City ready to purchase foreclosures
The city’s application for federal funding to acquire, rehabilitate, demolish and redevelop foreclosed and abandoned homes in three selected sections of the city is due in the nation’s capital this week — specifically today, Dec. 1.
The application is actually a five-year plan on how the city will proceed in accomplishing its goal to restore residential properties and the neighborhoods those houses reside in. The federal funding to do that will come from the $3.92 billion housing recovery act Congress approved last summer. The city is in line to get nearly $6.2 million of that total.
The application from Kent County is also due in Washington, D.C. The county is eligible to receive $3.9 million from the recovery act. The county will spend the money on houses in Wyoming, Kentwood and Grandville and in Gaines and Plainfield townships. Two-thirds of that amount will go toward buying and rehabbing foreclosed properties, while a third will be used to help low-income individuals buy or rent homes.
According to the Community Research Institute at Grand Valley State University, 4,994 homes within the Grand Rapids city limits were foreclosed on from 2004 through June of this year. City Community Development Director Connie Bohatch said the foreclosures amount to 9 percent of the city’s total housing stock.
Of course, $6.2 million isn’t nearly enough money to buy and fix every foreclosed house. So Bohatch and her staff followed federal guidelines from the Department of Housing and Urban Development to determine where the greatest need was. They found that the biggest clusters of foreclosed and abandoned homes were on the northeast, southeast and southwest sides. Those areas contain 920 such homes and make up the greatest-needs list the city included in its plan (see boxed information).
Bohatch said it’s not known when the city will receive the funds from HUD, or if the agency will even approve the city’s plan. If it doesn’t, the city can submit another application that would be due by Feb. 1. But she didn’t feel a second one would be needed.
“I don’t think that’s going to be an issue with Grand Rapids. So I think the timeline would be between Dec. 31 and the beginning of February is when they plan to release the funds,” she said.
“Even though it sounds like a lot, it’s not going to allow us to address the enormous scale of the problem for the city. One of the things that I need to continue working on is getting other investments to come in to help us with this problem by using the federal resources to leverage other resources, and I’m working on that now.”
Once the city gets the funds, though, Bohatch can begin to unroll the plan. It starts with the city using those dollars to buy about 60 homes and ends with the city giving the ultimate homebuyers 20 percent of the down payments. In between, the city will sell the homes to residential developers who will rehab the houses and then put the properties on the market.
“We will be doing a request for qualifications. It will be open to nonprofit developers and for-profit developers who would like to participate. We will then select developers to come into the program, and then we will establish a contract with them,” said Bohatch.
The city will purchase the houses from a number of sources, like HUD and banks.
“We will identify specific properties and then we will have to negotiate a sales price with the banker or whoever holds the property,” she said.
“A developer will then hold the property, but we’ve built in carrying costs. Their goal would be to sell it to a homeowner who meets the income guidelines that are at or below 120 percent of area median income, or they can put it into a lease-purchase option.”
Bohatch said a developer can also rent a home if a buyer can’t be found immediately.
“The hope is later a buyer could be found when the market turns around. But the goal right now is to make sure the properties aren’t dilapidated and that we get people living in the houses,” she said.
If everything goes according to the plan, Bohatch estimated the city will have $7.3 million to spend on the program, or roughly $1 million more than it will get in federal funds.
About $5.8 million will go toward purchases and the cost of holding the houses until the homes are sold. The down-payment assistance should total $800,000. Another $80,000 is expected to go to razing the houses that are beyond repair. And administering the massive undertaking should cost $618,700.
“Whoever acquires a property from us will have to bid the work out,” said Bohatch.
“So we’re hoping, too, that might create some employment opportunities as well, if people are getting contracts for various components of the redevelopment.”