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HomeMy WebLinkAbout09-61FEBRUARY 24, 2009 09 -37 09 -61 PENDING JANUARY 27, 2009 RESOLUTION (CARRIED 6 -1 LOST LAID OVER WITHDRAWN ) PURPOSE: APPROVAL FOR DEPARTMENT OF COMMUNITY DEVELOPMENT TO ACQUIRE PROPERTIES FORECLOSED ON BY THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT THROUGH THE $1 HOME PROGRAM AND SUBSEQUENT DISPOSITION OF PROPERTIES TO QUALIFIED BUYERS INITIATED BY: DEPARTMENT OF COMMUNITY DEVELOPMENT WHEREAS, the Department of Housing and Urban Development (HUD) has made foreclosed properties available to local governments for $1 under the $1 Home Program; and WHEREAS, acquisition of these properties supports the City's neighborhood improvement program by encouraging owner occupancy and removal of blighted properties; and WHEREAS, the Department of Community Development desires to participate in this program and in order to expedite acquisition of properties as they become available, the Department requests approval of a streamlined approach for acquiring and disposing of properties acquired under the HUD $1 Home Program. NOW, THEREFORE, BE IT RESOLVED by the Common Council of the City of Oshkosh that the upon the approval of the City Manager, the Department of Community Development is hereby authorized to acquire and dispose of HUD foreclosed properties under the $1 Home Program, and is further authorized and directed to execute any and all documents necessary for purposes of acquisition and disposition under the $1 Home Program. 0 O.fHKO1H ON THE WATER TO: Honorable Mayor and Members of the Common Council FROM: Jackson Ki ey� - -�' Director of o unity Development DATE: January 20, 2009 RE: Approval for Department of Community Development to Acquire Properties Foreclosed on by the Department of Housing and Urban Development through the $1 Home Program and Subsequent Disposition of Properties to Qualified Buyers BACKGROUND The Common Council previously received the attached memo setting forth a process by which foreclosed residential properties would be purchased through the Department of Housing and Urban Development (HUD) $1 Home Program. Homes are eligible for sale through this program after they have been on the market for 6 months. There are currently almost 20 properties that have been foreclosed upon by HUD in the City of Oshkosh. Approximately half of those have been on the market for 6 months or more (some of those for over a year) and are therefore eligible to be purchased by the City through the $1 Home Program. The Department has been contacted by the agency responsible for disposition of these properties inquiring about City interest in purchasing several properties. Due to the volume of properties currently available, and anticipated to be available, through this program, staff is proposing a streamlined approach for the acquisition of these properties as part of efforts to stabilize older neighborhoods. Streamlined Format: For each property proposed to be purchased through the program staff will submit the following information to the City Manager for review: An analysis of the condition of the property and a recommendation on suitability for razing or rehabilitation. Determination of the most appropriate end use of the property (i.e., owner or renter occupancy, target market, sale price or rent, etc.). Estimated cost and scope of rehabilitation or cost of razing, and the identification of funding source for covering carrying costs on the property. • Identification of the agency who will be completing rehabilitation of the home or new construction on the cleared lot, a time frame for the proposed project, a commitment on the part of that agency to the project and evidence of available funds to complete the proposed project • Evaluation of the impact of the proposed project on the neighborhood in which it is located. The City Manager would then make a determination on the acquisition and disposition of properties based on this information. At a minimum, Council will receive quarterly reports on the activities undertaken under this process. ANALYSIS The rate of residential foreclosure has accelerated in the past year. In this current economic climate of recession and tightening lending practices, foreclosed properties are languishing on the market in increasing numbers. This problem is being made worse as the number of dwelling units in the City exceeds demand based on basic population growth and household formation rates and is further compounded by the fact that during tough economic times, people are more likely to double up in rental units or move in with family members, which reduces demand for units even more. Often these foreclosed properties are managed by out of town businesses or individuals who are not responsive to the need to maintain them. As a result, many units are sitting with obvious maintenance and repair issues, vacant and for sale for extended periods of time, and creating a blighting influence in the surrounding area. Foreclosed properties are more likely to have suffered damage and deferred maintenance due to the circumstance of the owner in foreclosure which also makes them less marketable. The City, along with the majority of communities in the United States, must now deal with the increasing number of vacant foreclosed units for which there is little or no market. HUD is providing a tool for local units of government to address this issue by offering homes they have foreclosed upon to local units of government for $1. After a brief review of the properties that would be available through this program, it appears some would require minimal rehabilitation, some would require a more significant rehabilitation and some are candidates for razing. Disposition of the properties would be to income qualified buyers participating in the Winnebago County Housing Authority First Time Homebuyer Program and also to potential owner occupants with incomes between 80 and 120 % of County Median Income. These activities would be undertaken in partnership with NeighborWorks and Habitat For Humanity. FISCAL IMPACT The Department has applied for Federal Neighborhood Stabilization Program funds designed to assist communities