foreclosures in bowdoin-geneva_analysis&recommendations

Foreclosures in Bowdoin-Geneva: A Research Report & Policy Recommendations

Massachusetts Institute of Technology Department of Urban Studies and Planning

11.S958 Foreclosures and Neighborhood Revitalization Workshop Spring 2012

1

Table of Contents

1.#Introduction#........................................................................................................................#2#

2.#Foreclosure#&#Crime#Analysis#..............................................................................................#5#

3.#Recommendation#1:#Existing#Conditions#............................................................................#25#

4.#Recommendation#2:#Community#Land#Trust#......................................................................#30#

5.#Additional#Recommendations:#Social#Issues#......................................................................#36#

6.#Conclusion#.........................................................................................................................#41#

7.#Appendix#...........................................................................................................................#43#

##!

Foreclosures in Bowdoin-Geneva

2

CHAPTER 1: Introduction

No one was prepared for the foreclosure crisis in the scale it was experienced. To say that the crisis is over is naïve, as is the suggestion that an appropriate infrastructure for resolving conflict is in place. An imminent backlog of foreclosures threatens community cohesion, housing market stability, and larger economic growth.

In Boston, a region with a compelling history of housing activism tracing back over a half century, there is a heightened attention surrounding foreclosure issues. Community groups, foundations, universities and city departments have each launched initiatives of their own, sometimes working together. Efforts such as Project No One Leaves – a collaboration between CityLife/VidaUrbana, Harvard Legal Aid Bureau and Boston Community Capital – have received national media attention due to their innovative approach. Boston’s Mayor Menino convened a Foreclosure Intervention Team in early 2008. Two separate 90-day and 150-day moratoriums on new foreclosure petitions, implemented by the State of Massachusetts, have given delinquent homeowners a chance to catch up on payments. Yet despite all such efforts, the most recent data suggest that foreclosure deeds in the Greater Boston Region may indeed be on the rise once again. An annualized look at Boston’s foreclosures may suggest that the situation is tapering (figure 1).

Figure 1

Foreclosures in Bowdoin-Geneva Chapter 1: Introduction

3

A more nuanced look at foreclosures by month, however, suggests that the number of foreclosures may in fact be rising once again (figure 2). The fortunate decline sustained from September 2010 to May 2011 corresponds with a second state-mandated right-to-cure period, where homeowners had an extended opportunity to catch up with payments and lenders were required to make “good-faith efforts” to address a homeowner’s financial difficulties, and a slowdown in mortgage company foreclosure processing.

Both periods are now over.

Figure 2

Source: The Greater Boston Housing Report Card, 2011

This report is concerned with foreclosures in a part of the Dorchester neighborhood known as Bowdoin-Geneva. Residents of this area face challenges in addition to residential foreclosures, including unemployment and crime. In November 2011, Mayor Menino created the city’s third Neighborhood Response Team (NRT), centered in Bowdoin-Geneva, to focus on education and job training, mental health and housing, and youth programming.

We interviewed stakeholders to identify the neighborhood’s struggles, which are outlined in this report, along with potential solutions. Chapter 2 provides an analysis of foreclosure and crime statistics for the area. This is followed by our primary recommendations: pursuing a bulk purchase of foreclosed properties and establishing a community land trust. Chapter 5 addresses additional issues in the neighborhood related to employment. Finally, we conclude with feedback from the stakeholders we have worked with.

This document constitutes the final report for the Foreclosures and Neighborhood Revitalization Workshop at the Massachusetts Institute of Technology’s Department of Urban Studies & Planning. Lecturer James Buckley led this half-semester workshop from February to March 2012 for the Boston Mayor’s Office, which asked us to develop a community plan for the Bowdoin-Geneva neighborhood. Contributors include Rachel Alonso, Jenny

Foreclosures in Bowdoin-Geneva Chapter 1: Introduction

4

Larios Berlin, Scott Berzofsky, Christine Curella, Rance Graham-Bailey, Emily Mytkowicz, Nikhil Nadkarni, Marcie Parkhurst, Matthew Steyer, Nse Umoh, Ellen Ward, Paula Winicki, and Daniel Yadegar.

Foreclosures in Bowdoin-Geneva Authors: Rance Graham-Bailey, Nikhil Nadkarni, Matthew Steyer, Nse Umoh

!

5

5 !!

CHAPTER 2: Foreclosure and Crime Analysis

This chapter provides an understanding of neighborhood context by exploring both citywide trends and describing current conditions in Bowdoin-Geneva. We begin with a description of the foreclosure process specific to Massachusetts, as every state has unique processes in this regard. Next, there is a description of Boston’s demographics and patterns of foreclosure-related activity across the city. Finally, we present an analysis of the correlation between crime hotspots and foreclosures in Bowdoin-Geneva, as well as the associated costs faced by the city.

2.1 THE FORECLOSURE PROCESS

!

!

!

!

!

!

!

!

!

The foreclosure process in Massachusetts is defined by a set of concrete steps designed to preserve due process for borrowers (i.e., mortgage-holding homeowners). Nonetheless, the duration of the foreclosure process may vary significantly. The process starts when a borrower fails to make a payment. In turn, the lender (i.e., the bank holding the mortgage) sends the borrower a Notice to Cure. Since August 2010, If no response is received after 150 days, the bank sends a Notice of Acceleration, and the whole mortgage is due immediately.

If the borrower is unable to comply, the lender pursues the matter in the Massachusetts Land Court, by filing a foreclosure petition. The Land Court checks to ensure that the borrower is not entitled to the protections of the Servicemembers’ Civil Relief Act of 2003, and then issues an Order of Notice. This is a public record, announcing that the foreclosure process is underway.

The lender publishes the Order of Notice in the local newspaper. Barring any response from the homeowner, the Land Court issues a judgment to proceed to auction.

