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Several nonprofits are stepping in to struggling neighborhoods to buy foreclosed homes from banks.
The foreclosure boom has left Twin Cities financial institutions with thousands of houses that are difficult to sell and expensive to maintain. Organizations such as Urban Homeworks, The Greater Metropolitan Housing Corp. and Twin Cities Habitat for Humanity are eager to buy those homes, rehabilitate them, and sell them to low-income people.
Minneapolis-based Urban Homeworks has partnered with University National Bank. The bank agreed to sell Urban Homeworks north Minneapolis homes sitting on its books at below-market prices. The bank then writes off the difference between the market value and the sale price as a donation to charity.
"Everybody wins," said James Conrad, president of St. Paul-based University Bank.
The Greater Metropolitan Housing Corp., based in Minneapolis, received a $10 million loan from the state last year to purchase, rehab and sell foreclosed properties in north Minneapolis.
The organization put purchase agreements on 59 properties. To date, 43 of them were accepted, said Carolyn Olson, president. Unlike Urban Homeworks, the organization doesn't partner with banks, though it's bought blocks of properties from banks. It also buys through sheriff's sales.
Twin Cities Habitat for Humanity, which has focused for many years on new construction, is moving toward acquiring vacant properties and rehabbing them, said Karl Batalden, government and community relations officer. It plans to partner with municipalities and banks to acquire empty homes at a discount, he said.
Urban Homeworks, a faith-based nonprofit founded in 1995, has worked mostly on rehabbing inner-city, multitenant housing with the help of 1,500 to 3,000 volunteers annually. As the foreclosure boom set in, the organization sought a way to stabilize the situation.
"There were 28 foreclosures within a one-block radius of where we did two projects," said Chad Schwitters, executive director. "We needed to respond to this."
It came up with Project: Reclaim, a pilot program specifically targeting north Minneapolis. The program will include 10 properties, three of which will come from University Bank. The organization aims to get the remaining seven properties from other financial institutions.
"This is just a tiny sliver of what's needed to really alleviate the problem," Schwitters said. "But it's programs like this that help get things moving in the right direction."
As foreclosures have ballooned, many banks inadvertently got into the residential real estate business, a line of work they'd rather avoid. There's a strong incentive to sell vacant properties quickly, as they're susceptible to vandalism, arson, water damage and theft, especially of pipes and wiring. Banks also must pay to keep up with maintenance.
Last year, there were 2,895 foreclosures in Minneapolis, with the largest concentration in north Minneapolis, according to the city.
It makes business sense for banks to partner with organizations like Urban Homeworks on the vacant homes they own, Conrad said. "In this market, it's unlikely that somebody's going to come tomorrow and pay [fair market value]."
Urban Homeworks applied for a $300,000 grant from the Hennepin County Affordable Housing Incentive Fund to help subsidize financing plans for low-income home buyers. The grant is competitive, and decisions won't be made until May or June, said Kevin Dockry, manager of housing development and finance at Hennepin County.
One thing the organization has going for it is its alliance with the City of Lakes Community Land Trust, which has partnered with Hennepin County on redevelopment work for a number of years, Dockry said.
By putting Project: Reclaim land into the land trust, it ensures that the property values remain more affordable for the long term and that they're sold to low- to-moderate-income buyers.
By Bryant Ruiz Switzky
Minneapolis St. Paul Business Journal
March 21, 2008
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