Report shows another casualty of foreclosure crisis: renters

Report shows another casualty of foreclosure crisis: renters
Leftover signs from Hal Baskin’s 2011 campaign for 16th Ward Alderman remain on a boarded entrance of the South Side Masonic Temple in Englewood. The building, which once housed a clubhouse and an auditorium for the fraternal organization, has been abandoned since the mid-1980s. Photo by Jonathan Gibby.

You hear a lot about the foreclosure crisis and its impact on homeowners. It tore through black and Latino communities like a tornado. But homeowners weren’t the only ones affected. When rental buildings go into foreclosure, the impact on renters can have long-lasting effects–and foreclosures have hit low-income neighborhoods the hardest.

The 2012 annual foreclosure report by the Lawyers’ Committee for Better Housing, a Chicago-based non-profit law firm that focuses on housing issues, lays bare the little-known effects of foreclosures on the Chicago rental market. It found that not only were people displaced when a building went into foreclosure, but some were forced into paying higher rents.

Displaced tenants in foreclosure struggle to find new housing. Of the renters surveyed by LCBH, 50 percent had to seek some form of temporary housing before securing new, stable housing .

50 percent of renters surveyed by LCBH paid higher rent after being forced to leave their homes as a result of foreclosure. For 31 percent of surveyed renters, that increase was more than $200 per month.

Foreclosure filings on apartment buildings have been slowing down since 2009, the report found, but 2012 was notable in that it had the smallest decrease since 2009 in foreclosure filings. But in a few notable Chicago neighborhoods, foreclosure filings actually increased. These included Austin, Englewood, South Shore, Greater Grand Crossing, North Lawndale and South Lawndale.

How many renters have actually been impacted? In 2012, there were 4,346 new foreclosure filings on apartment buildings in Chicago, which affected 11,932 units. Over the past four years, the number of housing units affected has been staggering--20,279 apartment buildings entered foreclosure in Chicago, a total of 61,561 units.

Much like the foreclosure crisis that hit single-family homes, big banks are mostly the ones behind the apartment foreclosures:

Big banks are repeat offenders, filing foreclosures on apartment buildings in consistently high numbers each year. In 2012, five lenders/servicers--JP Morgan Chase Bank, Bank of America, Wells Fargo Bank, US Bank and Deutsche Bank—filed 2,183 (50 percent) of the foreclosures.

The concern, the report says, is that these lenders aren’t interested in keeping the apartments in good shape, a long-time complaint in communities with many foreclosures.

The vast majority of foreclosure sales result in bank ownership, leaving renters vulnerable to the harmful practices of lenders uninterested in the responsibilities of property management. Of 1,613 apartment building foreclosures reaching sale this year, 86 percent (1,391) resulted in bank ownership, compared to 84 percent in 2011.

And neighborhood blight isn’t the only social consequence of apartment building foreclosure, the report says.

Children displaced by foreclosure suffer educational consequences. Of the surveyed families with children, over half were forced to switch schools as a result of their displacement.

The report looks at statistics from 2012 – before the city passed the Keep Chicago Renting ordinance on June 5.  Underwritten by a coalition of groups that included the Lawyers’ Committee for Better Housing, the ordinance requires a foreclosing bank to give tenants a rent-controlled lease until the property is sold, or offer a “relocation assistance” fee of $10,600 per unit.

The ordinance is expected to go into effect in fall 2013 – and the Lawyers Committee for Better Housing hopes it will impact the adverse effects of foreclosure on renters around the city.

 

 

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