Community organizers, state and federal government officials, and representatives from banking, research and educations institutions are currently meeting in Washington at a REO and Vacant Properties Summit sponsored by the Federal Reserve Bank. The two day conference is focused on examining the problems associated with vacant and abandoned property and to explore approaches to neighborhood stabilization.
Governor Elizabeth Duke, Board of Governors of the Federal Reserve opened the summit on Wednesday. In her remarks she introduced the types of issues that are faced by communities with high rates of foreclosure and REO and highlighted some of the lessons learned in the last few years about neighborhood stabilization strategies.
She pointed out that the impact of each foreclosure goes far beyond that one home; a conference participant estimated that every blighted home negatively impacts five or six nearby homes. Therefore, in Cleveland for example, where 11,500 homes have been foreclosed, 60,000 others can lose value which leads to lower taxes to support schools and other community services. The residents who remain in a community suffer social losses as well as their communities decline.
These problems, Duke said, are not limited to older communities. Formerly thriving subdivisions outside of larger metropolitan areas, once known as "boomburbs," are now suffering some of the highest rates of foreclosure and REO inventories. These communities are often new and do not have the community development infrastructures necessary to address the sudden problems they are facing. There are also indications that the so-called shadow inventory may be larger than currently recognized so there may be continuing downward pressure on prices, communities must confront problems posed by speculative investors,
Duke said that some important lessons have already been learned about community stabilization. First, there must be a full understanding of mortgage markets, their dynamics, and incentives. Earlier attempts to stabilize neighborhoods through acquisition, rehabilitation financing, demolition and land banking of blighted communities were constrained by unrealistic time limitations. The complexities of the secondary mortgage market have made it difficult for local governments and community organizations to ascertain who owns a particular property, much less arrange for its purchase in a timely way. Competition with more flexible investors hampered community groups and their plans.
Second, good data are necessary to target scarce resources. The funds provided under NSP, while substantial, are not nearly sufficient to tackle the entire inventory of vacant and abandoned homes; the strategic use of these funds, however, can help to stabilize individual neighborhoods.
The third lesson, she said, is that we need to use technology to create better decision making tools to assist communities. This means keeping up-to-date records of foreclosures, sheriff's sales, and the REO status of properties, as well as gathering information on vacancies and tax delinquencies that can serve as a proxy for identifying properties that may be falling into delinquency.
Fourth is the need to collaborate in new ways in order to develop a comprehensive approach to neighborhood stabilization efforts. Duke pointed out that the pre-conference publication is replete with examples of local collaborations that have successfully addressed neighborhood stabilization issues through partnerships between federal, state, and local governments, community organizations, lenders, servicers, universities, foundations, and others. The most promising initiatives, she said, take a comprehensive view of community development.
