Posted on Mon, Sep. 25, 2006
If nobody's home, trouble comes calling
St. Paul's spike in vacancies threatens neighborhoods
BY JASON HOPPIN and MARYJO SYLWESTER
Pioneer Press
Ali Dahir, 17, a student at Humboldt Senior High School, walks past a boarded up house on the corner of East Minnehaha Avenue and Bradley Street in St. Paul Friday.
More photos
Sunday: These homes were lost … and that's just the beginning
A map of St. Paul shows vacancies throughout the city, but concentrations in Payne-Phalen and Dayton's Bluff.
Five homes sit empty at an intersection in St. Paul's Railroad Island neighborhood — foreboding, boarded-up omens of a community teetering on the brink.
Broken glass glitters on a stretch of sidewalk in front of the East Side homes at Bradley Street and Minnehaha Avenue, near the geographic heart of the city. A Dumpster in a driveway overflows with what once were a family's belongings — an old couch, some chairs, a child's toy.
In scattered clusters, the scene is repeated across St. Paul, especially in the city's poorer neighborhoods, where there are many rental properties. In the past five years, the number of vacant St. Paul buildings has more than doubled, an alarming trend that, in some areas, threatens to unravel years of rising property values.
The reasons are many and the solutions few. A softening housing market, questionable lending practices and neighborhood crime all have contributed to the problem, while federal funding for rehabilitating urban cores has dwindled.
For people who invested in the neighborhoods, who bought homes and spent their hard-earned money fixing them up, the trend is unsettling.
"My immediate concern is the two houses across the street. They've been vacant for almost a year," said Elmer Heutmaker, 39, a Dayton's Bluff resident for 18 months, adding that one of the homes has been broken into. "My wife and I just hope and pray that someone decent moves in."
The situation has caught the attention of the mayor and the City Council, which will hear about the extent of the problem at its Wednesday meeting.
The burning question is what to do about the vacancies and foreclosures. Absent a huge rebound in the real estate market, the problem seems destined to linger. And the longer buildings remain vacant, the harder they are to keep from becoming blight on the neighborhood.
"It decreases the values of the surrounding homes, and it creates a sense of abandonment," said Mike Anderson, executive director of the East Side Neighborhood Development Co., one of a handful of St. Paul nonprofits that piece together public and private funding to revitalize neighborhoods.
A DOWNWARD SPIRAL
St. Paul's 766 listed vacancies put downward pressure on all aspects of their neighborhoods, from home values to the public's perception of its schools. When that happens, families become more reluctant to move in, hastening the downward spiral.
The vacancies disproportionately affect poor neighborhoods and those with a high number of minorities. Three-quarters are in neighborhoods where incomes are less than the citywide average, according to a Pioneer Press analysis of city records. Barely a quarter of St. Paul neighborhoods have predominantly minority populations, but those areas account for 43 percent of the vacancies.
Fueling the phenomenon is an escalating number of foreclosures that appears to be partly the result of nontraditional home financing, such as high-risk loans and adjustable-rate mortgages, which became popular during the go-go days of the real estate boom.
And there is widespread speculation that many investors in rental properties simply got in over their heads.
"They used collateral on this one to buy that one," City Council President Kathy Lantry said. "And when they start falling apart, they lose them all."
But there's evidence that not just first-time homebuyers and investors are losing their houses. According to City Council researchers, 46 percent of citywide foreclosures came after a homeowner took out a home equity loan.
The city maintains a vacant-building registry, but it lists only properties reported by owners or that draw neighborhood complaints, so there likely are hundreds more than 766 empty homes. Across from Heutmaker's Reaney Street house, for example, neither of the two vacant buildings is currently on the city's registry.
With families forced out and houses reclaimed by financial institutions, getting vacant houses rehabilitated and back on the market is difficult. Critics say banks — particularly those with no local ties — are reluctant to sell the foreclosed properties at a loss.
"The real question is: How long will the banks sit on these properties?" said Chuck Repke, head of the Northeast Neighborhoods Development Corp. "What price will the banks ask for, and what will the city's response be? That's the problem of some mega-international bank owning the home. It doesn't mean a thing to them. … It's just a line on a spreadsheet."
Vacancies are concentrated in the North End, Payne-Phalen, Frogtown and — distressingly for many who worked hard to turn the neighborhood around — Dayton's Bluff. But they are up, too, in more stable neighborhoods, such as the greater East Side and Highland Park.
The problem wears on activists in the Dayton's Bluff neighborhood, where much energy has been spent polishing the area's reputation. Stately, turn-of-the-century homes rivaling anything on Summit Avenue can now be found around many corners there. But they are abutted, increasingly, by vacant homes that are often boarded up.
"It's disheartening to see all these vacant houses again," admits Jim Erchul, executive director of Dayton's Bluff Neighborhood Housing Services.
FEWER FEDERAL FUNDS
The question is, what do you do about it?
On Wednesday, the St. Paul City Council will hear a report outlining the scope of the problem, and Mayor Chris Coleman's administration is trying a broad approach to finding solutions. Council Member Dan Bostrom, whose East Side ward has more than its share of vacant buildings, says the city should encourage people to invest in their neighborhoods.
"We've got to come up with a plan to get owner-occupied duplexes," Bostrom said. "Get home ownership back in those neighborhoods."
Ann Mulholland, Coleman's chief of staff, said neighborhood vitality is City Hall's top priority.
"Mayor Coleman feels that our neighborhood character and culture is what makes St. Paul St. Paul," she said. "We are really turning our attention to this in a focused and concentrated way."
In conversations with several council members and members of the Coleman administration, there seems to be a unity of purpose and an understanding that, if unchecked, the problem could tear at the fabric of the city.
