Paul Bass photo
Neal-Sanjurjo: “We can’t compete.”
After watching slumlords and other “investors” gobble up thousands of foreclosed homes in city neighborhoods, Serena Neal-Sanjurjo has come up with a plan.
She recently unveiled the plan to a committee of alders, who voted to delay a vote on it until they receive more information.
Neal-Sanjurjo, who heads New Haven’s neighborhood anti-blight agency, the Livable City Initiative (LCI), is asking the lawmakers to streamline the process for buying foreclosed properties from banks.
Right now it takes six to seven months for LCI to win all the approvals necessary to buy blighted abandoned properties, which have continued to stymie renewal in neighborhoods throughout town since the 2008 mortgage crash.
Banks don’t wait six to seven months to weigh offers when they finally decide to unload decaying foreclosed-upon properties. They usually take offers and accept a winner within 30 days.
As a result, a small number of investment companies — some but not all of them repeat violators of housing codes — have dominated the market, compiling portfolios of hundreds or thousands of apartments in Newhallville, Dixwell, Beaver Hills, Fair Haven, and the Hill.
In just 12 months, from June 2015 to June 2016, private investors bought more than 2,000 foreclosed properties in New Haven neighborhoods, Neal-Sanjurjo revealed at a hearing on her proposal held at City Hall last week by the Board of Alders Community Development Committee. She broke down the numbers by neighborhood in a chart distributed to committee members. (See chart at top of the story.)
“We can’t compete with the investors,” who can get “cash on the table” in 30 days, Neal-Sanjurjo said.
Her chart startled Beaver Hills Alder Brian Wingate — especially the number of properties in his neighborhood, 148, snapped out of foreclosure by the investors in just one year.
“I was staggered” by all the numbers, Neal-Sanjurjo agreed. “I could not believe the numbers were that high. But they are real. It is public record.
Neal-Sanjurjo estimated that 5 or 10 groups of out-of-town investors creating multiple limited liability companies that trade properties among themselves accounted for 75 percent of those 2,000-plus purchases. Often those companies perform just a minimum amount of work to pass inspections, then charge high rents to poor families receiving federal Section 8 subsidies, she said.
“Many working families believe they have no choice for homeownership and must rent,” Neal-Sanjurjo told the committee. She said those same renters could in many cases become homeowners for the same amount they pay in rent if LCI bought and renovated the properties.
Paul Bass File Photo
Foreclosure-frozen blight on William Street.
She pointed to the success LCI had in helping working families buy restored homes on Putnam Street in the Hill as an example of what the agency can accomplish under the proposed speed-up plan.
Two years ago LCI launched a campaign to help working families become first-time home-buyers. The city offers qualifying buyers $10,000 in downpayment assistance (100 percent forgivable after five years if you still live in the home) and $30,000 in energy-saving upgrades. It created this website to promote the program.
Neal-Sanjurjo’s proposed new foreclosure-sale bidding speed-up is a modest plan. Neal-Sanjurjo said her entire budget to buy properties hovers at only a little above $200,000. But that could pay for 10 distressed properties, she estimated, and if applied strategically, create more Putnam streets.
Right now, she said, LCI’s efforts to help stretches of Newhallville revive get stymied by the foreclosure-purchase problem. For instance, Neal-Sanjurjo said, her office is proceeding with a $2.5 million state bond-funded project to build new homes for local owner-occupants to buy on vacant lots in the area of Thompson Street and Winchester Avenue. “Investor”-owned hovels bought out of foreclosure are sprinkled amid those properties, endangering renewal plans.
30 Days Vs. 7 Months
Wingate: Good concept. Need details.
Under the current system, if LCI seeks to purchase a blighted property, it must negotiate a price with the seller. Then it must obtain a vote of approval from LCI’s Property Acquisition and Dispensation Committee. Next the full LCI board must vote to approve it. Then it goes to the Board of Alders, which sends the proposal to a committee for a hearing and a vote. If the proposal passes committee, it eventually returns to the full board for a “first reading,” then a vote at a subsequent meeting. Next the mayor’s office drafts a contract. The city Finance Department reviews it.
That takes half a year or more, according to Neal-Sanjurjo — five or six months after lenders will have otherwise settled with a private investor on these vacant “REO” (or “real estate owned”) portions of their portfolios.
Her proposal would authorize LCI to go straight from an offer to cash in 30 days in negotiating with banks for a limited number of blighted foreclosed properties by bypassing all those approval steps.
The wording of the proposed order calls for “authorizing the City of New Haven, acting through the Livable City Initiative, to negotiate and enter into a contract to purchase vacant, foreclosed properties form lending institutions throughout the City of New Haven and authorizing the mayor of the City of New Haven to execute and deliver any and all necessary documents to complete the acquisition of said vacant, foreclosed properties.”
“This is a big ask,” Alder Wingate said at last week’s hearing. “it is a big ask,” Neal-Sanjurjo agreed. “Our challenge around home ownership in this city is big. We’re losing a whole segment of population to East Haven, West Haven,” and losing out on helping local working families buy their homes and stabilize their neighborhoods.
Dwight Alder Frank Douglass, the committee chair, raised concern about whether new homeowners would eventually lose their homes, repeating the foreclosure and blight cycle. Neal-Sanjurjo said LCI would partner with not-for-profits to train homeowners and stay in touch with them after purchases to help them avoid problems.
Wingate noted that the proposal in its current form doesn’t contain many details including reporting procedures to the board to help alders monitor the process.
“It comes from a good place,” Wingate said of the proposal.
“I really believe it’s a strong idea. We need something like [this] in New Haven,” he said. “I just want the i’s dotted and the t’s crossed.
“Unfortunately you have foreclosures. We want this program to be managed and well put together with people watching it.”
Douglass, too, praised the general concept while seeking more details. The committee voted unanimously to table the proposal while LCI and Board of Alders staff work on fleshing out the details. “We need to work out the kinds,” Neal-Sanjurjo agreed. “I’m open to any suggestions and recommendations in order to make this work.”
In an interview, James Paley, whose not-for-profit Neighborhood Housing Services also restores blighted properties and resells them to first-time homebuying working families, said he supports efforts like LCI’s proposed plan to combat bank sales of foreclosed-upon properties to private investors.
NHS faces the same problem as LCI in seeing its work threatened by the current foreclosure sales. He called the 2,000 sales over 12 months a “terrifying” phenomenon: “It could undermine everything that we’re trying to do if our homeowners become surrounded by these investment-owned properties.” He recommended that the city go further than speeding up the process of approving a limited number of purchases, and use eminent domain powers to snatch properties from irresponsible banks and slumlords in Enterprise Zone neighborhoods like Newhallville.
This sounds like a fantastic proposal. Please give LCI the tools it needs to combat blight.