In nearly every state across the country, families are being forced from their homes, and the American dream of homeownership is turning into a nightmare. The nation's mortgage crisis -- due to a combination of some unconscionable lenders, some fraud and some overextended borrowers -- has resulted in individuals burdened with loans they can no longer afford. The effects of the crisis are devastating, both for the families forced from their homes and the neighborhoods left behind.
Subprime lending practices -- including adjustable-rate mortgages, balloon payments and prepayment penalties -- hit already vulnerable individuals and neighborhoods the hardest. Communities of color, in particular, will face incredible challenges as teaser interest rates reset and the housing slump continues.
Well before the current crisis, Boston Mayor Thomas M. Menino made preserving and creating affordable housing a priority. In fact, in 1997 Menino established Boston's Abandoned Housing Strategy, which was recognized in 2006 by the U.S. Conference of Mayors as a "best practice." 1 At the time the program was recognized, it had yielded a 77 percent decline in the number of abandoned residential properties in the city. 2 Under this program, the city surveys abandoned commercial and residential properties, working with private owners and developers to rehabilitate those properties into viable housing units.
Fast-forward to today: The rate of foreclosures and the decline of property values are rising at an astonishing pace. According to Boston's Department of Neighborhood Development, there were 703 foreclosures in 2007, up from 261 foreclosures in 2006 -- a major shift from the 60 foreclosures in 2005 and just 25 the year before that. Not surprisingly, 75 percent of Boston's foreclosures occurred in four of the city's poorest communities: Roxbury, Mattapan, Dorchester and Hyde Park. These neighborhoods are now checkered with large numbers of foreclosed homes, many of which sit vacant and neglected, attracting vagrants and crime, and bringing down neighboring property values by as much as 10 to 15 percent.
According to Aaron Gornstein, executive director of the Citizens' Housing and Planning Association, "Boston is doing a significant amount to work with homeowners to try to prevent foreclosures, certainly more than most other cities around the country." 3 Most recently, the city brokered a deal with the Boston Real Estate Bar Association to serve residents facing foreclosure and eviction. With 750 adjustable-rate mortgages scheduled to reset between May and October of this year, the city is proactively filling the gap in legal assistance for homeowners at risk of foreclosure. 4 The association has agreed to work pro bono for residents whose incomes fall below 80 percent of the median.
In February of this year, Mayor Menino established the Foreclosure Intervention Team, a group of leaders culled from city agencies that deal directly with issues surrounding foreclosure and abandonment. The FIT includes representatives from the following Boston agencies: the Police Department, Inspectional Services, Department of Neighborhood Development, Public Health Commission, Corporation Counsel, Public Works, Public Property, Fair Housing Commission, Housing Authority and Redevelopment Authority. The team's first project focused on the Hendry Street neighborhood, a small area in Dorchester devastated by the housing crisis, with at least 12 foreclosed homes and several others that are abandoned, boarded up, and petitioned for foreclosure. Since the creation of the FIT, significant physical improvements have been made to the neighborhood: abandoned homes have been properly secured, graffiti removed, missing street and parking signs replaced, and abandoned cars towed. Additionally, streets, sidewalks and empty lots have been swept of debris and household trash.
During the same period, the city announced that it would work to acquire empty properties from the mortgage companies currently servicing them. Again, the city started with the Hendry Street neighborhood, working to purchase four buildings in the area, including six condominiums and a three-family home. 5 If the city is able to acquire these properties, the city's Department of Neighborhood Development will manage them until an appropriate disposition occurs. Potential disposition plans include redeveloping properties for homeownership or rental use, with continued involvement by the FIT until local stability is restored.
The city is also combating this epidemic by working directly with the mortgage companies, stepping up efforts to get them to take better care of, or sell, foreclosed properties without government intervention. This past January, Mayor Menino received pledges from mortgage companies holding large amounts of foreclosed properties in Boston to improve maintenance of their properties and to work with the city on selling those buildings as quickly as possible.
As I write this column, the front page of the Boston Globe shows the following headline, "Many More Going Bankrupt: Rise in State Filings Tied to Housing Crisis." 6 Future historians will judge today's leaders by their responses to foreclosure and abandonment. It will take visionary mayors to stabilize neighborhoods, assist displaced families, and restore hope in urban centers across the country. The efforts of Mayor Menino are a very impressive start.
Boston's efforts are some of the many good ideas undertaken across the country to ameliorate this serious issue. The U.S. Conference of Mayors has created a database of best practices around city governance, and the organization's survey of city programs that address the surge of vacant and abandoned properties can be found here: http://usmayors.org/uscm/best_practices/vacantproperties06.pdf. I welcome your suggestions and feedback throughout the series. E-mail me at firstname.lastname@example.org.
1. "Combating Problems of Vacant and Abandoned Properties: Best Practices in 27 Cities," U.S. Conference of Mayors, June 2006. http://usmayors.org/uscm/best_practices/vacantproperties06.pdf
2. "Marketplace of Ideas" conference proceedings, Drum Major Institute for Public Policy, November 19, 2007. http://www.drummajorinstitute.org/events/unique_event.php?ID=50
3, 4. John C. Drake, "City, Lawyers to Go to Bat for Homeowners: Volunteers to Help Thwart Foreclosures," Boston Globe, March 14, 2008. http://www.boston.com/news/local/massachusetts/articles/2008/03/14/
5. "Mayor Convenes Foreclosure Intervention Team," City of Boston Press Release, February 27, 2008. http://www.cityofboston.gov/news/default.aspx?id=3804
6. Blanton, Kimberly, and Todd Wallack, "Many More Going Bankrupt: Rise in State Filings Tied to Housing Crisis," Boston Globe, March 11, 2008. http://www.boston.com/realestate/news/articles/2008/03/11/many_more_going_bankrupt/
Series introduction: Lessons from Our Best