"We're not going to take a year to look at this," said Cecile Bedore, the city's director of planning and economic development. "We have to make sure we don't develop an 80-page report and stick it on a shelf."
But city government doesn't have as many revitalization tools as it once did.
Neighborhood development corporations, which are funded by local, state and federal grants, often take a leading role in revitalizing neighborhoods. But there is less money for redevelopment today than five years ago, when the number of vacant buildings was low.
St. Paul funding from Community Development Block Grants and the HOME program, the two main sources of federal urban-renewal funds, declined from $12.8 million in 2001 to $11.4 million in 2005 — an 11 percent drop that looms larger when the increasing costs of redevelopment are factored in.
St. Paul — which received $18.8 million in 1975, the first year of the block grant program — is not alone. In recent years, funding nationwide has been cut from $4.3 billion in 2002 to $3.7 billion in 2006.
"It's a nationwide problem," said Michael Wallace, senior legislative counsel for the Washington, D.C.-based National League of Cities.
President Bush's administration wants to tweak the formulas used to award grants to better serve communities in need, said Brian Sullivan, a spokesman for the U.S. Department of Housing and Urban Development.
"In the budget climate we're in, if you can't demonstrate results, you're going to be a target," Sullivan said, explaining why the program has been cut. "People here at HUD still love (the program). We all love it."
SPREADING CANCER
Surprisingly, not everyone's unhappy with a boarded-up home. A Pioneer Press analysis seven years ago found that crime associated with many buildings dropped once they became vacant.
"Some of the people who are living next to those boarded-up houses will say it's better today than it was when the miscreants were living there," Bostrom said.
But the problems associated with vacant homes only worsen with time. Youths commonly break in, as do vandals looking to gut the homes of their copper and lead pipes to resell, especially now that the market for recycled metals is booming.
Homes that sit empty often fall into disrepair, dragging down property values. A 1995 study by the Family Housing Fund of Minneapolis and St. Paul found that homes adjacent to and directly across from a vacancy drop $10,000 in value.
Mark Johnson has seen the effect firsthand. A Realtor with Edina Realty, Johnson is trying to sell a North End house at 9 E. Jessamine St. for an out-of-state investor. The small, single-story home, surrounded by vacancies, was listed last year for almost $130,000. It's now offered for less than $95,000.
"The neighborhood does matter. It's location, location, location," Johnson said.
With four registered vacant buildings nearby and an empty lot where the city recently razed a nuisance house across the street, the home is a tough sell. Johnson said crime in the area also is a problem, and that the reports he gets from agents working with potential buyers aren't good.
"They say, 'Clients drove by, didn't feel comfortable, didn't get out of car, left,' " Johnson said.
The city spends $700,000 a year to maintain unkempt properties, including vacancies, as part of an aggressive monitoring campaign. The city mows the lawn, picks up garbage and boards up windows if needed. The cost for the work is added to the home's tax bill, and most of the money is eventually recouped once the owner pays the taxes or the home is sold.
But laws intended to protect homebuyers can stall the turnaround of a vacant property. After a property goes into foreclosure, for example, the owner often has six months or more to take it back. This so-called redemption period is among the longest in the nation.
"Let's say the city wants to prevent a vacant property from sitting empty for X amount of time," City Council President Lantry said. "The fact is, if the mortgage company isn't past the redemption period, it's gotta sit there."
RELUCTANT TO RAZE
The city does have available some extreme measures. If a home deteriorates enough, the city has the power to demolish it. But that only creates more problems.
Not only does razing create a "gap-toothed" streetscape, but the action also is fraught with symbolism. When a home at 14 E. Jessamine St. was leveled earlier this year, picketers accused the city of trampling on property rights.
Furthermore, owners of property where a home has been razed sometimes quit paying their taxes. Then a lot can sit as long as five years before it's forfeited back to the government.
Vacant homes have long been the source of angst, spawning litigation between the city and HUD, which once owned hundreds of homes across the Twin Cities. Activists have squatted in vacant homes to focus attention on homelessness, arguing that some could be used to shelter the needy. And they can harbor crime — in 1999, an 8-year-old girl was raped in a vacant Frogtown home.
So, what to do?
For one thing, Lantry would like the city to open a dialogue with the banks.
"They'd better come to the table to see if there's some strategy we can employ to get them out from holding all these homes. … They took a chance, they overextended, they compromised their underwriting policies and procedures," Lantry said. "They took a chance because values were increasing so rapidly that they could recoup their money if people walked away.
"That's not happening anymore."
Jason Hoppin can be reached at jhoppin@pioneerpress.com or 651- 292-1892.
Next steps in St. Paul
St. Paul is following two tracks to attack the problem of emptying neighborhoods:
• The City Council will officially hear a report Wednesday that examines the roots of foreclosures and vacancies. That report will be the basis for policy decisions, which could include such steps as seeking state legislation or adding staff to the city's licensing department, which oversees vacant buildings.
• The report likely will align with a fast-track effort by Mayor Chris Coleman's administration to examine the broader scope of the problem, including poverty, education disparities and other socioeconomic causes. The Department of Planning and Economic Development is spearheading the effort and is meeting with City Hall department heads and concerned community organizations. PED Director Cecile Bedore said the mayor may convene a community development cabinet to make sure the recommendations for solving neighborhood disinvestment are implemented.
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From Sunday: "These Homes Were Lost," with a map of foreclosures across the Twin Cities during the past year and a half, is on www.twincities.com.
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Bob> This is the second story on this subject and I see nothing concerning the Citys actions contributing to these registered vacant homes.
