Chicago's use of eminent domain to save homes could be longshot

Chicago's use of eminent domain to save homes could be longshot
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Despite impassioned testimony from housing advocates and a cameo appearance by actor John Cusack, it's far from certain that the city will use eminent domain  to keep troubled borrowers in their homes.

To start, Mayor Rahm Emanuel has already stated he opposes the idea, which could mean it's all but a dead issue. After all, nothing moves through the city council without Emanuel's blessing.

"The mayor has not been rebuffed once, so I don’t see that happening," said Paul Green, a political commentator and professor of politics at Roosevelt University.

Last week the City Council’s Finance and Housing and Real Estate Committees held a joint hearing on the issue.

"This is a national problem that requires a broad solution that is applicable across the United States," said mayoral spokesman Tom Alexander, in an email. "He [Emanuel] believes that municipalities using eminent domain is not the right approach to dealing with it and distracts from the larger issue."

In short, the plan would see the city use its eminent domain power to grab underwater mortgages, which is when the borrower owes more than the house is worth. The city would then work to refinance the mortgages to make it easier for homeowners to pay back the loans.

Tom Feltner, vice president of Woodstock Institute, a Chicago housing advocacy group, told the joint committee that his organization supports the idea of using eminent domain, but only when principal reduction is not an option.

He agrees with Emanuel, in that the mortgage crisis is not just an issue in Chicago, it's a national problem, one deserving of new action by the the Federal Housing Finance Agency or Congress.

"I think that we need to continue to push for principal reduction and loan modification for loans held by Fannie Mae and Freddie Mac, or a reversal by the FHFA to permit principal reductions," Feltner said.

Currently, the FHFA does not permit principal reductions. The city's current plan would not include loans backed by Fannie Mae or Freddie Mac.

Congress could pass legislation mandating FHFA to do so, but Feltner noted that the issue is a "very contentious one" and passing a federal law might not be that easy.

The Chicago Reporter contacted 7th District Congressman Danny Davis to ask about the likelihood of any bill moving forward.

He didn't specifically address the issue; instead, he said "other approaches" are needed before the city undertakes eminent domain initiatives, or the federal government requires Fannie Mae or Freddie Mac to offer principal reductions or loan modifications.

Alexander, the Emanuel spokesperson, said the mayor has already taken steps to prevent foreclosures, and to preserve the city's housing stock.

"We’ve done a number of things to help secure vacant properties, prevent foreclosures, and generally improve communities," Alexander said. "A good example is the micro-market recovery program. In this program, the city is working with community groups to intervene in key situations, to help prevent foreclosures, help people stay in their homes, etc."

Twenty-sixth Ward Alderman Roberto Maldonado supports using eminent domain to save underwater mortgages, and said that Emanuel--an "intelligent guy" who values "compromise"--might come around once he studies the issue closer.

According to data from the Woodstock Institute, which was presented to the joint committee, one in four homes in Cook County were underwater at the end of the fourth quarter in 2011.

African-American and Latino communities bear the true brunt of this epidemic, with 40 percent and 38 percent of mortgages underwater, respectively, in these communities.

© Community Renewal Society 2012

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  • What makes no sense to me is why people are proposing to do this under eminent domain rather than setting up a (misguided but far less scary) program that would involve voluntary contracts stipulating that the government will buy the house at such and such an offered value, hold it for no more than x years, and then sell it back to the owner for no more than the same sum as the third transaction.

    Insisting upon eminent domain indicates that the program wants the "flexibility" to force owners to participate, or that local government will have the authority to seize property for other "related" reasons. Let's not unnecessarily shred property rights pursuing an approach that fails to address the cause of the problem.

    Eminent domain has already destroyed vast areas of Chicago, from Little Italy to "The Valley," the former Dutch neighborhood Southwest of Ashland and Roosevelt, to the destruction of privately-owned poor communities and their replacement with violence ridden publicly-owned poor communities to highways which sap adjacent business corridors and were "accidentally" routed exclusively through areas mapped out for slum clearance. The Valley, a large mostly vacant area between Ashland, Roosevelt, Western, and the rail viaduct, was seized for "expansion" by the medical district and is now serving noble public purposes such as providing cheap land for Costco. Let's avoid further unleashing this destructive force upon Chicago's neighborhoods.

  • In reply to C M Snyder:

    "third" should be "first"

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