Last-minute lottery creates 'hot mess' for first-time D.C. homebuyers

With an eye toward buying her first place in D.C. but with a limited budget, Southeast resident Josephine applied for help last year from the city’s popular Home Purchase Assistance Program. HPAP provides critical interest-free loans and closing cost assistance to low- and moderate-income first-time buyers in the city. 

“I never thought it was something that was unattainable,” she says of homeownership in D.C. “HPAP made it seem feasible to do it.”

But the 28-year-old, who asked only to be referred to by her first name to protect her privacy, initially struck out. With high demand and limited funding, the program quickly ran out of money for fiscal year 2024. Still, she optimistically set her sights on this October, when the program’s funding would be replenished. With initial approval from HPAP in hand, she went under contract on a $480,000 home – with an expectation that the program would kick in up to $80,000 towards the purchase price.

This week, though, came confusion: Last-minute changes from the D.C. Department of Housing and Community Development surprised (and confounded) Josephine and many other first-time homebuyers who were expecting to qualify for assistance. In late October, DHCD suddenly announced it would determine assistance via a lottery system, and then gave conflicting explanations as to how the lottery would work. 

After all the confusion, Josephine did ultimately get the money she was hoping for. But she said the process was opaque and unsettling – even more so for people who did not end up getting the assistance they needed.

“If this many people are hurt and confused, there has to be an acceptance that there were mistakes along the way,” Josephine says. “A lack of transparency breeds mistrust.”

Since it was created in 1978, HPAP has served as the city’s primary tool to help low- and moderate-income residents buy homes. From October 2022 to September 2023, the last period for which full data is publicly available, DHCD issued 304 HPAP loans worth more than $43 million. According to D.C. data, more than 60% of HPAP recipients are under 40, 75% are Black, and almost 70% make less than $80,000 a year.

There have been persistent complaints over the years about the management of HPAP, including sometimes slow-moving bureaucracy holding up purchases. And as real estate prices shot up in D.C., the maximum amount of assistance – $80,000 – wasn’t keeping pace. In 2022, Mayor Muriel Bowser announced a significant increase to $202,000. But that has put a strain on the program’s funding, so much so that earlier this year HPAP’s $26 million budget was fully claimed within four months of the start of the city’s 2024 fiscal year. (Similar mid-year budget shortfalls have also happened with the city’s emergency rental assistance program.) To better manage the high demand for HPAP, in late October DHCD announced a new approach for its $32 million pot of HPAP money: a lottery.

“Our goal is to provide prospective homebuyers with more assurance,” said DHCD Director Colleen Green in a statement posted on the agency’s website on Oct. 25. “Given the high demand and limited availability of funds, DHCD will award HPAP loans through a lottery process. If selected, DHCD will reserve funding for up to six months giving a prospective homebuyer more certainty when deciding on a home, mortgage provider or other advisory services. ”

In an email sent to applicants on that same day, the agency unveiled further details: Any applicant with a ratified purchase contract in hand was asked to email a copy to DHCD, after which they would seemingly get the go-ahead to close on their home purchases. Anyone else who had been pre-qualified for assistance but hadn’t yet signed a contract would be entered into the lottery for funding. 

But even that confusing process wasn’t what ended up happening. Those with purchase contracts like Josephine were ultimately entered into the lottery, while anyone without a purchase contract was set aside for a potential second lottery should funding be left over. That included B., a 29-year-old HPAP applicant who had received an initial notice that she was eligible for up to $101,000 in assistance on what she was hoping would be a one-bedroom condo in Northwest costing $380,000. (She asked to be identified only by her first initial to protect her privacy.) 

“I was asked if I had submitted my sales contract, and I said no because I was waiting to see if I won the lottery. The DHCD employee said that only those with ratified sales contracts were entered into the lottery,” she says. 

That directly contradicted what DHCD said in a Frequently Asked Questions document posted on its website. “I have an NOE [notice of eligibility], contract for a home, and a lenders package, do I get preference?” read one question. “No. All current NOE holders’ names will be placed into the lottery for selection,” was the response.

During a D.C. Council hearing last Friday, Green said the decision to give certain applicants priority in the lottery provided the best help to people furthest along in the home-buying process. According to DCHD, 211 people with ratified purchase contracts were entered into the lottery, and all of them were selected for financial assistance.

But potential buyers, elected officials, lenders, and real estate agents with experience in HPAP counter that regardless of intent, the new lottery system was poorly communicated and confusing.

“Realtors aren’t clear, potential buyers aren’t clear. I’m hearing contradictory information,” said Councilmember Robert White (D-At Large), who chairs the council’s housing committee, during last Friday’s hearing.

“I am incredibly disappointed with the level of communication and very sudden changes. I tried to play it to the best of my abilities and I feel like I got played,” says B. of her experience. 

Others took aim at DHCD’s timing, noting that the agency waited too long to announce changes to how it would dole out HPAP funding. 

“D.C. determined the budget for HPAP over the summer. DHCD could have decided and announced before the fiscal year [which starts on Oct. 1] that funding would entirely be allocated by lottery,” says Alex Jaffe, a Branch Sales Manager with First Home Mortgage who has worked with HPAP clients for years. “Instead, there was no clarity until October 25.” 

The confusion also bubbled up on social media, where realtor and local real estate influencer John Coleman expressed his frustration to his more than 42,000 followers on Instagram, calling HPAP a “hot mess.”

“The program just moved the goalposts. First-time buyers who followed all the rules and counted on promised funds are now left scrambling to figure out their next steps,” he wrote. 

Coleman said that he worries that with a lottery in place, sellers would be even more hesitant to take a chance on people using HPAP to buy their first homes.

“This isn’t just frustrating — it’s heartbreaking. Buyers are out money spent on inspections and appraisals, and sellers who worked with HPAP buyers are stuck, likely putting their homes back on the market. Programs like this should create trust, not chaos. HPAP needs to hit reset and refocus on its mission to truly support the community it was designed to help,” he wrote.

In an email, Green defended the decision to use a lottery for HPAP applicants.

"HPAP has helped 650 Washingtonians become first time homeowners in our city over the past two years. Our team works every day to try to support as many Washingtonians as possible achieve the dream of homeownership with the limited resources available, and the new process will make HPAP more stable, certain, and efficient. As we fight to make first-time homeownership accessible to more Washingtonians, DHCD will continue to improve our communication and processes so that participants have the best possible experience," she wrote.

Green also said that if funding is left over after the first lottery, a second lottery will be held for people like B. But with the shrinking possibility of HPAP funding coming down to chance, B. says she’s also weighing other options.

“I might as well go to 7-Eleven and buy a scratch-off lottery ticket,” she says..

This story has been updated to reflect that Josephine received HPAP assistance after publication and to include comments from DHCD.