Thursday, August 4, 2011

Making the Most of Your Money in Neighborhood Stabilization

With weak revenue leading to spending cuts nationally, communities with large numbers of foreclosures are in a difficult position of needing to take action to prevent ripple effects of neighborhood decline but also needing to watch every penny in the process.  What are some of the ways to get the most value for your limited neighborhood stabilization dollars? 

Target Programs for Maximum Effect

Spreading funding around in a thin layer throughout a city may seem equitable, but it is not effective.  Rehabbing one property on a block where several other properties are vacant will not improve local conditions.  On the contrary, even a high-quality rehab may find no interested buyers if the block is still distressed, and the home can be expected to deteriorate again.  Rehab money can easily be wasted by attempting to spread a little money around a lot of places.

Similarly putting rehab money into properties that are in very strong housing markets may not be the smartest use of limited funding.  A small number of vacant properties in an otherwise strong area are likely to attract private investment and recover without public money. 

Public funds are generally better spent on areas with tipping point housing markets – areas that would still have moderate appeal if only the foreclosures were fixed up.  Local real estate experts may already know which communities fit this category.  For communities that need some extra help, data and guidance for creating an effective neighborhood stabilization strategy are available through

Targeting resources to revive a few areas completely will allow the community to get the most impact from its funding investment and then turn its focus to another neighborhood and begin to apply a similar strategy there. 

Adopt Cost-Saving Approaches to Code Enforcement

Maintaining the quality of a neighborhood can also happen within existing budgets – no special neighborhood stabilization funding is needed.  The new approach to code enforcement included in Baltimore’s Vacants to Value initiative is a good example.  The city streamlined its procedures for following up on violation notices and was able to reduce costs while increasing results.  Violation notices now automatically trigger a warning letter followed by a citation (with a $900 administrative fine, similar to a parking ticket).  A second citation and ticket are automatically issued if the violation is not resolved.  The new system means that the housing department only needs to get attorneys involved in the most egregious cases.  The steep fines and quick turnaround of citations helps the city improve the condition of properties without needing to increase their code enforcement budget.

Prevent Vacancies 

One of the strongest ways to stabilize neighborhoods is to prevent vacancies; if properties don’t go into decline there is no need to spend money stabilizing them.  Foreclosure prevention is clearly a key way to prevent vacancies, but policies can also be implemented to break the link between foreclosures and vacancies.  Creating an automatic mediation program is one low-cost, high-impact policy for foreclosure prevention.  Communities can also build a coalition with a local bar association to train lawyers to provide pro bono assistance in foreclosure cases.  Ensuring that renters are aware of their rights after foreclosure can also be a low-cost method of preventing vacancies and thereby preventing neighborhood decline.

As foreclosure rates stay at historic highs (and rise even higher) and budgets are constantly being slashed, communities are faced with a tremendous challenge.  The approaches mentioned here are some of the stronger solutions for stabilizing neighborhoods on a limited budget, but innovative thinking can surely uncover more ways to stretch the value of your neighborhood stabilization dollars and improve communities even if there is no NSP money on the table.

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