During these initial steps of the process, several types of targeted interventions can stave off foreclosure. Payment counseling and loan modification can help the homeowner stabilize their mortgage and remain in their home. Short sales and deed-in-lieu of foreclosure are negotiated settlements to give up ownership of the house but limit the financial fallout for the homeowner.

Borrower fails to make payment; lender sends a Notice to Cure, and then a Notice of Acceleration.!

Lender files a complaint in Land Court, which issues an Order of Notice. This Order is published in local papers.!

Land Court issues a judgment to proceed. Lender publishes a Notice of Sale in the newspaper for 3 weeks.!

An auction is held onsite, at the property. The lender is obligated to sell at fair value.!

The buyer – often the foreclosing bank itself – closes on the property up to 90 days later; and a Foreclosure Deed is recorded.!

AUCTION!

Interventions: Foreclosure prevention counseling, short sale, deed-in-lieu of foreclosure, loan modification!

Intervention: Community capital loan!

Foreclosures in Bowdoin-Geneva Chapter 2: Foreclosure and Crime Analysis

! 6

Absent any interventions, the lender proceeds to list the home for auction in local newspapers, and, after at least three weeks of public notice, an auction is held. The auction is held, by law, on the property itself. Since the proceeds from the sale are used to write down the borrower’s outstanding mortgage, the foreclosing bank has a duty to obtain a fair price for the property.

The buyer may be the bank itself, in which case the property becomes real-estate owned (REO). It may be a third-party buyer that purchases the property. Alternatively, interventions through local community capital loans can help the original homeowner buy back their house at the foreclosed price. Barring such interventions, however, the new owners, once they have closed on the house, can proceed to seek eviction of any existing residents in court. The new owner receives a Foreclosure Deed upon closing the transaction.

2.2 DATA SOURCES

In order to explore the patterns behind the foreclosures occurring in Bowdoin-Geneva a number of data sets were explored and mapped. From the city of Boston’s Department of Neighborhood Development, we obtained data on: ownership and property details, tax & property values, buildings identified as distressed (2000-2010), foreclosure petitions (2006-2012), foreclosure auctions (2006-2012), foreclosure deeds (2006-2012), and Real-Estate Owned properties in Bowdoin-Geneva (2006-2012). All of the foreclosure related data was obtained by the City from the Warren Group. As explained above, once a Bank has initiated a foreclosure process against a homeowner and the Order of Notice has been issued, the Bank files a petition with Massachusetts Courts; all of these properties, located in Bowdoin-Geneva, were listed in the foreclosure petition database. The foreclosure deeds database records properties that have been auctioned and for which the deed was transferred.

In order to observe crime trends we explored and mapped two key datasets 1) service requests received on the city’s 24 hour ‘Mayor’s hotline’ (2011- 2012) and 2) incidents of crime/illegal behavior responded to and recorded by the Boston Police Department in Bowdoin-Geneva. The former was downloaded via the City of Boston’s GIS Data Hub, while the latter was received directly from the Boston Police Department. Finally, we also used data from the 2010 U.S. Census and Esri.

We noticed that the City of Boston is ahead of the curve, in comparison to many other cities, with regards to making data available to the general public and researchers. In particular, having the Warren Group data from the Department of Neighborhood Development for the Bowdoin-Geneva neighborhood was critical to our ability to complete this report and the recommendations it contains. While the city’s willingness to provide a subset of the data it has acquired is notable, there are limitations to this strategy. For example, because the City’s data comes from the Warren Group, DND was unable to share citywide data that might have allowed us to compare neighborhoods across Boston. If the city were to maintain its own foreclosure database, this and related challenges would be avoidable.

2.3 BOSTON TRENDS

While Boston has experienced a low level of foreclosure activity relative to many U.S. metropolitan areas (ranking 134th in 2010), it nonetheless experienced a 1,268% increase in foreclosure deeds issued between 2005 and 2010.1 Such an abrupt change can cause significant family and neighborhood destabilization due to the financial hardship and the necessity of relocation.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 City of Boston, Department of Neighborhood Development. “Foreclosure Trends 2010.” December 21, 2010.


! 7

2.3.1 Spatial Patterns: Demographics

Studies on foreclosure have demonstrated that foreclosure activity is often concentrated disproportionately in low- to moderate-income neighborhoods and areas with higher percentages of racial and ethnic minorities.2

Looking at the spatial distribution of median household income in Boston (Map 1), there is a clear concentration of higher income levels in central Boston (Back Bay, Beacon Hill, South End, Downtown, Charlestown) and along the city’s southwest boundary (Jamaica Plain and West Roxbury), with lower and moderate income households spread throughout the city, particularly in East Boston and along a large portion of the city beginning in Fenway/Kenmore and extending South/Southeast through large portions of Roxbury, Dorchester, Mattapan, and Hyde Park.

More striking, however, is the spatial distribution of racial and ethnic minorities throughout the city. Map 2, indicates a high predominance of minority residents located in a ‘central corridor’ that extends from the South End down through to the city’s southern edge. This area includes a core concentration of high percentage minority tracts extending through Roxbury, western Dorchester, Mattapan, and into Hyde Park. These tracts contain between 88% and 99% racial and ethnic minority populations (non-white) in contrast to the citywide total of 53%.3 Furthermore, these areas are buffered by tracts that contain above-average levels (60-88%) of minority populations.

Finally, Map 3 shows the spatial distribution of unemployment levels in Boston, indicating a high concentration of unemployment in East Boston, Roxbury, Dorchester, and Mattapan, where levels reach as high as two to three times the citywide average of 8.64%.4

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2 Rugh, Jacob S. and Massey, Douglas S., 2010. “Racial Segregation and the Foreclosure Crisis.” American Sociological Review. 3 City of Boston and U.S. Census 2010. “Mayor Menino Announces Boston Population Continues to Grow.” March 22, 2011. http://www.cityofboston.gov/news/default.aspx?id=5030 4 Boston Redevelopment Authority. Boston by the Numbers: Land Area and Land Use; Demographic and Socio-economic Trends in Boston. www.bostonredevelopmentauthority.org/


! 8

Map 1: Boston Median Household Income

!!!!!!! !!!


