Maximizing the impact of the neighborhood stabilization program

1. Maximizing the impact of the neighborhood stabilization program Alan Mallach Non-Resident Senior Fellow The Brookings Institution

2. Prices in Miami-Dade have plummeted • The median home price in Miami-Dade is down 43% from its 12.06 peak (Case-Shiller Index January 2009) • Between January 2004 and December 2007 nearly 300,000 purchase mortgage loans were made in Miami-Dade County (HMDA) • Today nearly every one of these mortgages is under water

3. Many areas are losing value even faster Source: Trulia.com

4. Prices have not hit bottom Best case – additional loss of 21% in value before stabilizing In 2010

5. Foreclosures are at epidemic levels • 58,000 properties in Miami-Dade are in the foreclosure process (RealtyTrac, 3.11.09) • 7,500 new lis pendens were filed in Miami-Dade in March 2009 • Nearly 2,000 foreclosure sales are scheduled for April 2009

6. 7546 in March 09 3544 in Jan 08

7. Foreclosures affect neighborhoods unevenly • Foreclosures are unevenly • distributed – some areas • are far more heavily • impacted than others. • Spatial distribution of • foreclosures can change • over time

8. What is neighborhood stabilization about? • Neighborhood stabilization is about building confidence and market demand - fostering market recovery. • Foreclosures and abandoned properties may have been the trigger to destabilize the neighborhood – dealing with those problems alone may not be enough to restore stability.

9. What are the goals of a neighborhood stabilization strategy? • Reduce the link between foreclosures, disinvestment and vacancy • Get properties back into productive use • Prevent future foreclosures • Address other forces working to destabilize neighborhoods • Restore confidence and foster market recovery

10. How can you achieve these goals? • Target enough resources to selected areas to make a real impact • Design strategies and expectations to align with market realities. • Focus on the forces driving destabilization, not just the properties. • Assemble enough delivery capacity to carry out plans • Bring everyone to the table

11. The challenge • Neighborhood destabilization in the Miami area is a moving target. • It is particularly difficult to design a program to affect a process that is still under way – like trying to fix storm-damaged properties while the storm is still raging.

12. The challenge • Miami-Dade and Broward counties and cities are getting over $150 million in NSP funds • This will only deal with a small part of the problem facing the two counties. • The question is how to use these resources to gain the greatest effect

13. Three key themes: • Target resources strategically • Adopt cost-effective and high-impact NSP strategies • Link NSP activities to a larger public/ private strategy

14. Target resources strategically • Target areas where market conditions make impact possible or where strategic location or assets make it critical. • Target areas where organizational capacity exists to carry out strategy.

15. Target resources strategically • Use NSP funds in ways that will reach the greatest number of properties • Leverage other resources in target areas • Make sure each target area receives enough investment to make impact possible

16. Use NSP funds for maximum impact • Understand market dynamics – some key features: • Increasing flow of REO properties coming onto market • Prices continuing to decline – growing number affordable to moderate income buyers • Potential pool of homebuyers – many may need help to buy

17. Use NSP funds for maximum impact • Strategy options • Help qualified homebuyers buy REO properties? • Acquire REO properties, rehab and sell? • Acquire REO properties for lease-purchase or rental? • Demolish properties? • Land bank?

18. Use NSP funds for maximum impact • How to evaluate these options? • Number of properties directly affected • Impact on surrounding properties • Impact on neighborhood market • Direct subsidy cost per property • Delivery cost/capacity requirements • Time to implement

19. Link NSP activities to larger strategy • NSP activities at most will help slow down neighborhood destabilization and help lay groundwork for market recovery • Other activities may be as or more important toward achieving that goal.

20. Minimize foreclosure impacts • Keep properties occupied • Protect tenants/prevent evictions • Encourage lenders to allow owners to remain after foreclosure as tenants • Keep properties maintained • Enforce codes • Impose responsibility on lenders/servicers • Use nuisance abatement authority

21. Address neighborhood quality of life issues • Leverage other activities to promote stabilization and market demand • Crime prevention • Foreclosure prevention • Strengthen neighborhood quality of life • Build stronger neighborhood social fabric • Build market demand

22. Leverage resources • Leverage tools and resources to promote stabilization and market demand • Property acquisition tools • Code enforcement and nuisance abatement • Public/private sector housing assistance and mortgage financing • Legal tools to minimize foreclosure impacts and prevent future foreclosures

23. Build partnerships • Multiple public agencies (housing, code enforcement, public safety) • CDCs and non-profit service providers • Real estate industry (developers, realtors, contractors, appraisers) • Local and regional institutions (colleges, hospitals • Residents and civic organizations

24. Use partnerships to implement strategy • Leverage capacity of real estate industry and non-profit community for acquisition, rehab and reuse • Leverage institutional resources • Integrate other community stabilization strategies with NSP activities • Work with residents and civic organizations to build community confidence • Engage all parties in framing neighborhood stabilization plans, not just implementation.

25. Alan Mallach PO Box 623 Roosevelt NJ 08555 609.448.5614 amallach@comcast.net