North City Park

Why does Denver need a Post Foreclosure Program?

  

Every day in 2008, 33 homes will fall to foreclosure in Denver

  

Every day in 2008, 82 homes will be foreclosed in the entire Metro area

   

No program is in play to help people who have to vacate their home

 

The result:                                              

 

 Neighborhoods have destabilized 

• Foreclosed families vacate their neighborhood and community; sometimes leaving their local church and social groups – causing holes in the fabric of the community.
• Most foreclosed families still have at least one income so can not qualify for public assistance programs.  They are on their own to find housing, place their pet, and repair their credit. 
• Children are removed from their schools – interrupting the child’s need for stability and continuity at a critical stage of their development.  Additionally, this degrades school funding and ability to teach children with a consistent program.
• Little to no funding or resources for relocation - furniture and other personal belongings are abandoned.
• Some families are “doubling up” moving in with friends or relatives, others are moving to houses as tenants, some are living in their cars.
• Investors who want to purchase a cash-flow property are the primary customers for most foreclosed homes at this time – increasing (by necessity) the number of rental units in the neighborhood.   Many of these landlords are new to real estate investing and have not made a long-term business plan for this investment.  We risk further destabilization by inexperienced absentee ownership.

 What do we propose?

 

Simple – PHASE ONE; move these families from their foreclosed home to a rental house in the same community. 

 

ESTABLISH AND MAINTAIN RESIDENTIAL PROPINQUITY!

 

 How?

 

 Develop a network of resources at a local level utilizing existing community groups –  

1. RNO’s,
2. Churches,
3. Local City Council offices,
4. Private and / or public schools.   

Ask the City or County to oversee the project to establish the program.  Then, through a small office dedicated to this program, market, promote, train and refer to the appropriate neighborhood contact.

 

Why?  

• We believe the PFP concept directly results in faster stabilization of the affected neighborhood.
• Only one empty house instead of two in a community means reduction in municipal costs associated with foreclosures.
• Children remain with their established peer groups and in the same school, reducing the negative social and psychological impact.
• The family remains with their established community.
• The tenant family has 3 – 5 years of credit repair prior to buying a home again.  Keeping the foreclosed family in the same community increases the likelihood of re-purchase in the same area. Residential propinquity is critical for the health of the neighborhood.
• Churches keep their membership intact.
• Local retailers do not need to increase advertising to capture new customers  
• Police do not experience the negative effects of community transition and the increase in crime that comes with destabilization and population transiency.
• Furniture and personal belongings are kept with the families, reducing additional losses to the family and keeping the personal property from ending up in our alleys and landfills – Waste Management is strained now with this problem.  

Which Agencies and Groups Benefit with the PFP?

• City and Counties:

1. Tax Assessor
2. Public Safety
3. Fire Departments
4. Code Enforcement / Neighborhood Inspections
5. Animal Control
6. Waste Management
7. Public Schools
8. City Council Offices
9. Various Administrative and Support Services

•  Private Groups and Neighbors:

1. Retailers
2. Churches
3. Neighborhood Organizations (RNO’s)
4. Landlords / Single Family Unit Investors
5. Neighbors

 Is There Any Financial Benefit to the City?

 

No question!  Slowing the destabilization of our neighborhoods with an active effort to stabilize community will naturally and organically  reduce municipal costs, halt or greatly reduce the downward slide of property values and lost taxes. 

 

Hard costs and social costs are to be considered as the properties surrounding the affected home are also brought down in value and often, through lack of pride, in condition.

 

2007 Denver estimates set municipal costs from $7,000 to $30,000 per vacant property. (Source: Terrance Ware & Susan Foley, Denver OED)

 

In 2004, the City of Buffalo calculated the municipal cost of trash removal alone at $5,000 per lot. (For further discussion of the Buffalo study see B. Anderson, “New Jersey Fights Blight,” Affordable Housing Finance, June 2004: 78-79.)