! 9

Map 2: Boston Racial and Ethnic Minorities


! 10

Map 3: Boston Unemployment

!


! 11

2.3.2 Spatial Patterns: Foreclosures

In 2010, foreclosure petition activity, which was overwhelmingly concentrated in Roxbury, Dorchester, Mattapan, Roslindale, and Hyde Park in 2009, was becoming more dispersed throughout the city. Despite this fact, these same areas remained at the epicenter, with Dorchester, Hyde Park, and Roxbury containing the 5 most heavily petitioned census tracts in 2010.5 In addition, Graph 1 depicts that Dorchester, Hyde Park, Mattapan, and Roxbury were four of the top five districts experiencing foreclosure deeds in 2010. Along with East Boston, these areas had 76% of the city’s foreclosure deeds, despite containing 35% of the city’s residential properties.6

Graph 1: 2010 Foreclosure Petitions (% of total housing stock)

!Source: Boston Redevelopment Authority; Boston DND; Warren Group

A spatial analysis of the distribution of petition density in 2011 (Map 4) demonstrates the disproportionate concentration of foreclosure activity in the aforementioned areas – areas that also contain large minority populations with low to moderate median household income and above average levels of unemployment, as explained previously. This distinction becomes further pronounced in Map 5, a depiction of 2011 REOs, which are overwhelmingly concentrated in eastern Roxbury, western Dorchester, and central Mattapan.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!5 City of Boston, Department of Neighborhood Development. “Foreclosure Trends 2010.” December 21, 2010. 6 Ibid.

0.00%!0.20%!0.40%!0.60%!0.80%!1.00%!1.20%!1.40%!1.60%!


! 12

Map 4: 2011 Foreclosure Petitions

Source: Boston DND!

!


! 13

Map 5: 2011 REOs

Source: Boston DND!

2.4 BOWDOIN-GENEVA TRENDS

Located in central Dorchester, Bowdoin-Geneva is a primarily residential neighborhood defined by its two major thoroughfares, Geneva Avenue to the southwest, and Bowdoin Street, a key commercial corridor, running through the center of the neighborhood.


! 14

Bowdoin-Geneva is a low- to moderate-income neighborhood with a median household income of $43,542. However, there is some income variability within the neighborhood, with the eight primary census blocks within Bowdoin-Geneva ranging from $25,186 to $59,649. The neighborhood has a very high percentage minority population (93%), including 49% black or African American and 21% Hispanic or Latino. The neighborhood has a relatively high population density (47.18 persons per acre versus the city wide average of 19.98) due to the predominance of three-family dwellings commonly referred to as “triple-deckers.” Lastly, it is important to consider Bowdoin-Geneva’s 2010 unemployment rate of 15.94% (as compared to the citywide average of 8.64%), as unemployment is often times a key underlying condition influencing neighborhood stability.7,8

Graph 2: Bowdoin-Geneva Race & Ethnicity Graph 3: Boston Race & Ethnicity

!Source: Boston Redevelopment Authority; Census 2010

Bowdoin-Geneva has faced significant foreclosure activity over the last 6 years, with 311 properties receiving foreclosure petitions between 2006 and 2011. In 2010, Bowdoin-Geneva had a petition rate of 1.11%, placing it between Hyde Park and Dorchester, the two hardest hit areas of Boston that year.9 As shown in Graph 4, petition activity peaked in 2007 with 91 first petitions and has declined steadily since, reaching 12 in 2011.10 However, recent data demonstrates that foreclosure petitions across Massachusetts increased 32% between December 2011 and January, 2012, indicating that banks may now be moving ahead with previously stalled foreclosures. How this emerging trend affects Bowdoin-Geneva should be an important consideration moving forward.11

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!7 Boston Redevelopment Authority. Boston by the Numbers: Land Area and Land Use; Demographic and Socio-economic Trends in Boston. www.bostonredevelopmentauthority.org/ 8 Internal analysis using Esri and Census 2010 Data. Values for Bowdoin-Geneva are estimates based on data from the neighborhood’s eight primary census block groups. 9 Petition rate is equal to foreclosure petitions divided by total housing units. Estimate for Bowdoin-Geneva based on internal calculation of total housing units by property type (Boston Assessing Department occupancy codes). 10 For properties that received multiple petitions, the date of first petition is used as it indicates the initiation of the foreclosure process. 11 Grillo, Thomas. “Bay State Foreclosures Soar in January.” Boston Business Journal. March 1, 2012. sales>http://www.bizjournals.com/boston/real_estate/2012/03/bay-state-foreclosures-soar-in-january.html

7%!

49%!21%!

0%!3%! 14%!

6%!White!Alone!

Black!or!African!American!Alone!!Hispanic!or!LaAno!

American!Indian!and!Alaska!NaAve!Alone!Asian!Alone!

Other!Race!Alone!

Two!or!More!Races!

47%!

22%!

18%!

0%!

9%! 2%!2%!

White!Alone!

Black!or!African!American!Alone!!Hispanic!or!LaAno!Alone!

American!Indian!and!Alaska!NaAve!Alone!Asian!Alone!

Other!Race!Alone!

Two!or!More!Races!


! 15

Graph 4: Bowdoin-Geneva Foreclosure Petitions 2006-2011

!Data Source: Warren Group; Boston DND

Graph 5 depicts the breakdown of foreclosure petitions by residential property type. Triple-deckers make up almost half of all foreclosed units in the neighborhood (47%), indicating that a single foreclosure can often affect multiple households. For example, between 2006-2011, while there were 202 foreclosure deeds issued, almost twice as many households were impacted (402).

