Friday, December 14, 2007

The Other Housing Crisis

Road Home Sell Outs

One of the options for the Road Home is to sell the State your house for 60% of the pre-K value, although if my appraisal from them is any indication it will be more like 40% of the real pre-K value. I've long wondered what would happen to those houses.

Recently the LRA said they expect to have 7,000 properties in New Orleans. Many of those will simply be bulldozed because they are too far gone. Most people with repairable houses seem to have been able to get more quicker from speculators or flippers. One factor may have been that Road Home was putting a floor on the market. That floor might collapse as Road Home winds down.

LRA has accepted New Orleans' Plan for those properties. Under the plan New Orleans
... expects its New Orleans Redevelopment Authority to receive 7,000 Road Home properties in the next year. The city's plan calls for the properties to be sold to developers or cleared for parks and community gardens in the next 10 years
I haven't been able to discern exactly how NORA is going to go about this. In the past they have offered blighted properties for redevelopment, but that process was slow, expensive, complex and convoluted. The results were frequently disappointing. The NORA Submission to the LRA has four methods of distribution identified.
  1. Lot Next Door program and transfers to individuals
  2. Transfers to for-profits and non-profits for development as residential property
  3. Utilization of properties as sites for community gardens, urban agriculture and pocket parks
  4. Selected use of properties for other uses expounded in neighborhood plans, such as community health centers, smallgrocers, and expansion of school and other facilities.
Blighted Properties

According their plan NORA also expects to get about 7,000 additional blighted properties. The city recently auctioned almost 2,000 tax delinquent properties and is expected to get more early next year. The sale was accomplished online and was apparently a great success. Hopefully NORA will employ a similar open process. I'd suggest getting eBay to do it.


In addition Real Estate industry spokesmen expect as many as 20.000 foreclosures in New Orleans. That's a lot of houses to be disposed of and I don't see any lending institution wanting any part of the flooded ones with with repairs, maintenance and remediation costs, plus potential liability for concealed damage and mold, among other things. Most of these may eventually end up with the Feds, and from there go to NORA, but that is was pure speculation. NORA is already negotiating for FHA foreclosures.


Included in the Lot Next Door is a suggestion that NORA might engage in land swaps to improve clustering. That seems reasonable, but potentially subject to favoritism.

The Lot Next Door.

The Lot Next Door programs seems exclusively directed to Homeowners. It would allow Homeowners to acquire adjacent property on preferential terms. I see no reason it shouldn't, under a somewhat different conditions, also be directed toward landlords. It seems to me many rental properties could benefit from additional adjacent land for amenities and/or off street parking, which would enhance the value of the existing properties.

Where are the Families?

In reading the proposal I see no mention of individual families being given any direct assistance as new home owners. Only for-profit and non-profit developers are mentioned. That is a serious omission. I can imagine an opportunity for young families committed to New Orleans to invest sweat equity in a new or upgraded home. Most of us know people who using their own resources have completed restoration largely on their own. I can imagine community resources being used to assist people with skills training and other assistance.

Urban Homesteading.

I'd like to see an Urban homesteading program where infill properties in developing areas would be offered to potential home owners on favorable terms, in return for a covenant that the family complete renovations in a reasonable time and reside in the home for a reasonable time. Something similar to the Road Home covenants. Perhaps banks could be lined up to provide bridge financing for the renovations and guarantee a mortgage on completion for qualified families. Perhaps certain necessary professions could be offered even more favorable terms like teachers, police, firefighters and nurses. Perhaps military veterans, National Guard members, musicians or others might be attractive targets.

I understand that a modest 1200 sq. ft. Gentilly Bungalow can be rehabilitated for around $70,000, using "builder" quality materials and labor. With sweat equity this could probably be cut in half. Many people have now lived in FEMA trailers for two years now. I wonder if some kind of temporary on-site housing could be arranged for homesteaders while repairs are underway, possibly re-purposing existing surplus FEMA housing.

The Impact.

If these figures are correct, and I don't think any of them are really reliable, there may be as many as 35,000 houses that will be transfered to NORA. That's almost 10 times the number of public housing units being torn down.

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