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Wednesday, April 15, 2009

Absentee-owner trend growing on North Side

Carlos Gonzalez, Star Tribune
The first-floor windows were boarded up on a home on the 2400 block of Bryant Avenue N. in north Minneapolis.
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posted by Bob at Wednesday, April 15, 2009

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In some North Side neighborhoods, absentee buyers outnumber residents.

By STEVE BRANDT, Star Tribune

Last update: April 14, 2009 - 10:52PM
Sarah Kiefer is a first-year homeowner who still gets giddy over shoveling her own walk. The 27-year-old got a deal last year on a bank-owned house in the Jordan neighborhood of north Minneapolis. She paid $75,000 for a place with three bedrooms and two fireplaces -- plus a leaky roof and a basement stripped of its copper pipes. "It was great if you overlooked those two little things," she said. Kiefer bought the house with help from a city program aimed at repopulating foreclosed homes. But the problem is that there aren't enough Kiefers buying into the North Side.
Home sales nearly doubled in the North Side last year, unlike most places in the metro area, according to data kept by the Minneapolis Area Association of Realtors. The North Side has been at the epicenter of a wave of foreclosures that has roiled Minnesota, with the area's problems abetted by mortgage fraud that has littered some blocks with boarded houses vulnerable to vandalism, driving down property values.

But many of the buyers were investors looking to rehab for resale, or landlords who will draw rent until the market appreciates. There's evidence the same dynamics are at work in suburbs as foreclosures proliferate there.

"Brooklyn Park, Brooklyn Center, anywhere an investor can find a deal, they buy," said Carolyn Olson, who has competed against investors for homes as president of the nonprofit Greater Minneapolis Housing Corp.

Absentee ownership is starting to dominate some North Side neighborhoods, even without counting apartment buildings. In Kiefer's Jordan neighborhood, half the single-family and duplex homes are owned by non-homesteading owners, according to city records.

The neighborhood's non-homesteaded homes have more than doubled in number since 2001.

The number has tripled in the same period in the nearby Folwell and McKinley neighborhoods. The surge was fueled by some bargain-basement prices and a change in state tax policy that eased the property tax bite on non-homesteaded property.

Like 'a hurricane'

Scott Lindquist, a city assessment manager, has seen the impact of those forces in the McKinley neighborhood. "It just destroyed that neighborhood, in my opinion," he said.

The city is trying to fight the absentee-owner tide with incentives for owner-occupants such as Kiefer. It provides up to $10,000 toward closing costs, down-payment help and repairs to people who buy foreclosed housing. Kiefer used the money for repairs.

"It's an attempt to get stable people into the neighborhoods," said Barbara Johnson, a North Side council member.

But the incentives helped only 50 homeowners last year, 40 of whom bought on the North Side. There's money for another 200 purchasers this year in targeted neighborhoods. Yet nearly 1,500 Multiple Listing Service home sales were reported last year on the North Side.

"It's just like being caught in a hurricane," Lindstrom said.

To be sure, 83 percent of the single-family and duplex homes across Minneapolis remain owner-occupied. But that figure dropped from 93 percent in 2001, when the law changed to ease the tax disadvantage on non-homestead properties.

On the North Side alone, more than 3,100 structures shifted from homeowner to rental status in that period, city records show.

"We are experiencing the highest conversion rate in recent history," said Henry Reimer, a city inspection director.

Alarmed residents are reacting. Johnson's Victory neighborhood created a livability committee in part because of alarm over a more than threefold increase in rental property units.

"It is of great concern to neighbors and homeowners that the number of homeowners has gone down," she said. "It is destabilizing and it requires increased vigilance."

Squirrels in the attic

The city early last year imposed a $1,000 fee on housing converted from ownership to rental status, to pay for inspections to make sure it meets rental licensing standards. Officials thought that might slow conversions, but 765 units were converted in just 10 months, twice what the city had prepared for, Reimer said.

Now his unit is resurrecting a proposal the council didn't pass last year, for a $450 fee to finance an immediate inspection whenever a rental unit changes ownership. Why? "We are continuing to see the fallout from fly-by-night rental operators," he said.

Kiefer has rental properties on both sides. Her block's absentee owners hail from as far as Anoka and Hopkins. Squirrels scampered through the attic of one neighboring rental until a new landlord rehabbed it.

She, too, has fixed things -- with a lot of help from family -- since closing on her home last May. She used Rubbermaid containers to catch leaks until the roof was replaced. Paint samples still lie around the house, which smells faintly of fresh paint.

Owning has been a driving aspiration for the Oakdale native. She was renting in the Seward neighborhood when she took a home-ownership workshop and found an agent.

She searched mostly on the North Side. Despite its higher crime rate, she was familiar enough with the area through volunteer work to feel comfortable. Plus, she liked the affordability and access. She gave up her car now that she lives on a bus line that takes her to her downtown job in the office of a college registrar.

"You get a lot of house for the money," she said.

That affordability is shown in the $44,763 median price for the 749 homes sold in her real estate district last year. That's a plunge from $84,900 in 2007.

Neighborhood activist Roberta Englund said there's still a plentiful supply, with 139 homes listed for $50,000 or less on the North Side last week. Her staff at the Folwell neighborhood group has started checking the ownership status of the latest batch of sales.

"We think from the activity that we are seeing that 60 percent of those sales will turn out to be investors," she said.

The effect of absentee owners on neighborhoods won't be known until their tenant screening and rental management practices are evident, she said.

Steve Brandt • 612-673-4438

9:05 AM  

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