Graph 5: Bowdoin-Geneva Foreclosure Petitions 2006-2011


0!

5!

10!

15!

20!

25!

30!

35!

40!

Q1!Q2!Q3!Q4! Q1!Q2!Q3!Q4! Q1!Q2!Q3!Q4! Q1!Q2!Q3!Q4! Q1!Q2!Q3!Q4! Q1!Q2!Q3!Q4!

2006! 2007! 2008! 2009! 2010! 2011!

8%!

17%!

28%!

47%!

Single!Family!Dwelling!

TwoRFamily!Dwelling!

ResidenAal!Condo!

ThreeRFamily!Dwelling!


! 16

Furthermore, of the properties that faced foreclosure petition, an overwhelming majority (66%) were non-owner occupied (i.e. the owner of the property resided at a different address). Renters are particularly vulnerable in foreclosure situations, as they are often unaware of the commencement of foreclosure proceedings on their rental property or unit. While outreach efforts focused on homeowners, such as those offered by the Boston Home Center, are extremely valuable, addressing the destabilizing effect of foreclosures on renters is essential to the long-term health of neighborhoods like Bowdoin-Geneva. For further analysis of occupancy trends & foreclosure see Appendix I.

Due to high foreclosure activity, banks and servicers have played a prominent role in the ownership and management of property in Bowdoin-Geneva. For example, between 2009 and 2012, 86 properties in Bowdoin-Geneva were designated as real estate owned (REO). Of those 86 properties, over 50% of the properties were foreclosed by four main entities: Deutsche Bank (19%), Fannie Mae (15%), U.S. Bank (10%) and Wells Fargo (7%). More information about REO trends can be found in Appendix II.

Finally, of properties in Bowdoin-Geneva that were foreclosed upon and resold, an overwhelming majority experienced a substantial loss of value between original purchase date and resale date (date of foreclosure deed). Of the 177 properties sold for greater than $1 dollar between 2006 and 2011, the median decrease in value was a staggering $110,000. Furthermore, with a median of 853 days between original purchase date and date foreclosed, that value was lost very quickly. Such data hints at a scenario where many owners may have found themselves substantially ‘under water’ within a short period of ownership.

2.5 ANALYSIS

2.5.1 Clustering of foreclosure activity in Bowdoin-Geneva

A density map showing the location of foreclosure petition filings in the past three years (Figure 2) shows that there is a dense cluster of petitions in the southern center of the neighborhood, between Topliff Street and Geneva Avenue. This hotspot extends through the neighborhood east of Bowdoin Street.

Map 6: Foreclosure Petition Hotspots (2009-2012)

!


! 17

!

!

!

!

!

!

!

!

!

!

!

Map 6: Foreclosure Petition Hotspots (2009-2012)

!

2.5.2 Clustering of crime and deterioration in Bowdoin-Geneva

An analysis of the crime data and 311/Mayor’s Hotline data also provides a look at quality-of-life issues in this foreclosure-hit neighborhood. Crime, clearly, translates to a reduced quality of life; in addition, the Mayor’s Hotline data can be analyzed to provide a look at instances of neighborhood disorder. Specifically, data from the Mayor’s Hotline consists of the service requests filed for graffiti, street cleaning, trash removal, snow plowing, illegal dumping, poor conditions of property, illegal vending, abandoned vehicles, and similar neighborhood concerns. By extracting those calls which correspond to an unsightly or deteriorated neighborhood environments, we can get a sense of the degree of “broken windows” issues in the area.

As the theory goes, broken-windows issues, such as graffiti, vandalism, disrepair, and petty crime can be a precursor, if left unchecked, to further deterioration and/or an escalation in crime.12 Locally, the theory has been tested in Lowell, Massachusetts, targeting specific crime hot spots for clean-up, streetlight repair, enforcement against petty crime, and homeless aid. These spots showed a reduction in calls to police when compared to the control group of crime hot spots. 13

With this in mind, we mapped hotline calls for the following services in Bowdoin-Geneva between January 1, 2011 and mid-spring 2012: abandoned vehicles, graffiti removal, illegal dumping, improper storage of trash, poor conditions of property, and sign repair. A total of 219 calls have been recorded in the neighborhood for these categories. As seen in Figure 3, there is a significant need for graffiti removal throughout Bowdoin-Geneva. Additionally, poor conditions of property have been logged in a dense cluster along Coleman Street and Bellevue

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!12 James Q. Wilson and George L. Kelling. "Broken Windows: The police and neighborhood safety" The Atlantic. March 1982. 13 Johnson, Carolyn Y. (2009-02-08). "Breakthrough on 'broken windows'". The Boston Globe. http://www.boston.com/news/local/massachusetts/articles/2009/02/08/breakthrough_on_broken_windows/. Retrieved 2009-02-20.

The Stories of Recent Foreclosures, Told Through Public Records

In Massachusetts, the state Registry of Deeds makes information on home deeds, mortgages, and orders of notice, among other records, available for public access. Combing through these records, we took a look at documents relevant to the 17 homes in Bowdoin-Geneva that were served Orders of Notice in 2011, in order to understand some of the narratives behind each foreclosure story.

First, the time in which the home was initially purchased varied widely. Some dated back only a year – i.e. the property was bought in 2010. But others had been a home for much longer, dating back to the early 2000s, or, in one case 1988.

We also observed variance in the total mortgage amount. On some homes, there was a significant gap between the mortgage amount and the closing price, presumably indicating a down payment. But there were four properties in which there were multiple mortgages, issued on the date of closing, that totaled 100% or higher of the closing price. This, combined with the fact that multiple properties were mortgaged with adjustable rate riders, indicates highly questionable lending practices.

Finally, we observed that most of the homes that were served Orders of Notice in the second half of 2011 had not yet gone through auction, indicating a process that is many months in length.


