10.5.11 | Chicago is attacking the foreclosure crisis with a new approach. Rather than shoveling snow in a snowstorm, addressing one foreclosure at a time, the city is targeting subsections of nine of the hardest hit neighborhoods with a pool of money and support.
The foreclosure problem “needs a neighborhood approach,” Mayor Rahm Emanuel said in announcing the Micro-Market Recovery Program over the summer. “It needs a comprehensive, integrated approach rather than home-by-home because the system is too big and complicated for that alone.”
The Micro-Market Recovery Program centers on $15-20 million pool of loans provided by the Chicago-based MacArthur Foundation. The foundation hopes to leverage additional money with that contribution. The foundation will work with the Chicago Department of Housing and Economic Development to design loan products that specifically address the need to stabilize the targeted communities. The funds are to be used to turn over 2,500 foreclosed homes in six specific neighborhoods over the next few years.
In 2010, more than 10,500 foreclosures were completed in Chicago. An estimated 95% of the properties are currently vacant, costing the city upwards of $15 million just to maintain the homes. (The city recently passed legislation requiring banks to maintain empty foreclosed homes on their books.)
And the problem is growing. New 2011 data just released from the Woodstock Institute shows that the foreclosure pipeline is getting very clogged up. Foreclosure cases in Chicago are taking longer to complete, resulting in a dramatic drop in foreclosure completions from the first half of 2010 to the first half of 2011. Researchers from Woodstock say it’s likely that the number of homes tied up in the foreclosure process is growing.
BRR Network Member Todd Swanstrom has studied how metro regions are responding to the housing crisis. Swanstrom and his colleagues find that foreclosures have concentrated negative effects in local neighborhoods, especially in low- and moderate-income areas with weak housing markets.
“The negative effects of foreclosures on surrounding housing prices are confined to an area in a circle within about 1/8th of a mile radius of the foreclosure,” Swanstrom said. “Even a small number of vacant properties can set in motion a vicious cycle of abandonment and decay that can devastate neighborhoods.”
His research finds that those cities and counties that were better able to weather the storm were those that collaborated with other sectors of government, foundations and community-based organizations; redirected resources to where they were needed; and passed targeted reform laws, all of which Chicago is working on.
But before the new foundation funds can be put to work, the city’s first step is to take an inventory. Who are the owners? What’s in foreclosure? Who are the bankers who own the homes?
Swanstrom notes: “If Chicago can intervene in a very timely and targeted fashion, using up-to-date data, to stop this process, the benefits will be enormous — not just for the neighborhood but for the whole city,” he said. “Stable neighborhoods make for a prosperous and stable city.”
Once the city has an inventory and a lay of the land, they plan to bring in capital resources to help the homeowner stay in, or figure out how to get the home back in circulation.
For more on the program, see the news clip from WTTW.
Photo by Eric Allix Rogers.