Business Trends

Strategies in Combatting the Foreclosure Crisis

In Uncategorized on July 13, 2009 at 5:12 pm

The long-term effects of the foreclosure crisis are only now sinking in for many communities, as homes languish unattended and property values plummet across entire neighborhoods. But a new report from PolicyLink report, Reclaiming Foreclosed Properties for Community Benefit, is showing how some cities and states are dealing with this second wave of the foreclosure tsunami.

With more than five million mortgages in some stage of foreclosure and more than 15 million Americans “underwater” with homes worth less than they owe on their mortgage, the foreclosure crisis remains a very real threat to countless communities.

“As foreclosed properties fester, communities are reeling from blight, crime, and property value decline,” said Kalima Rose, a report co-author and the Director of the PolicyLink Center for Infrastructure Equity. “Thankfully, some proven strategies are showing communities how to reclaim their housing stock and get their cities back on track.”

With a July 17th deadline looming for cities and nonprofits to apply for nearly $2 billion in federal Neighborhood Stabilization Program funding, the information in the tool is needed now more than ever.

Creating Community Land Trusts

Land trusts have been very successful at securing vacant properties and ensuring they remain affordable for years to come. In Providence, RI, city and state leaders acquired foreclosed properties in two of the hardest-hit areas and put covenants on their sale to ensure they remain affordable for decades.

Marketing Foreclosed Homes and Offering Tax Incentives to Buyers

Some cities with still-functioning housing markets have been able to attract new buyers to foreclosed properties. Boston has a trolley ride to take potential buyers on a tour of foreclosed properties. Los Angeles has hired marketers to tout the benefits of buying a foreclosed home. And other cities are offering low-interest loans or tax incentives to attract buyers.

Increasing the Cost for Owning Vacant Foreclosed Properties

Owners of foreclosed properties are often large investors who are waiting for the market to turn around — and letting their properties fall into disrepair in the meantime. By imposing taxes or fines on properties that remain vacant for more than a year, cities and towns can change the incentive structure and make it easier to sell the property to someone who is willing to fix it and live in it.

Rehabbing or Demolishing Vacant Properties

In Cleveland, community leaders have started a six-neighborhood pilot program to identify properties that can be rehabbed and demolish ones that cannot. Getting new homeowners into salvageable properties and saving the upkeep and repair money on non-salvageable properties reduces the burden for local government. Other cities with excess housing stock and low demand are following suit.

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