! 18

Street, and problems with abandoned vehicles are clustered along Draper St. For more analysis on 311 calls, see Appendix III.

Map 7: Selected Mayor’s Hotline Calls since January 2011

!

!

In addition to 311 calls, we mapped all crimes in Bowdoin-Geneva in which the Boston Police Department were involved. We looked at this crime first at an aggregate level, including over 100 categories of reported crime ranging from assault and battery to violation of a restraining order, and then disaggregated across various crime types of interest in search of meaningful patterns. Recent criminological research suggests that there is significant clustering of crime in micro places or ‘hotspots’ (Braga, 2011). Wanting to explore whether this was happening in


! 19

Bowdoin-Geneva we mapped the density of all crimes responded to by the Boston Police department in the neighborhood between 2009 and 2011.

As maps 8, 9, and 10 show, there are a few high-density crime hotspots in the neighborhood. The most consistent hotspot is at the center of the neighborhood where Olney, Norton & Bowdoin converge. We also notice that that at the western boundary of the neighborhood, where Bowdoin & Olney converge there is a hotspot that was particularly crime-ridden in 2010.

When we disaggregate the Boston Police crime data by crime types different spatial patterns begin to emerge. Increasing foreclosure rates can lead to increases in crimes such as theft, vandalism, and arson.14 Maps 11 and 12 show the density of vandalism & arson in the Bowdoin-Geneva neighborhood in 2010 and 2011.

Note that within a one-year period, the location of hotspots for these particular crimes changes significantly. Vandalism and arson go from being concentrated in the lower half of the neighborhood to slightly above Bowdoin. The area to the Southwest, where Geneva & Olney meet, remained a hotspot for vandalism & arson from 2010 to 2011. In exploring the relationship between crime & foreclosures it will be necessary to take these disaggregated crime patterns into account. !

2.5.3 Impact of foreclosure on crime, deterioration and property values

It is one thing to posit a relationship between crime and foreclosure and another thing to argue for a causal relationship flowing from foreclosure to crime. Physical deterioration, lack of collective concern, social disorder, residential turnover, and prolonged vacant space can all be seen as precursors to increased criminal activity. The challenges in assessing causation rely in eliminating the possibility of reverse correlation and considering the role of other explanatory variables. The former could be addressed using both point-data for foreclosures and crime within and across neighborhoods.15 As we were unable to obtain this point data at the city level, we only had the expectation of identifying correlations between foreclosures and crime in Bowdoin-Geneva.

Exploring the relationship between foreclosures and 311 calls, we saw, as Map 13 shows, that there is no significant clustering of 311 hotline calls within 150 feet of foreclosure activity.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!14 National Institute of Justice. Mortgage Fraud, Foreclosures, and Neighborhood Decline Meeting. Spring 2009. http://www.nij.gov/maps/foreclosure-crime-meeting/welcome.htm 15 Ingrid Gould Ellen, Johanna Lacoe and Claudia Ayanna Sharygin. “Do Foreclosures Cause Crime?” June 2011. NYU Wagner School and Furman Center for Real Estate & Urban Policy.


! 20


! 21


! 22

Map 13: Clustering of 311 hotline calls near foreclosure activity

!

More information on overlapping 311 calls & foreclosure hotspots can be found in Appendix IV.

Regarding crime incidences responded to by the Boston Police Department, we are able to notice some spatial overlap between foreclosure petitions and incidents of theft and robbery. As Maps 14 and 15 illustrate, in 2008, foreclosure petitions were at highest densities at the intersection of Hamilton and Speedwell and slightly farther down towards Draper Street. Two years later, one of the major vandalism and arson hotspots was also located in this area. Appendix V discusses observations of the built environment in these hotspots.


! 23

Foreclosures in Bowdoin-Geneva Authors: Rance Graham-Bailey, Nikhil Nadkarni, Matthew Steyer, Nse Umoh

!

24

5 !!

2.5.4 Financial impact of foreclosure on the city

A recent research study by two Federal Reserve Economists and Fannie Mae estimates that properties within 1/16 of a mile of an REO property will sell at 3.3% less than what would otherwise be expected.16 Using this value and the assumptions that assessed property values correspond proportionally to sale price and that commercial and residential property values follow the same trends, we can identify a building’s property tax rate and its assessed value to estimate the lower-threshold of how much tax revenue is lost to the city.

From this analysis, we have estimated that REO properties in Bowdoin-Geneva cost the city a minimum of $296,297 for residential ($312 on average), $17,214 for commercial ($1,324 on average) and $313,511 overall. Given that the methodology does not disaggregate the effects of the multiple years a property may have been in REO, one could reasonably assume that this captures the aggregate fiscal impact of the 2011 and 2012 REO properties.

Summary of Fiscal Impact Methodology

Phenomena Available Data/Approximation Formula Property Tax Assessment after Reduction Property Value

Tax Assessed Value X

Tax Payment to City Foregone 3.44% reduction R: X / (1-0.0344)

C: X/ (1-0.0344)

Sum of Foregone Tax Revenues Sum of properties within 1/16 mile of a REO property

R1 + R2 + C1 + C2...

The subsequent sections of this report propose and evaluate new and existing mechanisms for tackling the foreclosure crises in Bowdoin-Geneva and the city more broadly. These recommendations are rooted in the understanding of demographic trends and the analysis of foreclosure and its impact on crime, deterioration, and city finances laid out in this chapter.

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!16 Kristopher Gerardi, Paul S. Willen, Eric Rosenblatt and Vincent W. Yao. “Foreclosure externalities: Some new evidence.” 27 February 2012. Presentation by Kris Gerardi, March 2, 2012, at the University of Connecticut.

