Need urgent for creating new Affordable Housing
It is no surprise among advocates for affordable housing that the need is great to add to the availability of quality rental housing. Indeed there is a decades-long history of both governmental bodies and private NGOs supporting multifamily housing projects to address this need. Sadly, such programs have been underfunded for some time due to both a lack of governmental policy support and limited funds availability at every level of government.
"Zombie" foreclosed homes an opportunity
Meanwhile we are still digging out from an historic "correction" in housing values that has resulted in stunning numbers of vacant foreclosed homes. In some markets there remain literally thousands of homes held captive by lenders unwilling to complete the foreclosure process, leaving so-called "zombie" properties vacant and unoccupied; this due to the refusal of the foreclosing bank to assume responsibility (and liability) for the ongoing maintenance and upkeep of such properties.
All the while, such properties deteriorate further to the detriment of the surrounding neighborhood and community as a whole. In the Chicago market, the numbers are so staggering that the local government lacks both the funds or manpower to address the problem in any meaningful manner.
These homes-- including smaller multifamily properties-- and foreclosures in general, represent a great opportunity to address the need for affordable rental housing.
Cost to buy and fix half the cost of new construction
The cost to acquire and refurbish a typical vacant home in most markets is easily half the cost of new single family construction. This reduced cost would, in the right hands, result in commensurately lower costs of ownership and upkeep. In a word, affordability is greatly enhanced.
Further benefits include: enhanced amenities in terms of both interior and outdoors living space and privacy; maintaining the architectural character of neighborhoods; reduced housing density (when compared with the usual alternative of attached town homes); the likelihood of of onsite parking, and more.
Not for today's merchant or production developers
Unfortunately, the rehabilitation of single family and smaller multifamily homes is a challenge for the production builder/developer typically relied upon to produce affordable housing. Such projects lack economies of scale and logistical efficiencies due to the scattered-site and "one-off" nature of such a program. Some would consider the very idea a management nightmare.
Opportunity for small-scale Entrepreneurial Investors
The answer is to actively encourage small-scale developers and investors with access to this inventory (i.e., the "liberation" of the inventory of zombie properties) and the ready availability of financing. Much as economic recoveries are fueled by small business and entrepreneurship, affordable housing would be enhanced by encouraging grass roots rehab. and investment. Here the solution would come from an under appreciated private sector niche: The small-scale "Entrepreneurial Real Estate Investor".
Banks the primary block to progress
Sadly, it would appear-- unsurprisingly-- that the primary impediment to this neighborhood revitalization model may very well be the banks. This initiative would require a turnaround from the banks' present wait-it-out strategy, if one may call it that. Nevertheless the benefits to all concerned, including the banks themselves, would represent a great step forward in addressing the growing need for affordable housing. #
- Philip Elmes