A recent study of foreclosures in 25 Chicago communities finds that there were 6,560 new apartment building foreclosures in 2009, totaling 20,691 apartment units. The report shows that new multifamily building foreclosures outpaced foreclosures of single-family homes and condominiums by a total of 4,000 units.
While all of the 25 communities studied lost more than 5% of their 2000 rental stock to foreclosure in 2009, most affected were low income, historically black communities where renters are concentrated. The authors cite a Woodstock Institute study that found that communities with a 80% or greater African- American population accounted for more than 64% of the city’s inventory unsold, bank-owned (also known as real-estate owned or REO) properties.
Compounding the problem is that landlords, lenders, realtors, and new owners, as well as the renters themselves, often misunderstand their rights and responsibilities. According to the study, many tenants were unaware of their landlord’s foreclosure until essential services were shut-off or until they received eviction threats. The study found that building owners often discontinue building maintenance and repairs once they know their properties face foreclosure, increasing tenants’ risk of living in unsafe conditions. Further, lenders that acquire properties frequently fail to attend to them and often ask tenants to vacate without proper notice. The report explains in detail the various violations of the Protecting Tenants at Foreclosure Act (PTFA), which generally requires those acquiring title at foreclosure to provide a minimum 90-day notice before seeking to evict a tenant.
Specifically, the report cites “cash for keys” as a common practice that violates tenants’ rights. Under this practice, the lender gives the tenant a lump sum, typically $1,000 to $2,500, to vacate the property quickly, which results in tenants losing their legal rights to fight the case in court and their ability to stay in their homes for a longer period of time. Unfortunately, the report finds, many tenants are unaware of the law and stop paying rent once they learn that properties are being foreclosed, giving the owner the right to file a lawsuit for eviction.
The report cites the number of rental foreclosures as evidence of increased need for affordable housing units in Chicago. The authors cite a report by The Preservation Compact, which predicted that by 2020 more than 185,000 households will seek but be unable to find affordable rental housing in Cook County.
The report also includes a list of the lenders with the most units impacted by foreclosures; the top three were Citimortgage Inc. with 2,439 apartment units impacted, US Bank with 1,306, and Deutsche Bank with 1,303.
Chicago Apartment Building Foreclosures: Impact on Tenants was prepared by Lawyers’ Committee for Better Housing, a Chicago-based tenant advocacy group. To read the study, visit: http://lcbh.org/wp-content/uploads/2010/05/LCBH-2009- REPORT-Chicago-Apartment-Building-Foreclosures-Impact-on-Tenants-RB.pdf