While many low income and minority neighborhoods faced with high numbers of foreclosures are threatened by absentee investor landlords, a new report by PolicyLink finds there are numerous ways for these communities to facilitate the responsible purchase and maintenance of foreclosed, vacant, or condemned properties.
The report cites data from the National Association of Realtors showing that nationwide in 2008, investor-owners bought 20% of all the residential homes for sale. Most of these investors reside outside the communities where they bought properties; the median distance between an investor’s address and a property was 19 miles, and 31% of investors’ addresses were more than 100 miles away. According to the data, 58% of investor-owners planned on operating their homes as rentals.
Although the authors found that the communities were concerned about the negative consequences of transforming a homeowners’ neighborhood into a renters’ neighborhood, they argue that renter-occupied homes are better for the stability of a community than vacant or condemned homes. The report also notes the increasing need for rental homes and proposes ways of upgrading former foreclosed homes while simultaneously increasing the supply of rental housing.
Using the case study of communities in the Twin Cities (North Minneapolis and East St. Paul, Minnesota), the study links “absentee owners” to deteriorated properties that are rented to tenants with very little or no maintenance. The report suggests that because minority and low income households have been hardest hit by the foreclosure crisis, they are also disproportionately likely to rent neglected ex-foreclosed homes. The authors speculate that many of these properties will end up being foreclosed a second time, extending the effects of foreclosure to renters and further destabilizing distressed neighborhoods. As a result, the study concludes, communities will face increasing rates of poverty and segregation.
The paper presents strategies that communities can use to gain control and prevent such neighborhood decline. The paper describes and discusses community-based initiatives that include acquiring foreclosed homes and rehabilitating them to rent or sell to low and moderate income families; providing tax-credits and mortgages to qualified homebuyers; and establishing community land trusts, housing cooperatives, or deed-restrictive units. The authors also advocate for policies and regulations that would hold investors responsible for the condition of their properties.
Two specific initiatives presented are The National Community Stabilization Trust’s “First Look” program and the community land bank. First Look, which began in September of 2009, gives non-investor buyers the chance to view and bid on foreclosed properties before they go into the general public market. In the Twin Cities, this program has allowed the Greater Metropolitan Housing Corporation (GMHC) to view a total of 552 homes, of which they bought 48.
The second initiative, the community land bank, holds and maintains the properties until responsible buyers can be identified. The goal of the Twin Cities Community Land Bank, which was federally funded by the Neighborhood Stabilization Program (NSP), is to purchase and rehabilitate a total of 2,000 residential units, and rent or sell them to households in need.
The reports includes examples from more than 30 metropolitan areas in addition to Twin Cities that the authors hope others will use to identify potential strategies.
The report, “When investors buy up the neighborhood: Preventing investor ownership from causing neighborhood decline,” can be downloaded from the Policy Link’s website: http://www.policylink.org/site/apps/nlnet/content2.aspx?c=l kIXLbMNJrE&b=5136581&ct=8313075