to address the problem of vacant foreclosed properties. These funds, together with CDBG funds will be used for acquisition, for covering carrying costs, for rehabilitation (or razing as appropriate) and for disposition or management of the properties. Equity captured at the sale of rehabilitated properties would be used to fund additional similar projects. RECOMMENDATION Staff recommends Common Council approval of the proposed process by which the City would purchase property through the HUD $1 Home Program. Approved, Mark Rohloff City Manager City of Oshkosh - Department of Community Development OfHKOf ON THE WATER 215 Church Avenue Oshkosh, WI 54903 (920) 236 -5058 (920) 236 -5053 fax MEMORANDUM TO: Mark Rohloff, City Manager Common Council FROM: Jackson R. Kinn f ,�-L� Director of Comm ty Development DATE: January 15, 2009 RE: Utilizing Services of NeighborWorks and Other Neighborhood Programming In October you and the Council received a Memorandum discussing an approach the Department of Community Development was proposing for the ongoing implementation of neighborhood improvement programming in the community. That approach would involve engaging the services of NeighborWorks of Green Bay to work with the City on a variety of neighborhood improvement efforts. On January 27 the Council will be asked to act on a Resolution to authorize the City to enter into an agreement with NeighborWorks. This is an important step in moving the City forward in the implementation of the Great Neighborhoods Program that will help the City achieve goals and objectives set forth in the 2005 Comprehensive Plan. At that same meeting the Council will also be asked for approval to implement a streamlined approach for acquiring and disposing of properties foreclosed on by the U.S. Department of Housing & Urban Development (HUD). That activity is also part of the City's neighborhood improvement efforts. NeighborWorks NeighborWorks is a non - profit organization that is associated with the National NeighborWorks organization, which evolved from the former Neighborhood Housing Services organization. The National NeighborWorks organization has affiliates across the United States and receives some of its annual funding from a Congressional line item. NeighborWorks has been active in Green Bay for about 20 years, successfully organizing neighborhoods and undertaking a significant number of bricks and mortar projects. They also provide a number of other types of housing programming, including homeownership training, which is important in Oshkosh due to the fact that Habitat for Humanity has faced challenges in producing homes recently. NeighborWorks and the City of Green Bay Department of Community Development have worked hand in hand to address the City's neighborhood improvement and housing needs. NeighborWorks is involved with a number of housing and community development related activities including neighborhood organization, homebuyer and foreclosure counseling, rehabilitation and resale of single family properties and rehabilitation and management of rental units. Their funding comes from a variety of sources including private donations, grants from private foundations and the city as well as receiving federal funds from an annual congressional set aside for the national organization. The City of Green Bay not only benefitted from the formation of a number of neighborhood associations who play an active role in revitalization efforts,. but it has benefitted significantly from the presence of NeighborWorks which serves as an umbrella organization devoted to the general improvement of older central city areas in that community. Over the course of the past year the Department has been involved in discussions that have been held by the Oshkosh Area Community Foundation regarding their interest in seeing an expansion of neighborhood improvement efforts in the community. One area that has been discussed would be to the southeast of the Near East Neighborhood, with the area generally bounded by Bowen Street, Washington Avenue, Lake Winnebago and the Fox River. This general area was one of the priority neighborhoods identified in the 2005 Comprehensive Plan. The City would look to use $100,000 of currently available Community Development Block Grant (CDBG) funds to cover the costs of NeighborWorks services. It is envisioned that the initial funds provided by the City would be supplemented by additional monies that NeighborWorks is seeking from the Foundation. In addition, donors have approached the Foundation with an interest in providing funding that would be used in support of neighborhood improvement efforts. NeighborWorks will also bring with them a proven record in fundraising from both private and public sources. The agreement between the City and NeighborWorks would identify a number of activities the organization would be asked to undertake in Oshkosh. One of the first activities NeighborWorks would tackle is the establishment of a neighborhood association in the Near East Neighborhood. It would appear we are at a crucial crossroads with implementation of a variety of programming efforts in that neighborhood. For neighborhood improvement programs in areas such as the Near East Neighborhood to be successful, it is important the neighborhood residents themselves play a key role in determining the type of programming they would like to see implemented in their neighborhood, and how they would like the City to deal with issues like design reviews and targeted code enforcement. In having the neighborhood effectively speak for itself, the neighborhood should transition from the current Steering Committee approach which is by and large informal to a more structured and formally organized neighborhood group and/or association — and NeighborWorks can assist neighborhood residents in meeting that need. In addition to working on the possible formation of neighborhood associations, there are also a variety of other activities NeighborWorks would pursue including housing_ rehabilitation, development and implementation of broader neighborhood improvement activities and collaboration with the City in a general review of housing and neighborhood improvement programs, in order to identify areas where changes may be needed. 