Why Use It?

Rental Units Are Also Being Lost.

While single family home foreclosures dominate the press, in many cities multifamily rentals are also being foreclosed upon. Thirty-five percent of the nearly 14,000 foreclosures in Chicago in 2008 involved two- to six-unit apartment buildings. In Providence, Rhode Island, there were more foreclosures of multi-family properties than of single family homes in 2007. The diminishing affordable rental supply makes it even harder for foreclosed homeowner households and displaced tenants to find a place to live.

Opportunities for much-needed affordable housing. Many communities across the country have long struggled with a supply of affordable homes that is inadequate to meet the needs of moderate- and low-income households. In other places, the bulk of affordable housing is concentrated in just one or two areas, which are typically far from transit, jobs and other amenities. Foreclosures are worsening this deficit by reducing even further the stock of affordable homes for purchase or lease. By acquiring, rehabilitating and re-selling foreclosed properties, communities can create affordable units in areas where soaring property values had made the cost of building new affordable units prohibitive; or they can stabilize economically vulnerable communities. Four important objectives include:

Long-term affordability. Maximizing the initial subsidy to ensure that homes remain affordable and neighborhoods stable well into the future.
Opportunity housing. Extending to low-income families housing opportunities in communities that have good schools and transportation.
Quality housing. Ensuring that homes are well maintained by their new owners.
Secure housing. Helping homeowners stay in their homes down the road, in the face of the next economic downturn.

Increased neighboring property values and reduced blight. Having a foreclosed property in the neighborhood decreases surrounding home values by an average of $5,000 according to the Center for Responsible Lending in a report commissioned by the Fannie Mae Foundation. Heavily concentrated in low- and moderate-income neighborhoods and communities of color, foreclosures exert a multiplier effect in these areas, erasing decades of community revitalization work.

Reduced burden for local governments. Municipalities spend money to care for foreclosed properties, enforcing code violations, boarding up vacant properties, and policing areas with abandoned properties, all while tax revenues decline. A Chicago study found that each vacant foreclosed home costs local government between $5,000 to $34,000. These costs include inspections, court actions, police and fire department efforts, demolition, unpaid water and sewage fees, and trash removal. For instance, inspecting, securing and maintaining empty buildings in St. Paul, Minnesota costs the city nearly $2.3 million per year. By returning the property to productive reuse, the new owners or tenants contribute, rather than deplete, the city’s revenues.

Restore housing markets. Distressed sales of foreclosed properties made up the majority of home sales in the latter half of 2008. The witches’ brew of massive inventories of foreclosed homes, aggressive speculation, and reduced access to credit have thrown the entire housing market off-balance. By quickly bringing foreclosed properties back to productive re-use, communities can begin to restore functioning markets.

Create new jobs. Each time a city or neighborhood repairs or demolishes a vacant property to create a more energy-efficient building or a green space; jobs are created, at a time when millions need work. Workers must be hired to repair, inspect, demolish or sell the foreclosed properties, and, when cities move to weatherize vacant properties, that effort requires skilled workers as well.