Foreclosures in Bowdoin-Geneva Authors: Emily Mytkowicz, Marcie Parkhurst, Ellen Ward, Daniel Yadegar

25

CHAPTER 3: Existing Forms of Foreclosure Response

3.1 CONTEXT

In spite of well-established localized efforts, the Boston foreclosure crisis continues to grow. Boston received over 1,500 petitions for foreclosure in 2010.1 Addressing the scale of foreclosed deeds, let alone the existing backlog of foreclosure petitions that await processing, is simply beyond the capacity of existing municipal and organizational infrastructure. Boston Community Capital’s SUN Initiative for example, backed by $50 million of investor capital, only aims to handle 10 mortgages a month.2 The City of Boston, with $21+ million in funds from the federal government’s Neighborhood Stabilization Program (NSP), is working to place new homeowners in vacant housing but does little to protect existing homeowners. The response, simply put, is not enough.

Civic activism surrounding foreclosures is impressive. CityLife/VidaUrbana has proven essential in the capacity of organizing a strong network of foreclosure victims and their allies. The organization strongly advocates principal reduction. The Harvard Legal Aid Bureau also provides free legal advice and informs owners and tenants of their rights, often helping to prolong the foreclosure process by several months. The group is active in an advisory capacity as well as an organizing capacity, with weekly door-to-door canvassing playing a crucial part in the consistently full room during CityLife meetings.

But banks are loath to negotiate principal reduction before a foreclosure is processed for fear others will demand a similar write down. Even where write-downs may seem appropriate to ‘cure’ a troubled mortgage, banks have proven unwilling to document their losses.

And given more time to cure delinquency, a positive outcome typical of the Harvard Legal Aid Bureau’s process, recent research is finding that borrowers are just as likely to default on payments and fall into foreclosure as they were before!3 A 3-month extension on payments, for example, does little good when a homeowner remains unemployed.

The challenges inherent to Boston’s most comprehensive form of existing foreclosure response, namely the SUN Initiative, include:

1) Identifying eligible homeowners for participation in the SUN Initiative 2) Increasing the pool of candidates eligible to participate in the SUN Initiative 3) Diversifying the SUN Initiative to provide options for renters

1 City of Boston, Department of Neighborhood Development. “Foreclosure Trends 2010.” December 21, 2010. P. 1. 2 Dewan, Shaila. “Lender With An Unusual Offer: A Second Chance.” New York Times. March 21, 2012 <http://www.nytimes.com/2012/03/22/your-money/program-in-massachusetts-helps-those-facing-foreclosure.html?src=recg> 3 Gerardi, Kristopher, Lauren Lambie-Hanson, and Paul S. Willen. “Do Borrower Rights Improve Borrower Outcomes? Evidence from the Foreclosure Process.” Federal Reserve Bank of Boston. Public Policy Discussion Paper No. 11-9.

Foreclosures in Bowdoin-Geneva Chapter 4: Existing Forms of Foreclosure Response

26

3.2 CLIENT SCREENING

Challenge #1: Identifying eligible homeowners for participation in the SUN Initiative

BCC’s current outreach strategy is broad in scope, leading to inefficiencies in the screening process. BCC currently relies on its community outreach partner, No One Leaves (a partnership of City Life/Vida Urbana, Harvard Legal Aid Bureau, and Greater Boston Legal Services) to identify potential clients through their weekly meetings, direct action events, and legal assistance services. Currently, though, only 5-12% of initial applicants ultimately participate in the program.4 BCC staff report that the initiative has the capital and staff capacity to support a greater number of deals, but they are challenged to find better ways of identifying potential clients.

Strategy: Partner with nonprofit tax preparation services to screen clients for SUN Initiative eligibility

The Boston Earned Income Tax Credit Coalition provides low-income families with free financial services, including assistance preparing their income taxes. Volunteer tax preparers have access to families’ financial information, including annual income and employment status. Brian Robinson, Operations Manager for the EITC Coalition, indicated that his organization would be interested in partnering with BCC to help identify SUN Initiative-eligible families.

Sharon Shepard, the Managing Director of BCC’s Venture Fund, which operates the SUN Initiative, agrees that EITC preparers may be helpful in identifying families with steady sources of income, but cautions that without accurate information on current home value, it will not be possible for tax preparers to clearly identify SUN Initiative-eligible households.

The FY11 federal income limits on EITC eligibility provide an opportunity to address this challenge. Given that any family that is found to be eligible for the EITC would likely be ineligible for the SUN Initiative (because household income would be too low to support a market-rate mortgage), EITC preparers could refer higher-income families to BCC to learn more about the SUN Initiative.

3.3 A SOFT SECOND

Challenge #2: Increasing the pool of candidates eligible to participate in the SUN Initiative

Another challenge to BCC’s ability to serve more clients through the SUN Initiative is the strict financial eligibility test that households must pass to be eligible for assistance. Specifically, applicant households must show that their monthly housing expenses (principal and interest on the new mortgage plus taxes and insurance) will not exceed 38% of their gross monthly household income. In addition, when a household’s other debt payments are added to household costs, this amount must not exceed 48% of monthly household income. Many low-income borrowers struggle to meet these standards.

Strategy: Second Mortgage Financing through the Neighborhood Stabilization Program

The Neighborhood Stabilization Program (NSP) allowed many cities to use a portion of the capital to offer subordinate financing for purchasers of foreclosed homes. In a survey of the various loan programs, eligibility and structure vary across cities, but all target homebuyers at or below 120% of AMI and provide a financial incentive either in the form of a forgivable loan or below-market interest payments.

4 Sharon Shepard, Managing Director of Boston Community Venture Fund. Phone Interview. March 9, 2012.


27

Los Angeles created a “Walk-in Program” to assist low and moderate-income homebuyers purchase foreclosed homes. Working with lenders, realtors and homebuyer educators, the city provides eligible homebuyers a soft second mortgage of up to $75,000 underwritten by the Los Angeles Housing Department to make their home affordable. The City will also provide up to $50,000 to assist homebuyers with rehabilitation of the home.

