The recent housing foreclosure crisis has had devastating impacts on individuals and their communities. To mitigate some of these impacts a number of community-based organizations are acquiring foreclosed properties in efforts to support neighborhood stabilization and revitalization. Examples of actions taken on these foreclosed properties include: land-banking, rehabilitation, demolition and re-sale or/re-rental. These actions have the potential to minimize blight, reduce unanticipated housing mobility, and provide affordable housing opportunities. However, the cost of pursuing any or all of these strategies to their fullest extent far exceeds the resources available to typical community-based organizations. In this research project, the PIs will develop decision support tools to assist community based organizations in identifying the subset of available foreclosed properties to acquired for the purposes of neighborhood stabilization and revitalization, determining which actions should be undertaken with respect to which properties, when the actions should be taken and to what degree?
In terms of broader impacts, the policy/decision models developed will yield acquisition policies that are, relative to current operations and procedures: (1) more efficient, i.e. they make better use of organization resources and social subsidies, (2) more effective, i.e. they help organizations make more rapid progress towards social goals related to affordable housing and community development, and (3) more equitable, i.e. they ensure that stakeholder groups and the communities see the foreclosure acquisition process as more transparent, consistent and fair.
The foreclosure problem within the United States has had major impacts throughout the national economy, as well as at the local community level. Among these impacts are: increases in housing vacancies, increased crime, higher insurance rates on neighboring properties, unanticipated mobility for renters, decreased property values and lost tax revenues. In response to the negative impacts of foreclosures at the local level, community development corporations (CDCs) have worked to develop solutions to the foreclosed housing crisis though acquisition and redevelopment of foreclosed properties, as this is central to their mission. The goal of this project was to design, implement, and evaluate evidence-based decision models that lead to new theory about housing development processes and strategies to assist CDCs in their efforts to choose and redevelop foreclosed properties as a means to stabilize and revitalize local communities. Our project involved collaboration among the Amherst, Boston, and Lowell campuses within the University of Massachusetts that worked closely with two partner CDCs who were active on foreclosure acquisition and redevelopment efforts within Massachusetts inner-city neighborhoods. We were able to assist these CDCs with the following: Conducted value-focused thinking planning sessions with both community partners to help align organization values and objectives with foreclosure housing acquisition and development strategies. Developed a property value impacts model to estimate how foreclosed housing impacts property values of nearby properties. Developed a strategic value analysis model to estimate the strategic value of foreclosed property locations to inform CDCs foreclosed housing acquisitions efforts. Developed tactical and strategic decision models to guide short and long term housing acquisitions and budget allocation decisions. Conducted training seminars for CDC staff in the uses and capabilities of Geographical Information Systems (GIS) for their housing development activities. The project findings included the following: Value Focused Thinking models are a useful tool to assist CDCs in identifying core decisions and how their decisions relate to achieving organizational missions. Property value impacts model provides one measure of potential social impacts of foreclosures and may be used in conjunction with other impact measures to evaluate the relative benefits of foreclosure acquisition and redevelopment decisions. Strategic value analysis assists practitioners identify what location-specific attributes are important to consider in foreclosure acquisition decisions. Decision models, when combined with empirical data, provide general rules of thumb to guide CDCs’ housing acquisition policy. When bidding for properties, overhead costs associated with the bidding process have a negligible impact for CDCs in determining whether to bid on a foreclosed property. For a given budget year, CDCs should be more selective initially in deciding which properties to bid/acquire, and then they should become more aggressive in bidding/acquisition towards the end of the year. If the probability of a successful bid is low due to competition, CDCs should be aggressive in their bidding/acquisition policies, i.e. they should keep trying to acquire more foreclosed properties. If CDCs have lower budgets, they should be more selective in bidding/acquisition decisions. In slow markets, where the expected social returns are lower, CDCs should not be so selective. They should continue bidding/acquiring as much as possible. In most cases CDCs should not overbid on properties, rather they should always bid at the asking price of a foreclosed property. Multiple objectives dealing with equity and utility in the CDC decision framework are not necessarily in conflict with each other. Government policy at all levels was intended to facilitate CDCs’ efforts, but bureaucratic processes and certain restrictions undercut policy goals. CDCs require high level of organizational capacity and flexibility to navigate government policies and other uncontrollable market factors in order to successfully acquire foreclosed properties. The lack of data to assess foreclosure acquisition impacts calls into question the ability of rational decision-making models to provide real-time guidance to CDCs doing foreclosure redevelopment.
