The foreclosure crisis is a tragedy for an increasing number of families, but what is frequently missing in the media coverage is the negative impact that the crisis is having in a growing number of low-income communities. Vacant and deteriorated properties have plagued certain low-income communities for years, and the recent spate of foreclosures is contributing to a number of negative outcomes, from declining property values to vandalism to loss of the real-estate tax base so crucial for financing public schools.
The federal government response needs a strategy predicated on both stabilizing existing homeowners facing foreclosures and strengthening neighborhoods that are scarred by abandoned and vacant properties. These properties need to be restored quickly and occupied by renters and homeowners. Reclaiming residential units can help increase the availability of quality affordable housing in these communities.
Fortunately, on May 8 the House of Representatives passed H.R. 5818, the Neighborhood Stabilization Act, by a vote of 391 to 33. This bill was sponsored by Congresswoman Maxine Waters and 35 other co-sponsors. H.R. 5818 authorizes up to $7.5 billion in loans and up to $7.5 billion in grants through state and local governments to qualified entities to purchase or finance the purchase of qualified foreclosed properties to get them reoccupied quickly. Eligible expenses include property holding and operating costs, property-related acquisition costs. The funds will be allocated to the states based on the level of foreclosures with California and Florida combining for 31 percent of the foreclosures.
Those states (Arizona, California, Colorado, Florida, Michigan, Nevada, Ohio, and Texas) which have a high level of foreclosures will need to ramp up their capacity to convert abandoned properties to occupied properties over a short-time horizon. Housing practitioners and advocates in New Jersey are proposing a Community Asset Preservation Corporation to help individuals stay in their homes and avoid foreclosure; acquire property that has been foreclosed; and lastly re-convey property to appropriate entities including CDCs to be put back into productive use in an equitable manner.
The growing foreclosure crisis requires timeliness, creativity, and capacity at the federal, state, and community level. Time is running out, so it’s crucial to mobilize constituencies to secure the passage of H.R. 5818 and other innovative state and local efforts.