Foreclosure and vacancy rates targeted through housing rehab program
By Katy Zillmer
Brooklyn Center is working to improve its housing stock, but the efforts come with a challenge.
Financial support for the effort comes from the Neighborhood Stabilization Program (NSP), established by the U.S. Department of Housing and Urban Development, but city staff are finding competition in the market of homes in foreclosure or in need of significant repair, according to Brooklyn Center’s deputy director of Building and Community Standards Jesse Anderson.
The NSP program is in its third round, this time focusing on issuing funding to communities in Hennepin County with the highest foreclosure or vacancy rates.
In the past the program offered down-payment assistance to cities or funding to demolish and rebuild, Anderson said.
Brooklyn Center and Brooklyn Park were the only cities that received funding in this round.
Brooklyn Center received about $1.2 million in funding through NSP for the purchase and renovation of foreclosed and blighted homes, according to Kevin Dockry, the manager of housing development and finance in Hennepin County Housing, Community Works and Transit. Brooklyn Park has about $1.3 million to work with.
Dockry works with the NSP program to administer grants to the communities most in need.
Cities are provided with a foreclosure need index score from HUD that takes into account causes for foreclosures and delinquent loans. Housing price declines, increases in unemployment, and a rate of high cost and highly leveraged loans are incorporated into the score as well, according to Dockry.
Vacancy rates in neighborhoods with serious foreclosure-related problems are also factored into the score, which ranges from 1 to 20 for the greatest areas of need.
In Brooklyn Center, 12 areas were identified with a score of 20 and 18 came in with a score of 19, according to Dockry. Neighboring Brooklyn Park had 10 areas with a score of 20 and 24 with a score of 19.
Overall, Brooklyn Center and Brooklyn Park have consistently ranked high in the number of foreclosures, Dockry said. Foreclosure sale data from the Hennepin County Sheriff’s Office from 2007-2009 ranks Brooklyn Park with 3,022 and Brooklyn Center with 1,316.
Dockry said while Brooklyn Park has more foreclosures overall, Brooklyn Center has a more concentrated amount of foreclosures and vacancies because its population is lower.
The challenge for Brooklyn Center isn’t in finding vacant and foreclosed homes – it’s being competitive with other bids on the properties, Anderson said.
Lower prices make the properties appealing for contractors looking to flip houses or first-time home buyers willing to take on a project, he said.
But the homes in Brooklyn Center’s target neighborhoods to improve often need a lot more than cosmetic repairs.
“We’re trying to get some of the ones that are too difficult for a contractor to buy, fix and sell,” Anderson said.
Using funds from the NSP, the city works with the Greater Minnesota Housing Corporation to make a home offer, facilitate the repairs and sell it, he said. Buyers get a good house to move into and they won’t have to make significant repairs.
The caveat is for the city to secure a low price, which makes the bidding process competitive with buyers trying to do the same thing and make repairs.
Homes the city secures through the NSP are made more energy-efficient and brought up to city code, Anderson said.
“We’re getting the houses we need. It’s just more work to find a good house for the program. It’s more having to write up more offers.”
Brooklyn Center’s goal is to acquire 17 properties during the third round of the NSP. There are 12 properties the city recently purchased or is the process of purchasing, Anderson said.
Improvements to a home often take about six months after the purchase is complete, he said.
Foreclosures and the future
The stock of foreclosed homes is declining some, but county-wide the numbers are still about four times higher than normal, according to Dockry.
The peak for Hennepin County was about 7,300 in 2008 and 2013 is expected to yield about 4,000 foreclosures, he said. The normal number is 1,000.
“The value is to get properties occupied again and improve housing stock that might not otherwise be taken care of,” Dockry said. “You can find difficult properties and turn them into an asset for the community,” he said.
“Investors are doing this too, but typically they might not have capital resources for a full rehab, which means non-cosmetic issues are still there for the occupant.”
All the funds are already allocated to Brooklyn Center and Brooklyn Park in the third round of the NSP. Those are the only cities to receive the funding because of their high foreclosure and home vacancy rates.
Since the beginning of the NSP, Brooklyn Center has purchased and repaired 38 homes and Brooklyn Park has purchased 91 homes, Dockry said.
As the program winds down, the focus becomes more on properties with the most damage and that have been vacant the longest.
“I think the program has validity past these funds,” Anderson said. “There are other people flipping houses and doing a good job too. We’re trying to get to some of the ones that are too difficult for a contractor to buy, fix and sell.”
Contact Katy Zillmer at firstname.lastname@example.org.
Tips from the – first time – home buyer field
Lisa Dawidowicz and Eric Butte had only been in their one-bedroom Hopkins rental for one year when they knew they needed more space. They embarked on the process to buy their first home in August 2012.
“Financially, it’s a big responsibility so we needed to review the pros and cons,” said Eric, age 25. They based their initial criteria on what type of home they thought they could afford, said Lisa, age 24.
The couple started with reviewing listings on mls.com, which has multiple real estate listings from new homes to foreclosures. Liz said they thought the website was a helpful start, but learned after hiring a realtor that some of the prices and details are not accurate. However, licensed realtors have more full access to the site to assist their clients, she said.
Liz and Eric did make a list of their top criteria for a home, but found it changed as they started to attend showings and see what was on the market.
They looked at 19 homes, which didn’t seem like a lot when considering they wanted to find the perfect space for their needs and budget, Liz and Eric said. “You look until you find something and you have to give and take,” Liz said. They also learned about a first-time home buyer class through their mortgage broker, which Liz said was a worthwhile eight hours.
Their search included older homes with character, which Liz would have preferred, but the level of repairs would have been too much.
After seeing homes in Hopkins, St. Louis Park, Robbinsdale and Brooklyn Center, they chose a rambler style near Evergreen Park Elementary School.
The home was flipped by a contractor, who purchased the home for about $87,000, Liz said. The couple secured the four-bedroom home for $145,000, she said.
Overall, Liz and Eric said they had a lot of helpful advice from their friends and relatives about buying a home. Liz said it is helpful to take into account, but people should remember the home to purchase is their decision.
And, there is no harm in initially making a low offer.
“If you’re not embarrassed by your offer, then don’t make it,” Liz said, laughing.
After they found their ideal home in Brooklyn Center, Liz and Eric said they made an offer in November 2012 and moved in during late January.
“The space is nice, and you can have a dog,” they said.
The Minnesota Housing Finance Agency, mnhousing.gov, lists several resources for first-time home buyers including loan programs.