Vacant properties blog series: Communities working together to tackle daunting foreclosure challenges
Photo by get directly down via Flickr
Throughout January and February, the Metropolitan Planning Council (MPC) is curating a blog series on vacant properties in metropolitan Chicago. In the coming weeks, MPC's blog, The Connector — as well as the web sites of some of our partners — will feature posts from elected and appointed officials, policy advocates, finance experts, and others about the many ways we are all working together to get a handle on this growing regional and national housing and community development challenge. The opinions expressed in these posts do not necessarily reflect MPC's opinion. Follow the series at www.metroplanning.org/vacantproperties.
Since the housing crisis began in 2008, two areas of suburban Chicago have been hit particularly hard by the resulting wave of foreclosures. The municipalities in south and west Cook County (along with the City of Chicago) have consistently led the region in the rate of foreclosure filings and foreclosure auctions.
As the crisis ramped up, clusters of neighboring suburbs in these two areas took a unique approach to the challenge – they began collaborating across borders to more effectively and efficiently tackle the daunting foreclosure challenges. The result was the formation of two multi-town efforts, the Chicago Southland Housing and Community Development Collaborative, and the West Cook County Housing Collaborative.
The two collaboratives pursued public sector funding to help stabilize the member communities, and Cook County and the State of Illinois rewarded these joint efforts in both the south and west. These funding awards brought more than $20 million to help these communities address foreclosures; specifically, the communities united around a shared strategy to target the funding as much as possible near public transit or existing redevelopment efforts. Yet you don’t have to study the numbers very long to realize that even these substantial funding achievements pale in comparison to the scale of the problem. The collaboratives hope to impact at least 300 homes with this funding by rehabbing them for sale or rental or demolishing blighted properties. In a recent 18-month period, almost 4,300 foreclosure auctions were completed in the collaboratives’ communities; more than 95 percent of these properties reverted to lender-ownership, also known as Real Estate Owned (REO) properties, which typically sit vacant for long periods of time.
Faced with this realization, the collaboratives have been pursuing additional strategies to combat the vast – and growing – inventory of foreclosed and vacant properties. Four communities in the south collaborative have been working on the creation of a land bank, an entity that can acquire and maintain vacant properties and help return them to a productive use. They hope to launch the land bank in the next several months, and other interested communities will be able to join after the launch. Recent steps like Cook County’s new Vacant Building Ordinance are increasing the pressure on financial institutions to think more about properties in their foreclosure pipeline or that they already own after a foreclosure auction. A land bank will provide a key missing element – a clearinghouse that can accept vacant properties and has the capacity and skills to manage and repurpose them.
The south collaborative also has started conversations with financial institutions to explore the mutual benefit created when banks can work with many suburban communities through a single point of contact. For example, the mere existence of the collaborative’s housing coordinator working on behalf of multiple communities greatly reduces the number of municipal relationships a bank would otherwise need to build and manage. Creating these kinds of efficiencies has been one key driver of the collaboration from the beginning. The collaborative brings new capacity that towns often do not possess individually, while also creating economies of scale for banks that cannot be achieved when working with individual suburbs.
Strong redevelopment partners and property owners are also important parts of the solution, and the collaboratives are continuing to build these relationships. One example has been the south collaborative’s work with the Chicago Metropolitan Housing Development Corporation (CMHDC), which is serving as the real estate partner to help invest some of the collaborative’s foreclosure recovery funding. Recently, CMHDC completed the kind of private market transaction that the collaborative hopes to replicate through its growing bank relationships: CMHDC acquired 86 properties – the majority occupied by renters – in eight south suburban communities from a single bank and will continue to manage the rental properties with a long-term vision of transitioning them to homeownership opportunities. The reputation and reliability of the real estate partners are critical issues in building trust with the municipalities and aligning redevelopment activities with the communities’ goals, and the collaboratives are positioned to play the role of building the bridges between these groups.
Both collaboratives received seed money to establish funds to foster transit-oriented development (and, in turn, attract additional investment) in the member communities. While not limited to projects dealing with foreclosed or vacant properties, the proposed funds’ focus on development near Metra and CTA rail lines aligns with the collaboratives’ goals to target much of their foreclosure recovery efforts in neighborhoods with access to public transit. Once up and running, the funds will provide another tool the communities can tap into to support their redevelopment efforts.