When life serves you lemons, make lemonade. That seems to be the adage the Prince William County authorities are following with regard to the foreclosure crisis. Prince William County has very high foreclosure rates, the highest in the state of Virginia. There are currently at least 7,000 foreclosed or vacant homes in the county. This has had deleterious impacts on the community and has placed burdens on the local government.
The local government in Prince William County is already burdened with having to mow the lawns of 2,700 homes this year, at an estimated cost of about $2 million. Typically, a county bears this cost upfront and then passes it along to the bank that owns the home.
Prince William County is now considering making the foreclosed homes available to its employees, including teachers, firefighters, and security personnel. These employees would receive lower-interest-rate loans from banks to buy foreclosed homes in the county.
The finance director of Prince William County will present this proposal to the Board of Supervisors on Tuesday (May 20). Under the plan, about $20 million of the county’s investment pool will be used as leverage to get banks to make hundreds of low-interest home loans to county employees. Currently, the county expects that 500 to 1,000 homes will be made available to its employees through this program. If it is successful, the county might invest even more money to make more homes available.
The crisis of affordable housing created by runaway housing prices had priced out many of the county’s workforce, who have had to live in farther places and incur high commuting costs in the process. This new opportunity might allow these essential workers to live closer to their place of work, and create positive synergies in terms of higher productivity and quality of service, lower congestion, and community cohesiveness.
Supervisors from both parties seem to support this plan; Chairman Corey Stewart (R-at large) described it as a “brilliant, out-of-the-box idea” and Supervisor Frank Principi (D-Woodbridge) said that “the time is right to try this.”
Other jurisdictions can follow this example for making affordable workforce housing available. They should also make lemonade from the large number of foreclosed homes, and the lower home prices seen as a result of the current foreclosure crisis.
Angela Blackwell Glover, CEO of PolicyLink. has suggested downward conversions of large homes (such as the McMansions) into multi-unit rental housing for lower income residents. She proposes a comprehensive strategy for exploiting the “upside” to the present crisis:
But there’s a potential upside:These low costs [of housing] present an opportunity to create something that the market has not: affordable homes.
Cities and towns can buy these homes for well-below market value. Then, they can fix them up and resell them at truly affordable prices. Covenants would require that these homes remain affordable for decades. The result? Communities could create a lasting pool of affordable housing.
The experiment is already underway. Birmingham, Ala., uses a federal program to buy foreclosed homes for as little as $1 each. The homes are then refurbished and resold. This helps stop the pernicious spread of blight.
This strategy isn’t new. Community Land Trusts started in the 1960s and have popped up in more than 35 states. These nonprofit trusts buy up properties. Some are individual homes and vacant lots that have fallen into disrepair; others have been taken over by local governments through tax liens.
Land trusts renovate these properties and return them to the market at affordable prices. This helps communities across the country create a stable and reliable source of good housing for working people.
The mortgage crisis has devastated families and communities across the nation. But every disaster offers opportunity. There are blueprints and tools available to rebuild our communities. Now we have to harness the creative energy to get the job done.
According to James J. Saccacio, CEO of RealtyTrac, foreclosed homes can present a great opportunity to buy homes at below market prices, but there are hidden issues. such as remaining liens on the property, and lack of a clear title that a buyer should beware of.
Individuals, community development organizations, other non-profits, and local governments can all judiciously tap opportunities for adding to the pool of affordable housing that home foreclosures present. Efforts should also be made to preserve these properties as affordable housing. A balance of tenures is also desirable — some of these properties can be converted into affordable rental housing, and others maintained as owner-occupied housing.
When the underlying causes of the foreclosure are fraud, malfeasance, and discrimination on the part of lenders, as is the case for a subset of foreclosures (but not for all foreclosures), local and state governments should pursue the culprits vigorously, using the full force of the law. Homeowners who were victims of fraud, malfeasance or discrimination should be adequately compensated from fines imposed on the guilty parties. Without taking the eye off the ball with respect to pursuing fraudulent operators and providing relief for affected homeowners, local governments can make constructive use of foreclosed and vacant homes within their jurisdictions.
Such efforts will not only provide affordable housing for working-class Americans, they will also help revive the housing market and create safe and stable communities. Local jurisdictions most affected by the foreclosure crisis should start serving up lemonade soon.