Minneapolis/St. Paul developed a down-payment assistance program, Minneapolis Advantage, which provides smaller grants of $5,000-$30,000 to help residents buy foreclosed homes. The loan can be used for up to 50% of the required down payment and/or be used to cover origination fees, credit reports, attorney or appraisal fees. The goal is to make a homebuyer’s front-end ratio not exceed 29% of monthly gross income.

Boston, through the Boston Home Center, offers a similar product but has requirements that could be adapted to broaden the target population. The current program requires borrowers to have a credit score (FICO) of 660, have less than $75,000 in assets, and not own a home. While these requirements are understood, we feel the City could reach a larger population of potential homebuyers if the criteria were expanded to include current homeowners who have a demonstrated ability to maintain a home, and lower credit score requirements to allow households who have lost their homes to foreclosure or short-sale to remain in their homes. A foreclosure or short-sale has the potential to negatively impact a borrower’s credit score by 80 to 160 points.5 In order to accommodate these households, the Federal Housing Agency reduced its minimum credit requirement from 620 to 580 to their 3.5% down payment assistance and insurance program. We feel the City should follow FHA’s lead to reach a broader group of potential buyers and allow those who are in their home to remain.

Keeping borrowers in their homes was the primary goal of Boston Community Capital’s SUN Initiative. While the program has helped several homeowners stay in their homes by reducing their monthly principal and interest payments, it too has been limited in its ability to find eligible borrowers. To date, the SUN Initiative has modified 120 mortgages, much fewer than expected.6The biggest barrier to eligibility has been the 38% front-end ratio. In order to achieve it, borrowers need a much larger reduction in first mortgage payments, which could be done by adding a second-mortgage through the City.

For this reason, we propose a pilot program that would allow potential SUN Initiative clients to access the City’s second mortgage financing to purchase foreclosed homes in Geneva-Bowdoin. The City would set aside $650,000 for ten SUN Initiative clients, providing a $65,000 soft second mortgage thereby reducing the amount of the first mortgage. This would achieve both BCC’s goals of keeping homeowners in their homes as well as the City’s goal to maintain stability in the neighborhood by mitigating the negative impacts of vacant foreclosed properties. This proposal would require coordination between BCC and the City, but would make strides toward both entities achieving their intended goals.

3.4 BULK PURCHASE

Challenge #3: Diversifying the SUN Initiative to provide options for renters

There are two key reasons why a relatively large-scale rental conversion initiative would be beneficial to residents of the Bowdoin-Geneva neighborhood.

First, despite BCC’s innovative model and its success in achieving significant principal reductions and favorable interest rates, homeownership is simply not a financially viable option for many residents of the Bowdoin-Geneva neighborhood. From 2006 to 2010, only 27% of foreclosure deeds in Boston have been owner-occupied7 - the crisis in Geneva Bowdoin, as in the rest of the city, is largely one borne by renters. In addition, median household

5 http://money.cnn.com/2010/04/22/real_estate/foreclosure_credit_score/ 6 Boston Community Capital Monthly Newsletter, March 2012 7 City of Boston, Department of Neighborhood Development. “Foreclosure Trends 2010.” December 21, 2010. P. 8.


28

income in this area was approximately $42,000 in 2010, or about 50% of area median income. Given the SUN Initiative’s current underwriting criteria, these households qualify for $156,000 mortgages – significantly less than what is needed to purchase a home in Geneva Bowdoin.8 For these low-income families, renting is a better option.

Second, many existing renters face the risk of displacement if their landlords, who live in the same building, lose their homes. By converting to rental units many of the multi-family homes that are already in or at risk of foreclosure, a bulk sale and rental conversion initiative could help keep existing renter households in their homes.

Strategy: BCC adopts a bulk purchase strategy similar to those adopted by private equity real estate firms in other markets, purchasing foreclosed properties and converting them to rental units

In several places around the country, private real estate investment firms have begun buying up foreclosed homes and managing them as rental properties as they wait for the real estate market to recover. This strategy provides a steady cash flow to the investment firm while expanding the supply of market rate rental housing in areas hard hit by the foreclosure crisis. The Wall Street Journal recently reported, “Economists at Goldman Sachs estimate the annual yield on an investment on rental property nationwide averages about 6.3%.”9. Since 2005, 86% of foreclosed properties in Boston have become REO.10

Case%Study%I:%American%Residential%Properties%(Scottsdale,%AZ)%

American Residential Properties (ARP) has acquired more than 450 single-family properties – most through short-sales – throughout the greater Phoenix metro area. ARP’s long-term buy and hold strategy leases properties to economically stable households, including former owners, for five to seven years. ARP, which manages the properties internally, screens households for evidence of stable employment, income flow, and consistency in utility and car payments. Participating households have seen their monthly housing expenditures drop from 50 to 20 percent of income. Data on ARP’s expected returns is not publicly available, but the company says it plans to acquire an additional 400 homes.11

Other real estate investment firms active in the acquire-and-rent industry include Waypoint Real Estate Group (Oakland, CA), Capital Management LLC (Santa Ana, CA), Starwood Capital Group LLC, and Apollo Investment Management (Chicago, IL).12

Case%Study%II:%FHFA%REO%Initiative%

The acquire-rent-hold model has proven interesting and effective enough in the private market to capture the attention of the Federal Housing Finance Agency. Last month, FHFA announced it was moving forward with an REO initiative designed to dispose of some of the 180,000+ GSA-backed foreclosed homes in the U.S. The initiative will “allow qualified investors to purchase pools of foreclosed properties with the requirement to rent the purchased properties for a specified number of years.” FHFA launched the initiative’s pilot phase in late February,

