Colonias : A Symptom, Not The Problem
Bordering the Future
Border housing programs run by nonprofit groups and other community organizations are built upon one basic principle: Border residents, underserved and even alienated by traditional market practices and housing programs, need help raising the money to buy a home. Those who question the scope of this problem need only look at the colonias--subdivisions established in unincorporated areas that lack such basic services as potable water, sewage connections, and electricity, and are characterized by extreme poverty and population density. Median annual income per household in Texas colonias ranges from $7,000 to $11,000. Typical households number five to six residents.1
Although documentation is inadequate, anecdotal evidence suggests that Border households operate on a "cash basis" more than households elsewhere in Texas. As a result, residents often have inadequate credit or have not developed relationships with financial institutions that would allow them to qualify for mortgage or home improvement loans. The colonias have grown, in part, out of the need for "cash-based" home ownership strategies.
A number of home buyer education programs help households develop credit and relationships with banks. Innovative programs could go one step further and explore cash-based strategies for home ownership.
Colonia residents, like many Texans, want homes to call their own. Unfortunately, the absence of mortgage loans leaves only one other finance mechanism to realize this dream: a contract for deed (CFD). A CFD is similar to a mortgage loan because it enables a buyer to purchase a lot from a developer. Unlike the holder of a mortgage, however, the CFD buyer does not receive title to the land until the full price of the lot is paid. Even as buyers make monthly payments on the property, they do not build equity and cannot use it as collateral for loans.
Despite the disadvantages associated with purchasing CFDs, the low monthly payment (usually about $40) and low down payment make the deal financially feasible for many poor Border residents. As finances permit, residents work year by year to build sturdy homes and improve the land. For this reason, older colonias tend to be more developed.
Colonias sprang up along the border because of the availability of affordable land close to urban areas. Other areas of the state, such as pockets of East Texas, also have colonias, but their spread is limited by a lack of affordable land.
Many colonias are located outside city limits, an intentional strategy by developers to free themselves from city codes and regulations. Some colonias were originally located outside city limits but have since been annexed by nearby cities.
Freedom from building codes makes the colonias affordable, but it also can make them unsafe. Many subdivisions lack such basic infrastructure as water and disposal systems. Colonia residents with complaints often have few legal remedies, in part because CFDs have not historically been recorded in the county register of deeds or recognized as official documents.
In 1995, state lawmakers approved the Colonias Fair Land Sales Act, intended to curb CFDs as a method of finance by requiring developers to record contracts in county registries and provide annual financial summaries for buyers regarding their land purchase. Developers must also document services provided, such as sewage, water, and electricity, and must inform buyers if the lot sits on a flood plain.2 Additional legislation expanded the Attorney General's authority to regulate colonia development and permits Border counties to refuse approval of a subdivision judged likely to be developed without sufficient infrastructure.3
Since 1989, the Texas Water Development Board has financed water and sewer hookups for colonia residents through the Economically Distressed Areas Program (EDAP). Counties along the border, and those having an average per-capita income 25 percent below the state average and an unemployment rate 25 percent above the state average, are eligible for EDAP funds.4
At the Texas Department of Housing and Community Affairs, the Colonia Set-Aside Program allocates 10 percent of annual federal Community Development Block Grant funds to support housing, planning, and infrastructure needs in the colonias. From this allocation--$8 million in fiscal 1998--$2 million may pay for residential service lines, water and sewer hookups, and plumbing improvements associated with being connected to a water supply or sewer service in economically distressed areas.
Attempts to regulate colonia development have resulted in problems of their own. For instance, counties require colonias to be platted before they can receive utility hookups. To be platted, colonias must conform to the model subdivision rules set forth in Senate Bill 2, enacted by the Texas Legislature in 1989. Many colonias are currently unplatted. For instance, a 1995 study showed that of 490 colonias reviewed in Hidalgo County, 82 were unplatted.5
Colonias that do not conform to model subdivision rules--and are thus unable to be platted--cannot receive utilities unless they are granted variances. Currently, counties are prohibited from granting such variances.
1 Texas A&M University, Center for Housing and Urban Development (http://chud.tamu.edu/chud/colonias/colonias.html). (Internet document.)
2 Texas S.B. 336, 74th Leg., Reg. Sess. (1995).
3 Texas H.B. 1001, 74th Leg., Reg. Sess. (1995).
4 V.T.C.A., Water Code SS 16.341 (1)
5 Letter from Amy Johnson, Henry, Lowerre, Johnson, Hess, and Fredrick, Attorneys at Law, to Elida Bocanegra, Valley Interfaith, April 7, 1997.
Bordering the Future