Vacant homes are trouble. There's no doubt about it. From attracting squatters, falling into disrepair or lowering home values, there's not a neighborhood in this city that doesn't have empty homes creating problems. More are piling onto the market every day, with little hope of a quick recovery.
So the Federal Reserve has decided it's time to do something. Its plan? Take all the homes that have been repossessed by FannieMay and FreddieMac and sell them in large chunks to investors who will then turn them into rental housing.
It's an ambitious plan. It has the potential to move the market forward after being in prolonged slump. But it has some potential problems, too.
How would the program work, exactly? How would they guarantee that the homes be used for rentals? What kind of financing would there be for investors? Just who would these investors be? We don't know yet. The fed says it's still working with administration officials and the U.S. Department of Housing and Urban Development on the specifics.
Wanting to know more, I called up Tom Feltner at the Woodstock Institute, a Chicago nonprofit that researches and provides policy solutions on topics like the housing market. They've been looking into the idea and researching the impact it might have. If it moves forward, it could have a great effect on Chicago's market, since our city has the second highest number of properties owned by Fannie and Freddie in the nation.
"The fed is looking at a number of different strategies to get properties back into productive use," Feltner said. "What we're concerned with is what is going to be the broader community impact?"
One clear concern is management. It's one thing to manage a multiunit rental building, Felter said. It's a very different task to manage 30 or 40 properties, single-family homes, spread out across the city. In addition, will the properties be priced affordably? The city already struggles with enough affordable housing.
"The Chicago region does not have the affordable rental stock to meet demand," Feltner said. "With a big influx of new housing stock, we need to make sure that these properties in areas that affordability is given consideration. Housing quality and housing condition is on the flip side of that coin."
But, if the fed can pull it off, moving these properties from a state of being abandoned eyesores to lived-in productive housing will certainly help struggling neighborhoods, he said.
"It''s ultimately going to be good for the remaining properties that are in limbo," Feltner said. "That's what's dragging down the housing market--a lot of uncertainty. Moving those back into productive use, even as a rental property, ultimately going to be good for the remaining for-sale properties."
While it's nice to see the government moving proactively to combat the crisis of vacant and abandoned homes, there's one sticking point I have--not a technical point or a practical concern, but more of a moral quandry.
We know that the majority of these vacant homes are in low-income minority communities. Because of redlining and other discriminatory banking practices, it was very difficult for anyone to buy a home in these communities for much of the last century, and when people did own, their property values were very low because of where they lived. The subprime mortgage industry targeted these communities precisely because homeownership rate were so low--there were lots of potential people to sell home loans to, and many of them may not have had the financial savvy to know what exactly they were signing. And although they were owning a home through bad loans, for the first time, they were owning a home. People of color in communities of color owned their own property.
Of course, it didn't last. Millions lost their homes, and now they're owned by a bank or by the government. So all that progress, based on false footing, was reversed.
Now, the fed wants to sell these properties to investors. Who are they? We don't know. Banks, rich people, corporations ... we'll have to wait and see. The influx of rental housing will be a great asset in our city, where finding an affordable place to live is no easy task. But again, those properties won't be owned by the people who live there. They won't be owned by people who have a stake in the community. Once again, they'll be owned by outsiders. Minority communities won't gain the equity or investment of home-ownership. They'll be paying money to the man to live in homes they used to own themselves.
Is it just me, or does this seem a little bothersome?
This program might just be the best hope we have of moving forward in this housing crisis, especially in devastated neighborhoods. But it's also another twist in the history of real estate and race, one that strikes me as a bit ironic and disturbing.
Photo credit: Bart Everson
© Community Renewal Society 2011