Chicago Targets ?Zombie Housing? for Renewal, Block by Block
Industry Update
July 9, 2018
Source: U.S. News & World Report
The city, nonprofit community groups, financial institutions and others are partnering to revitalize housing left behind in the foreclosure crisis.
Jeannie Oquendo was the first to move to North Central Park Avenue in the West Humboldt Park neighborhood of Chicago in winter 2016.
Amid frigid temperatures, the block had seven abandoned houses since the foreclosure crisis. It was the type of neighborhood that could attract crime, not necessarily first-time homebuyers.
But Oquendo, a single mother of three, didn’t see any trouble on several visits to the street where she found a vacant two-unit building with potential. She got an affordable mortgage and bought the building. It gave her a chance to live in her old neighborhood and to be close to her aging parents.
“It’s been two years now and you can see the neighborhood is changing so fast,” Oquendo says. Those six other empty buildings have since been bought and rehabbed and families are living there now.
West Humboldt Park is among several Chicago neighborhoods that needed an intervention after the foreclosure crisis peaked around 2010. Vacant lots and so-called zombie buildings were left empty and in disrepair, community leaders said.
In 2011, Chicago officials created the Micro Market Recovery Program (MMRP) to jump start individual blocks that had a high rate of vacant buildings due to foreclosures. MMRP sought to transform those abandoned, dilapidated buildings into affordable homes for renters or first-time homebuyers. It would help to re-settle diverse communities and attract businesses.
Chicago had already spent about $169.2 million from the Housing and Urban Development’s Neighborhood Stabilization Program (NSP) for areas hit hardest by foreclosures. MMRP would take the next step and include several community groups, such as Local Initiatives Support Corporation Chicago – known as LISC Chicago – to attract investors and families, according to the Chicago Department of Planning and Development.
Besides West Humboldt Park, MMRP has reoccupied nearly 1,000 buildings, including about 2,900 units, in Englewood, Auburn Gresham, West Pullman, Woodlawn and other neighborhoods. Also, more than 400 families received help with loans or obtained financial assistance to keep their existing homes.
“As long as the demand and the need are there, we will continue,” says David Reifman, commissioner of the Chicago Department of Planning and Development. “Right now, our recovery is steady but not complete.”
From 2011 through December 2018, about $12.8 million will be invested in MMRP, mostly from the city’s budget and grants from various nonprofits. The amount also includes about $3 million from the Illinois attorney general’s office settlement with major banks accused of questionable lending practices related to the foreclosure crisis.
“We wanted to focus our limited resources on key areas to bring back whole blocks at a time,” Reifman says.
Since then, foreclosure filings decreased by double digits in the MMRP zones from 2011 through 2016. The targeted areas in the north region had a 67.6 percent reduction. The middle region had a 66.1 percent decrease, while the south region had a 25.8 percent decrease. In comparison, foreclosure filings citywide decreased by 69.4 percent during the same period. Housing prices also increased in the MMRP communities, some as much as 33.1 percent, according to the Institute for Housing Studies at DePaul University.
The improvements are due to MMRP, community involvement, families returning to the area and an improving economy, says Geoff Smith, the institute’s executive director.
“Overall, (the city’s) strategy is one that’s important,” Smith says. “It targets small areas and helps the neighborhoods recover. When there are limited resources, you need to concentrate it and then target the areas to have some level of success.”
Also, providing an affordable mortgage, financial assistance, grants, and some forgivable loans are part of the equation, community experts say.
Oquendo obtained an affordable mortgage for about $86,000, which included about $39,000 for the home and the rest for the rehab project. Her monthly mortgage payment is $988, or about $75 more than what she paid in monthly rent for an apartment a few minutes away on North Avenue and Pulaski Road in Chicago.
But Oquendo faced a lengthy process. She closed on the property in February 2015 and anticipated a six-month rehab to replace the furnace, duct system, plumbing and roof. However, her contractor died and she needed to find another one. She finally moved in a year later.
Afterward, she bought the vacant lot next door for about $3,000 and turned it into a garden. She now raises tomatoes, green peppers, cucumbers and other vegetables. She also plans to install a basketball court for her sons.
“I’ve been very happy with my decision and would do it all over again,” Oquendo says.
