Solving the Foreclosure Crisis in Low-Income Neighborhoods

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In cities across the United States, the ongoing foreclosure crisis has caused the rapid spread of urban blight. The proliferation of foreclosed properties has consequences far beyond the hardships encountered by families facing foreclosure. Rising crime, unstable neighborhoods, and local budget problems are but a few of the external effects created by an overabundance of foreclosed property. Dealing with such property requires a two-faceted approach by local governments that focuses on acquiring abandoned properties and then creating programs to encourage responsible homeownership. Of particular importance are the concepts of land banking, which helps to consolidate land for reuse, and shared equity housing, which keeps housing affordable.

First of all, governments must have the tools to acquire foreclosed properties and to assemble parcels for redevelopment. Land banking is a process by which foreclosed properties are gathered under under a government authority so that their future use can be effectively planned based on community needs. It is particularly useful in areas with large amounts of abandoned and foreclosed property.

In forming a such a land bank, it is important that the state laws allow localities to deal effectively with foreclosed properties. Until 1999, Michigan's foreclosure laws could keep a property mired in the foreclosure process for up to seven years, contributing to blight. However, under today's new streamlined laws, foreclosed properties are deeded to the county treasurer after only a couple of years, allowing the land bank to efficiently address foreclosed property. Depending on the locality, laws may need to be changed to facilitate land banking.

Working in metropolitan Flint, Michiga...

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... the wake of the foreclosure crisis and stabilizing hurt communities requires laws and programs that allow localities to take charge of foreclosed property and a commitment by those localities towards promoting responsible homeownership. Of course, it is impossible to pin today's crisis on any one cause. In many inner-city neighborhoods, today's foreclosure crisis is the culmination of decades of neglect, and the solution will require a coordinated assault on all fronts. Ultimately, educational and work opportunities will also need to be improved to fully stabilize neighborhoods. The complexities of today's foreclosure crisis are daunting, but this paper presents a launching point from which to tackle the crisis. By working to mitigate the immediate harmful effects of disinvestment and depopulation, we begin building the sustainable communities of the future.

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