Dan Kildee has a word of advice for New Haven as a foreclosure crisis brews: land-bank.
Kildee, treasurer of Genesse County, Michigan, has become a guru of sorts for communities across the country confronting a wave of home foreclosures.
Kildee faced that challenge earlier than many, because he works in Flint, the rusted heart of America’s rust belt. The American auto industry’s decline devastated the city (as captured by hometown filmmaker Michael Moore). In droves Flint’s families left behind homes they couldn’t afford or lost them to foreclosure.
Faced with a more modest abandoned-home wave in the 1990s, New Haven found itself at the mercy of two groups of people to tackle those properties. The government sold tax liens to the Breen Company, with disastrous results for old folks struggling to hold onto their homes and for neighbors in parts of town struggling to rebuild. (Read about that here.) The city also saw hundreds of its abandoned or declining properties snapped up by out-of-state speculators. They bought low, sat on properties as they continued to decline; they either waited for a market upturn in order to resell, or they milked the properties though mortgage-fraud schemes involving real-estate flipping.
Kildee tried something else: He got state law changed so that government could control those properties more easily (by expediting the foreclosure process, for instance, once a property is abandoned). He set up an authority to oversee the sale, redevelopment, or demolition of problem properties, working in concert with not-for-profits. At times his office has owned between 8 and 11 percent of all of Flint’s real estate.
He started a think tank to develop and promote his ideas and has traveled the country offering advice. Read about Kildee’s story and his ideas in this article and this discussion from the latest Governing magazine.
Kildee spoke with the Independent to share suggestions for New Haven as city leaders embark on efforts to tackle the brewing foreclosure crisis.
Foreclosures went up 80 percent in our city last year. People expect an even bigger jump starting mid-2008. What should we do?
Wow. I’ll tell you. A couple of things. Number one, to the extent possible, organize the community around intervention and prevention efforts. Some of the folks may be unfortunately beyond assistance. But the cost of dealing with abandonment and the downstream effects of foreclosure are so much greater than often the cost of intervention might be, that it’s absolutely critical that a combination of government, community, social service and non-profit organizations come together and have a coordinated strategy. Identify people who may in trouble. Connect them to help. Walk them through the process.
It seems intuitive that that’s what somebody would do. But people that are in that condition dealing with a pending foreclosure have got lots of problems going on and often need just a little bit of guidance and a little bit of help to get them through the maze and get them connected to somebody who can help them. Even if it’s helping them understand what kind of refinancing options are available to them or what kind of assistance they can get. It doesn’t happen without somebody organizing it. And it’s not effective unless it’s really well-coordinated.
Second piece, and this is the one that I think many communities are not addressing, is dealing with the ultimate impact. No matter how hard we try, a big increase in mortgage foreclosure is going to lead to one extent or another diminished use of property. Owner-occupied properties will become rentals. Some owner-occupied properties will become abandoned. Abandoned property is an infection that is contagious. So communities need to simultaneously deal with prevention, but also [develop] inventories of vacant or foreclosed properties. There’s data out there to determine which properties are facing foreclosures. Which have already been abandoned. Which are held by a mortgage lender or may be facing tax foreclosure simultaneously.
Rule number one when it comes to dealing with the problem at the property side: Know your inventory. A community is wise to spend some time and effort in developing an information system.
Mayor DeStefano [in New Haven] has a task force doing that.
That’s good. It’s a significant first step [to know] what it is you’re dealing with. It puts you one step ahead of most communities.
But then come up with some plans so that properties coming up through tax foreclosure have a greater likelihood of going to a successive use [that] will take that neighborhood up… [or be stable]. Maximize the community’s control over its own destiny.
Sometimes that means approaching mortgage lenders and saying, “You’ve got inventory in New Haven, we want to have a conversation with you about how you dispose of that land. If you can’t find productive use, we want to help you find productive use to rehabilitate the properties in a way that does not reward the low-end speculator.” The big fear is that the properties will be dumped … for nickels or quarters on the dollars and end up in the hands of flippers, buying and selling the properties on eBay.
We’ve had a nightmare with flippers here. But one problem is the real estate companies have agents who set up speculative inside deals in their own interest. What can government do about that?
This is where our particular model presents an alternative: the creation of a public authority which has the public’s support and the transparency of a public authority to transform the properties into a land bank.
What is a land bank?
A public authority, like a library board or airport authority. It has a single purpose: to acquire, improve, manage, and ultimately dispose of vacant or abandoned properties.
We have a public housing authority that has a miserable track record in doing that. How do you avoid that?
This is certainly distinguishable from a housing authority. They have a focus on affordable housing. A land bank authority really is intended to approach the real estate market in a way that the real estate investor market can comprehend. If you sell properties at a public auction or a so-called sheriff’s sale, typically you don’t find — don’t get me wrong, there are exceptions — typically you don’t find investors that are willing to invest significant money to improve a property. You don’t find families shopping for the family home.
It’s important that the authority have a clear sense of the mission — improving the contribution that these properties make to the surrounding landscape.
Housing authorities have a broken model: concentrating poverty into these housing authority properties.
The last time New Haven faced a wave of abandoned properties, the city sold tax liens to an out-of-state company. Some of those properties lingered abandoned for many years, even when the city itself had plans for them but it wasn’t in the interest of the lienholder to let them go. Is there an alternative strategy we should try this time around if the city’s faced with hundreds of newly abandoned properties?