Anthony and Michelle Johnson, who have two children, purchased a two-unit building on North Spaulding Avenue in West Humboldt Park in 2015. They wanted to stay in the community where they teach masonry work to young people.
The Johnsons’ $160,000 mortgage also included money for all new electricity, plumbing and sewer work. Their monthly mortgage payment of about $1,400 is offset by $850 earned from renting out the other unit. That leaves about $550 out of pocket each month, compared to when they used to pay $850 rent at an apartment in the West Garfield Park neighborhood.
“This has changed the trajectory of our financial lives,” Michelle Johnson says. “We now own a piece of Chicago real estate and it’s now a part of our retirement plan.”
Also, MMRP aims to transform tough, poor neighborhoods, such as Englewood, where high-end grocer Whole Foods opened about two years ago. And more commercial development is planned, says Jack Swenson, program officer for LISC Chicago, which partners with the city on housing and other projects.
LISC Chicago develops a relationship with residents on a targeted block, finds out their needs and concerns, and works on filling vacant lots and acquiring vacant buildings. It’s a process that ultimately leads to a stronger foundation, Swenson says.
“Crime is a reality in every neighborhood and we think we sometimes forget how important a community is,” Swenson says. “In many neighborhoods across the city, it’s the people’s commitment to their community that outweigh the obstacles and they still choose to reinvest.”
Besides Chicago, NSP has distributed roughly $6.8 billion nationwide over the last 10 years to cities hit hardest by foreclosures, says Brian Sullivan, HUD spokesman in Washington, D.C.
“It’s hard to say if the foreclosure crisis is over,” Sullivan says. “They say all housing is local and the foreclosure crisis ended sooner in some areas rather than others. But who says it’s really over?”
Dallas received about $8 million in NSP funds to help the southern area most affected during the foreclosure crisis. Then Dallas officials in 2015 created the Neighborhood Plus Plan, a citywide revitalization program to help troubled neighborhoods. Dallas also has invested about $75.3 million in housing projects since 2009, says Dallas spokesman Corbin Rubinson.
The nation’s capital received about $17.4 million in NSP funds for its struggling neighborhoods. Then in December 2017, Washington’s Property Acquisition and Disposition Division created the Vacant to Vibrant DC program to quickly dispose of or sell vacant properties. Washington budgeted about $3 million this year for both programs, says Polly Donaldson, director of the city’s Department of Housing and Community Development.
Los Angeles received about $143 million in NSP funds to rebuild neighborhoods. In 2010, the city also adopted a Foreclosure Registry ordinance to further protect neighborhoods from inadequately maintained and abandoned foreclosed properties or face penalties, says Douglas Swoger, director of the asset management division of the Los Angeles Housing + Community Investment Department.
What cities spend on such programs also is difficult to compare, because of the wide range of services, the geography involved, the number of vacancies and other factors, says Alan Mallach, senior fellow and researcher for the Center for Community Progress in Washington, D.C.
Thousands of cities have neighborhood revitalization programs, which may range from a modest effort to give elderly homeowners grants to fix their homes to a multifaceted strategy. Some notable programs are in Minneapolis and Baltimore, Mallach says.
Some neighborhood revitalization work also is done by nonprofit organizations and not by city governments. Some include Youngstown Neighborhood Development Corporation and Cleveland Neighborhood Progress in Ohio, Mallach says.
Chicago’s MMRP has made tremendous progress and offers a cross-sector effort between the city, nonprofit community groups, financial institutions and others, says Maurice Jones, president and CEO of LISC, based in New York with 32 offices nationwide. LISC is a MMRP partner with Chicago.
“It’s a recipe that produces results and is sustainable,” Jones says.
Ojo and Michelle Patterson, parents of three children, just started the MMRP process to possibly buy a 3-unit building in the Englewood neighborhood of Chicago. They are renting an apartment in the nearby Auburn Gresham neighborhood for about $680 a month. They’re hoping their income as a barber and hairstylist could qualify them to pay a $1,600 monthly mortgage while renting out the other units. They also want to live in Englewood where they grew up and where they do volunteer work.
“Moving back into this community would allow me to grow in my own community, be included with other small businesses, and have the opportunity to live, breath and eat in my own community, while we invest and own,” Michelle Patterson says.