 

In 2003 / 2004, Chicago / Cook County broke out their costs and tax losses associated with each foreclosed home.  In the empty home, costs ranged from:

$5,358            vacant and unsecured properties

$13,452          vacant, unsecured properties tracked for demolition

$19,227          properties abandoned before foreclosure is completed

(See full report: Collateral Damage: The Municipal Impact of Today’s Mortgage Foreclosure Boom by William Apgar & Mark Duda. May 2005)

 

In 2003, a Temple University study found that Philadelphia properties located within 150 feet of an abandoned unit sold for $7,627 less than those not located near abandoned units, with the effect tapering off to $3,543.

  

What’s in it for the rest of us? 

• Many of these families are already established in the community, with children active in the local school.  There is no ‘integration’ time needed for this family if we keep them in the neighborhood.
• Most are employed and can afford to pay rent at a comparable home in their neighborhood but could not afford the 1.5 – 3 times increase of the adjustable rate mortgage that cost them their home.
• Foreclosed families are used to managing a house; they would likely make better tenants for the landlord.
• These families have 3 – 5 years of credit repair ahead of them before they can buy another home – If they remain in their community as a tenant, when they can purchase again then their neighborhood, perhaps even the home they are renting, is most likely where they will purchase.
• City infrastructure costs are reduced – police, social services, schools, waste management, even Denver’s Road Home can benefit.
• Neighborhoods recover from their destabilization faster, potentially increasing property values faster. Imagine keeping 25% of the families in their neighborhood.  This act alone could make the difference in whether the neighborhood dies or starts to recover!
• How can this be accomplished?
• By coordinating – at a local level – a network of communication.
• Establishing a method of identifying then assisting the foreclosed families to remain in their community as tenants.
• Activating and training RNO’s, churches, school staff, local retailers, landlords, selected city services, and community members to use this network.
• Funding through the projected savings to the City, other private and public contributions to:

1. Complete the development of phase one of the PFP.
2. Staff the program.
3. Launch a pilot program in several affected neighborhoods.
4. Publicly promote the PFP.
5. Relentless outreach to engage and teach churches, schools, community groups and individuals how to make a positive impact in their neighborhood.

Phase Two:  The Three to Five Year Plan 

 

Transition the neighborhood from a high rental model to high owner occupant in the shortest possible time.  

• Background:   

1. Many buy and hold real estate investors at the single family level are seeking to own less than 10 rental units and plan to sell the property in three to five years, (“when the market recovers”).  They are typically new to the investment game and may have an unrealistic plan to profit for their time frame.
2. The reality is that if left alone, some of these neighborhoods will take much longer than three to five years to stabilize and begin to increase in value.  These inexperienced landlords will likely be motivated to sell their property to the tenant who participates in the PFP.
3. The PFP tenant will be encouraged to remain stable while they work on their credit repair.  If they have successfully brought their household belongings with them from their foreclosed house, it will be cumbersome and expensive to move every year like many apartment dwellers. 

It’s about the life of the community 

1. Train and support the landlord to assist with a successful business model, (monthly cash flow and equitable exit plan) to keep the tenant secure and safe while they work on credit repair.
2. Provide basic support by way of funding free distribution of the Crime Control Handbook for Landlords. 
3. Develop low to no cost retention incentives for the tenant to remain in the rental unit for the duration of credit repair.
4. Partner with the landlord to position a willing property transfer to the loyal tenant as soon as credit repair allows for the tenant to qualify for a home loan.
5. Seek matching grant opportunities or other incentives to assist the landlord and the tenant in the property transfer.
6. In the end, the landlord is a hero instead of being a slumlord and we move the neighborhood from high rental, low value to high owner-occupant with stable and valuable neighborhoods and schools. 

Phase Three: The Rest of the Story…..  

 

How do you create a whole – life program that results in a sustainable community?

 

Stay Tuned! 

Filed under: Community Assistance, Education, Environmental Impact, Get Involved, Long-Term Planning, Neighborhood Identity, Neighborhood Stability, Residential Living, Safety