2 Additional information on NeighborWorks and its activities in Green Bay can be found at www. nw erg enbay. org Acquisition/Disposition of HUD Foreclosed Properties As noted above, on January 27 the Council will also be asked to approve implementation of a streamlined approach for acquiring and disposing of properties foreclosed on by HUD. The current state of the economy and housing market has resulted in a significant number of homes that have been foreclosed on by financial institutions including HUD. Lenders are using a variety of strategies to sell these homes in this difficult market. HUD is no different. When a HUD foreclosed property has been on the market for 6 months, it may be purchased by a unit of local government for $1 through the $1 Home program. The local government may raze, sell on the market as is or rehab and sell, or may turn the property over to a non -profit for one of those purposes. According to the City Assessor's records, there are nearly 20 HUD foreclosed homes currently on the market in Oshkosh. Nine of these have been on the market for over 6 months - long enough to be sold to the City through the $1 Home program. Vacant homes can have a very destabilizing impact on a neighborhood, and the longer a home sits vacant the greater that negative impact is. The foreclosure process is taking nine months or more following the initial notice from the mortgage lender and homes do not become eligible for the $1 Home Program until they have been on the market for 6 months. It is important to neighborhoods that these properties, that have been sitting empty for 15 months or more, be either razed (if not suitable for repair) and replaced with a new home, or rehabilitated and sold. Two of the properties on the list were transferred to HUD in September and December of 2007 respectively. Based on the length of time these properties have been for sale, it is clear the market is not interested in them and something must be done. Of the HUD homes currently on the market in Oshkosh, it appears some would be candidates for rehabilitation and resale, and some would probably be candidates for razing. In the rehab /resale scenario, it would be proposed that the rehabilitation be undertaken by NeighborWorks, Habitat, or the City. Homes would then be sold to households at a variety of income levels, from low and moderate income first time homebuyers participating in the Winnebago County Housing Authority's First Time Homebuyer Program or Habitat for Humanity to households at between 80 and 120 percent of median income. In the raze scenario, the cleared lot would be made available to Habitat for new construction. To enable the City to respond quickly to the availability of the HUD foreclosed properties and to get them into the hands of new homeowners, the Department would implement a streamlined process for the acquisition and disposition of the properties. The streamlined format would entail review and approval by the City Manager of a plan for the acquisition and disposition of each property. N For. each property proposed to be purchased through the $1 Home Program, staff will submit the following information to the City Manager for review; • an analysis of the condition of the property and a recommendation on suitability of the property for razing or rehabilitation • determination of the most appropriate end use of the property (i.e. owner or renter occupancy, target market, sale price or rent, etc.) • estimated cost and scope of rehabilitation or cost of razing • identification of the agency who will be completing rehabilitation of the home or new construction on the cleared lot; a time frame for the proposed project, a commitment on the part of that agency to the project and evidence of available funds to complete the proposed project • evaluation of the impact of the proposed project on the neighborhood in which it is located The City Manager would then make a determination on the acquisition and disposition of properties based on this information. At a minimum the Council will receive quarterly reports on the activities undertaken under this process. It should be noted that the proposed process would only apply to property in the HUD $1 Home Program. Any other acquisitions of foreclosed property would be brought forward for Council approval. The Neighborhood Stabilization Grant Program Council previously received a memo describing the City's involvement in a collaborative effort to pursue Neighborhood Stabilization Program (NSP) funds that are being provided by the federal government to deal with the unprecedented number of foreclosures occurring throughout the country. Since the State is stressing that for applications to be successful, they must involve a number of collaborating agencies, the City of Oshkosh is joining the Cities of Neenah and Menasha, Habitat for Humanity of the Fox Valley, Habitat for Humanity of Oshkosh, NeighborWorks and the Winnebago County Housing Authority to submit one application for these funds. Applications are due January 20. In Oshkosh funds are proposed to be used for acquisition, rehabilitation and resale of foreclosed properties, acquisition and demolition of unrepairable foreclosed properties and disposition of the lots to Habitat for the construction of new homes, or for sale at market rate to raise funds for the City's Great Neighborhoods Program. Since Congress is requiring speedy implementation of this program, funding will be made available in March and grantees are under a relatively tight timeframe to expend these funds. Funds that are not expended in a timely fashion must be surrendered by grantees. Therefore, it is critical that the City be in a position to implement the program in a timely manner. Having the involvement of NeighborWorks and streamlined access to properties through the HUD $1 Home program will be an important part of expediting the use of the NSP funds to improve our neighborhoods. If you or any member of the Council has any questions concerning the NeighborWorks Program or the Foreclosure Programs, please contact either myself or Principal Planner Susan Kepplinger. 19