Rebuild Communities Initiative
501(c)(3) non-profit publicly supported public charity
U.S. Treasury Certified Community Development Entity
A Community Development Entity (CDE) is a domestic corporation or partnership that is an intermediary vehicle for the provision of loans, investments, or financial counseling in low-income communities
Rebuild Communities Initiative’s primary mission is specifically serving, or providing investment capital for, low-income communities (LICs) or low-income persons (LIPs).
RECAPTURE REO AND VACANT PROPERTIES AND LAY THE FOUNDATION FOR COMMUNITY REBUILDING
While families that lose their homes are financially and psychologically distressed, foreclosures also greatly hurt the economic vitality of the communities in which they are located. The impact on surrounding property is felt more acutely in areas where foreclosed and real estate owned (REO) properties are not properly maintained.
These secondary impacts in turn perpetuate the foreclosure crisis, especially in areas with a high concentration of foreclosures. Concentrated and long-term foreclosures and vacancies wreak havoc on communities, particularly low-income and minority communities with fewer economic opportunities and safety nets.
Moreover, surrounding property values decline more rapidly as the number of nearby foreclosures increases.55 Between 2009 and 2012, as foreclosures and vacancies drive down surrounding property values, an estimated 91.5 million homes are estimated to suffer from price declines; these homes are expected to experience declines of, on average, $20,300 each, bringing the total impact on surrounding home values to $1.9 trillion.56 Due to the self-reinforcing nature of the crisis, a comprehensive redevelopment strategy must simultaneously address sustainable options for vacant and abandoned properties, foster the recovery of a homeownership market with diverse housing choices, identify green building opportunities as a means of job creation, invest in quality infrastructure, and provide amenities such as parks and community gardens in order to build community assets and attract further investment.
Stabilize REO and Vacant Properties
During the foreclosure and REO period, properties often remain vacant, lacking ongoing maintenance and lying vulnerable to vandalism. Efforts to maintain and stabilize properties while they are vacant will reduce the blighting impact of foreclosure.
To this end, local governments, community groups, and lenders have enacted legislation and created programs that make it easier for municipalities to act when abandoned or unmaintained properties have become a blight on the community and that minimize the secondary impacts of foreclosures and vacant REOs by keeping homes occupied.
Keep Existing Occupants in their Homes
Finally, several initiatives aim to keep occupants – either tenants or the original owners – in their homes following foreclosure, as a means of avoiding vacancies and displacement.
These initiatives, which include short-term rentals and sale-leaseback arrangements, aim to maintain family and neighborhood stability by preventing foreclosures from triggering evictions. Focusing on tenants, Fannie Mae has established a National REO Rental Policy, which allows current renters in Fannie Mae owned properties that are foreclosed on or that go through a deed-in-lieu process to stay in their homes on a month-to-month lease or to obtain an incentive payment to vacate the property in a “cash-for-keys” arrangement.
Tenants pay market rent, which is determined by “reviewing local comparable rents, conducting a neighborhood survey, or through other relevant indicators. Rates will also be subject to any legal rent control restrictions. The company will review each instance where the market rate may require a tenant to pay additional rent and will work to reach an equitable resolution.”
If the tenant cannot afford the new rent, they are offered relocation assistance. The program is managed locally by the property manager hired to maintain and sell the foreclosed property.
If the property sells, the lease will transfer to the new owner.
To keep owner-occupants in their homes, the Center for Economic and Policy Research has been advocating a residential sale-leaseback arrangement called the “Right to Rent” plan, which allows current owners to remain in their homes. More common in commercial real estate, a sale-leaseback is a deal in which an investor purchases a property and immediately leases it to the previous owner; the sale-leaseback is “an alternative form of financing that some companies turn to when traditional financing, such as bank loans, are harder to obtain.”
Sale-leaseback arrangements allow current owners facing foreclosure to avoid displacement and maintain family and neighborhood stability. The “Right to Rent” plan would require a regulatory change to temporarily amend foreclosure laws in order to give former owners the right to remain in their property at market rate rent for a significant length of time (i.e., five to ten years) in order to maintain security and tenure and neighborhood stability; the program could be administered by a judge, similar to the foreclosure process.
The lending institution could sell the property, but the new owner would have to honor the lease for at least the remainder of the guaranteed period. To target this program to low- and moderate-income families, the change in foreclosure rules could be restricted to homes sold under a specified price (i.e., local median sales price); the program could also be targeted specifically to the current crisis by restricting applicable mortgages to those issued during a certain time period.
This “Right to Rent” arrangement could be attractive to homeowners because, in many markets, monthly rental costs are cheaper than ownership costs, even after considering the tax benefits of ownership.
Moreover, this plan would ultimately put pressure on lenders to find alternatives to foreclosure in order to avoid having to become a landlord.
Return REO and Vacant Properties to Productive Use
Returning REOs and vacant properties to productive use requires a range of acquisition and disposition strategies,all of which depend on local market conditions. In areas with large concentrations of foreclosures and REO properties and/or long-term vacancies and long REO property holding periods, for example, programs address foreclosures on a large scale, such as through bulk acquisition or the creation of land banks.
The need for reinvestment in disadvantaged communities has never been greater. The collapse of the country’s economy and credit markets is having a damaging impact that is disproportionately affecting low-income communities and communities of color, who have been doubly hit by the foreclosure crisis and high rates of unemployment. Without a substantial increase in funding for revitalization activities, many communities could struggle for decades. However, money in itself is not sufficient; funding needs to be coordinated and flexible so that communities can maximize the impact of investment, creating a coherent strategy that proactively links foreclosure prevention to property reclamation and rebuilding, and connects reclamation and rebuilding to job creation and business development.
Many communities around the country have begun to develop promising models; these should be heralded, scaled up, and replicated across the country.
Name: Rebuild Communities Initiative
Address: 1819 S. Kihei Rd Ste D110, Kihei HI 96753
Phone: (808) 747-9670 / (808) 359-3574
Type: Domestic Nonprofit Corporation
Status: 501(c)(3) Publicly Supported Public Charity
Status: U.S. Treasury certified Community Development Entity
EIN: Upon Request
Hawaii File: 257081 D2
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