Yeah, there sure is. I advocate against selling tax liens to investors. In fact the reform that we pushed through in Michigan that led to our whole initiative was to eliminate tax lien sales. These properties, while they are privately owned, the government’s tax lien is the government’s right to foreclose on property for unpaid taxes. To me, that is authority given to us through the state constitution, by the people. It’s not some commodity we should sell for profit. It’s an important responsibility.
Why is that?
The analogy to me is like junk food. You don’t get up in the morning if you’re a healthy person and have Cheetos for breakfast. You get this big infusion of cash [through tax lien sales] just like the bag of Cheetos. It fills you up. It’s not a healthy way to manage a community. The effect is so short-lived. In exchange for some cash, we give up control of our landscape. You sentence neighbors to living next to a property or in proximity to a property that some out-of-state investor now controls and treats as a security, as a financial security, not as a piece of God’s real estate.
The cash from selling these tax liens is not more important than the use of this land in the neighborhoods. From a policy standpoint it’s a mistake [to sell liens]. The long-term economics are also a mistake. If you’re a tax collector, you should be just as concerned about the value of surrounding properties that surround the abandoned property.
Would that make you hesitant as a tax collector to foreclose?
No. I do foreclose. I have foreclosed in almost six years on 6,300 properties. Here’s a fundamental difference between the sale of tax liens and county foreclosure, which is what we advocate. I do not have a personal vested interest in someone losing their property. I have a political and policy interest in them keeping their property. I have a very aggressive foreclosure prevention program that in that same six-year period has saved 1,700 homeowners from the loss of their property.
Density At Any Cost?
In Flint you’ve taken some abandoned properties, torn down the houses, then sold the lots to adjoining property owners to give them more room. We tried that for a while in New Haven, made room for a bunch of community gardens, expanded homeowners’ properties. Then we shifted back to a density [growth] strategy. How important is density?
It’s important to have a degree of density. But we have to balance density with what the market is really looking for. Density does not have to mean so many people per square mile. But we have to have neighborhoods that have more full land use…
Sometimes you redesign your development projects so they don’t require such high- population density in order for the community to fully utilize the development.
What we hear in return is you have to maximize tax returns [and build buildings as tall as possible]. We have something called the Shartenberg project where that was a big issue.
That’s true. But we also have to deal with certain realities… One hundred or so cities in the United States would fit this definition: They have had significant population loss. If we can’t figure out a way to repopulate our cities without having to reestablish that number to be successful, we’re in a world of trouble. There’s no way Flint, Michigan, is gonna get back to 200,000 population. We have 115,000 people now. We have to deal with life as it is.
New Haven has similar numbers. What should we aiming at — the number we have now?
That’s a master planning question. The best thing that a city can do is not cling to what is now almost an ancient definition of what success looks like. When I say ancient, that means the 1960s really. Most cities in America hit their peak population somewhere between the ’40s and the ’70s; in Flint it was 1960.
We really need to rethink the urban planning models that are being taught. In America we have this obsession with growth, that the only measure of the success of a community is population growth and nothing else matters. If you live in a neighborhood in New Haven, you’re not concerned with how many other people live in New Haven. You want to make sure the streets are cleaned, the garbage is picked up, the fire department comes when you call them.
The argument you get in return: You need to densify to produce the revenue to do that.
Government needs to figure out how to provide the services in a way that matches the population that’s receiving them. You can’t have schools and fire department stations and infrastructure designed for 200,000 people if you’ve only got 100,000 taxpayers paying for it. We can take two approaches: Continue to spend as if there really are 200,000 people and try to get those people to show up. Or we can do what most families do when their income goes down. They don’t go out and have more kids. They change the way they spend their money.
I’m a social liberal. So don’t get me wrong. I’m not a small-government advocate; I’m accused of the opposite because I have a bias toward the government’s role in all this. At thee same time we need to match the way organize services with the reality of the population within our community.
Should we be building taxpayer-subsidized 30-story towers?
It’s different in every community. The one thing I would for sure encourage: As there is new development, that it integrate affordable housing with market-rate housing. And second, that it fits into a long-term plan what is likely an oversupply of housing in your current market. If you have significant population loss in New Haven, and you’re having a lot of foreclosures… the challenge here when it comes to development is to do two things simultaneously: Decrease the overall supply of housing units while increasing the quality and the variety of those housing units.
How would that work?
Flint’s been hemorrhaging jobs. Are there enough people in a city to buy abandoned homes in a city losing jobs?
Read previous Independent coverage of New Haven’s foreclosure crisis:
• WPCA Targets Church
•
WPCA Goes On Foreclosure Binge
• Subprime Mess Targeted
‚Ä¢ Renters Caught In Foreclosure King’s Fall
‚Ä¢ She’s One Of 1,150 In The Foreclosure Mill
‚Ä¢ Foreclosures Threaten Perrotti’s Empire
‚Ä¢“I’m Not Going To Lay Down And Let Them Take My House”
The following links are to various materials and brochures designed to help homeowners avoid foreclosure.
How to prepare a complaint to the Department of Banking; Department of Banking Online Assistance Form; Connecticut Department of Banking, Avoiding Foreclosure; FDIC Consumer News; Statewide Legal Services of Connecticut, Inc; Connecticut Bar Association Lawyer Referral Service.
For lawyer referral services in New Haven, call 562‑5750 or visit this website. For the Department of Social Services (DSS) Eviction Foreclosure Prevention Program (EFPP), call 211 to see which community-based organization in the state serves your town.
Click here for information on foreclosure prevention efforts from Empower New Haven.