August, 2010

Dear Friends & Supporters of HOST Development,

Since 1989, HOST Development has passionately pursued our mission: to help people become homeowners who might not otherwise get the opportunity. For the staff and Board members of our organization, this has been a labor of love, and we are gratified with the results. However, with this letter, we announce that HOST will shut down operation.

It was not without much consideration that this decision was made. Nor was it for lack of effort. The enormous community encouragement and support that we have received over the years, compels us to provide some explanation:

In 2005 and 2006, on the heels of the success of our two largest projects (99 and 80 homes), our organization made a strategic decision: to increase our capacity and to make a dramatically larger dent in two compelling problems afflicting our community—the minority homeownership gap, and the flight of young families from the City of Portland in search of more affordable housing. At this time, we had completed approximately 300 homes, and our model had demonstrated success in turning around struggling neighborhoods; assisting first-time buyers, about half of whom were people of color, to own their own home; and generating scores of children to bolster the declining enrollment in Portland Public Schools (PPS). At this time, we were building around 50 homes per year. We then committed ourselves to the Building BlocksCampaign : to create 1,000 new homeowners by 2017, and generate 2,000 students for PPS. This would require us to add staff, and to obtain the then most difficult ingredient to come by: residential land within the city, suitable for development. Community-oriented investors, banks, and foundations who believed in our mission, our people, and our track record, provided Program-Related Investments which, coupled with the net proceeds we had built up over 15 years, provided the necessary capital. We found and purchased the land, and immediately undertook the time- and money-consuming work of obtaining development entitlements. The first year of the Building Blocks Campaign went as projected, with HOST on track to become one of the 10 largest production homebuilders in the region. Then came the economic downturn, and almost overnight, this land became unmarketable, unfinanceable, and thereby, unbuildable. We reacted by cutting our overhead some 72%. We lowered our home prices. We were successful in selling some of our land holdings, however, these resulted in short-sales for the banks, with no recovery of the hundreds of thousands of dollars we had invested. It seems as though the past two years have been the most demanding in memory; even for those of us who worked through the Oregon of the

1980’s. Through these past two years, most of our partners and lenders could not have been more supportive, given that they were facing struggles of their own. Through patience, concessions, accelerated receivables, and other efforts, they said that they did not want to see the State’s largest builder of affordable homeownership go away. Our gratitude to them for this, and for their many years of support, is hard to adequately express.

So, here we are. The decision made. We take some measure of comfort in the results achieved:

The dramatic turnaround of numerous North and Northeast Portland neighborhoods which were struggling in the ‘80’s and early ‘90’s.

• Approximately 400 homes and homeowners created; the vast majority of whom were first-time Buyers earning less than median income.
• Reaching a significant number of those people most challenged in becoming homeowners: people of color, immigrants, and single mothers.
• Generating millions of dollars of equity for these low-income home-owners; once calculated at approximately $29,000,000. Even with the economic downturn, much of this equity still exists, because of the low entry price. And because of our emphasis on solid and responsible loan counseling, relatively few of our Buyers faced the foreclosure problems that came with sub-prime lending.
• Tens of thousands of hours of volunteers’ community service, directed back into the neighborhoods.
• Hundreds of children generated for PPS.

However, to say that this decision does not generate regrets, would be dishonest. Chief among these are:

1. Quite a few of our long-term supporters will not receive the full repayment of their Program-Related Investments and loans.

2. Despite a current economic climate that seems to be temporarily masking them, the twin problems of a minority homeownership gap and family flight will again accelerate with a vengeance in the near term. Population growth, in-migration, and our urban growth boundary will again combine to drive Portland’s already lagging percentage of homeownership even lower. These insidious issues will gradually wear on Portland’s vitality and sustainability. And while a number of capable groups provide education, outreach, and financial assistance, without scaleable production of quality housing product—affordable for Buyers earning 70% - 100% of median family income, Portland will drift closer to San Francisco; an effectively childless city where only the wealthy and near-wealthy can afford to own.

We want to finish this letter with the tone and emphasis of gratitude. It has been a gift and a privilege for all of us involved with HOST to serve, and to embrace this work. For those of you have stood with us, we are more thankful than you can know.

Sincerely,

Ted K. Gilbert, Chairman and John Miller, Executive Director