The Department of Housing and Urban Development is back in the predatory flipping business — destabilizing neighborhoods, eviscerating property values and leaving cash-strapped cities such as Cleveland to clean up the mess.
Why would a taxpayer-supported federal agency whose mission statement includes the promise to “utilize housing as a platform for improving quality of life” revert to policies that annihilate that quality of life?
It’s the same reason that bulk purchasers — HUD’s new customer base — leave zombie properties in their wake.
A HUD spokesman told Plain Dealer reporter Leila Atassi that the department “remains committed” to neighborhood restoration, but that it needs to protect “its own fiscal outlook.”
HUD’s number crunchers believe they can unload their distressed and abandoned properties for more than the $100 per eyesore they were getting from the Cuyahoga County land bank. HUD terminated its three-year relationship with the county Nov. 19. Up to that point, the county land bank had purchased more than 800 properties from HUD.
That the bottom line trumps the public good should surprise no one. Remember, HUD played a lead role in the foreclosure crisis by guaranteeing bad loans.
“We know from experience that the people who buy these properties are speculators. They’re not going to rehab them. Their business model is buy it and flip it,” said Jim Rokakis, land bank guru and vice president of the Western Reserve Land Conservancy.
The majority of these low-value properties will end up burdening taxpayers with board-up and maintenance fees and thousands of dollars in demolition costs, Rokakis predicted.
Worse, they will continue to drive down property values, including those on HUD-financed homes, and perpetuate the cycle of blight and neighborhood flight.
“They are shooting themselves in the foot,” said Frank Ford, senior vice president of Neighborhood Progress Inc. and chairman of the Cleveland Vacant and Abandoned Property Action Council.
HUD officials say the agency must offset a $16.3 billion shortfall in the fund that subsidizes the Federal Housing Administration’s mortgage insurance program.
But it’s short-sighted to do that in a way that sabotages neighborhood recovery.
Bipartisan congressional leadership must demand that the Federal Housing Administration work with communities, not against them, in resolving the foreclosure crisis.