About the Author

Gary Clark is a housing planner and project manager for the City of Seattle. He has more than 20 years of experience in his field, including start-up and ongoing administration of the Seattle Hometown Home Loan Program. He has a B.A. and M.P.A. from the University of Washington.

  1. “Marketing access” means nothing more than the following: occasional articles in departmental or union newsletters; information brochures in new-employee benefit packets and displays at the annual employee benefit fairs; web links and information posted on the OH and Personnel web sites; joint press events announcing new employers or program enhancements; and occasional brown bag information sessions for interested employees.
  2. “Overage” is the practice of charging more in fees for a loan than secondary market conditions require. For example, if a 7 percent, 30- year fixed rate conventional mortgage comes with a fee of 1?2 percent of the loan amount but the lender charges you 3?4 percent, the extra 1?4 percent (the overage) goes into the lender’s pocket as extra commission. First-time buyers and immigrants can be easily victimized this way without ever knowing it.
  3. Most loan officers work strictly on commission.


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