8 Estimate assumes 6.5% fixed rate interest, 30 year term, and 20% premium on sale price for borrowing from BCC. (Total mortgage = $187,875, of which $31,312 is purchase premium. 9 Nick Timiraos, Robbie Whelan, and Matt Phillips. “Wall Street Keys On Landlord Business.” WSJ. March 19, 2012. < http://online.wsj.com/article/SB10001424052702303863404577285791317719200.html?mod=googlenews_wsj> 10 City of Boston, Department of Neighborhood Development. “Foreclosure Trends 2010.” December 21, 2010. P. 5. 11 Emily Salomon. “Converting Short Sales into Scattered-Site Rentals in Phoenix: A Case Study of American Residential Properties, Inc.” Center for Housing Policy. January 2012. 12 Edward Robinson. “Private Equity’s Foreclosures for Rentals Net 8%: Mortgages.” Bloomberg. March 13, 2012. < http://www.bloomberg.com/news/2012-03-13/private-equity-buying-u-s-foreclosures-for-hot-rentals-net-8-mortgages.html>


29

2012; it is currently accepting bids on close to 2,500 foreclosed properties in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and Florida.13

3.5 BULK PURCHASE: RECOMMENDATIONS FOR BCC

A key challenge with the private investment model described above is the risk that low- and moderate-income families will be displaced from their homes in great numbers when the housing market returns and investors determine it is time to sell off their inventory. An obvious opportunity to mitigate this risk is to channel private capital through a socially-responsible investment vehicle. BCC, for example, is well-positioned to structure and lead a bulk sale and rental conversation initiative in Boston, given its social mission, its proven ability to attract socially-minded private investors, its existing relationships with local banks and lenders, and its track record of designing innovative community development initiatives.

The financial model in the Appendix reviews the mechanics of how a bulk sale and rental conversion initiative might work. Below are the steps necessary to operationalize such an initiative.

1. Fundraising. The estimated cost to acquire the 115 REO homes in the Geneva-Bowdoin neighborhood is $18.6M. The total development cost, including transaction and rehabilitation costs, is estimated at $23.6M. Given the inventory’s projected cash flow, BCC could secure a $10M loan, leaving a financing gap of approximately $13.6M. The City of Boston may have unspent NSP funds (or other monies) that could be used to help seed the fund and create a blended risk rate that would help attract private investors. The City may also have project-based rental housing vouchers that could be used to improve project cash flow while ensuring access for very low income families. Finally, BCC could consider a more modestly scaled program that targets 3-5 clusters of geographically proximate foreclosed homes, rather than buying up the entire inventory. This would allow the organization to reduce its up-front costs and risks while still helping to arrest the cycle of decline in Geneva-Bowdoin.

2. Acquisition. At this time, of the 86 real estate owned properties, over 50% of the properties were foreclosed by four main entities: Deutsche Bank (19%), Fannie Mae (15%), U.S. Bank (10%) and Wells Fargo (7%). By leveraging its existing relationships with local lenders and targeting properties appropriately, BCC may be able to negotiate bulk sale terms that are more favorable than the individual sale prices banks have been willing to agree to. According to the Wall Street Journal, “banks selling through regular real-estate listings are getting more than 90 cents on the dollar of their asking price,” indicating that bulk sales would result in at least a 10% reduction in current prices, and possibly significantly more. 14

3. Management. Given that BCC has neither the capacity nor the expertise to handle property management for a scattered site rental-housing portfolio, it must identify a trusted partner to perform this critical task. The property management firm would be responsible for initial lease-up, so the partnership should be in place prior to property acquisition. BCC could reach out to established multifamily housing managers in the local area, such as Winn Residential.

4. Hold and sell. A critical component to the structure of a bulk sale and rental conversation initiative is the investor’s exit strategy. Private real estate investors have acquired foreclosed properties with the explicit goal of realizing large returns when the housing market recovers and they can sell the properties for profit; a process that investors expect to take 5-7 years. As a mission-driven CDFI, BCC may wish to pursue a different exit strategy that would allow for at least some preservation of affordability. For example, it could limit the percentage of its portfolio that will be sold at market rate upon exit.

13 Justin T. Hilley. “FHFA launches pilot REO property sales.” HousingWire. < http://www.housingwire.com/article/fhfa-launches-pilot-reo-property-sales> 14 Nick Timiraos, Robbie Whelan, and Matt Phillips. “Wall Street Keys On Landlord Business.” WSJ. March 19, 2012. < http://online.wsj.com/article/SB10001424052702303863404577285791317719200.html?mod=googlenews_wsj>

Foreclosures in Bowdoin-Geneva Authors: Rachel Alonso, Jenny Larios Berlin, Scott Berzofsky, Christine Curella, Paula Winicki

30

CHAPTER 4: The Community Land Trust Model

While foreclosures are clearly a challenge for Bowdoin-Geneva, the housing crisis also presents an opportunity to pilot a Community Land Trust (CLT) to mitigate negative impacts on the neighborhood in the short-run and sustain affordable housing for the future. CLTs can significantly reduce the cost of homeownership for low- and moderate-income residents and institutionalize sustainable finance, enabling the City to preserve affordable housing in the long-run and deepen the impact of finite housing subsidies.

Below is an overview of the benefits a CLT can provide, as well as opportunities for the City to enable and support the development and management of one. To assess the viability of a CLT in Bowdoin-Geneva, financing, governance, management, and land acquisition strategies are also examined. Finally, a potential model demonstrates how a CLT could operate in the neighborhood.

4.1 WHAT IS A COMMUNITY LAND TRUST?

A CLT is a non-profit corporation that acquires and develops properties for low- and moderate-income households, preserving affordability by retaining ownership of the land, which is leased to the homeowner through a long-term ground lease, usually 99 years. This separation of land ownership and homeownership is what allows the home to remain affordable.

As part of the deal, the homeowner agrees to take a smaller share of the home’s appreciated value upon resale. By retaining ownership of the land, the CLT ensures permanent affordability and passes it on to subsequent low- and moderate-income homebuyers. Thus, the model both improves residential affordability and provides some equity to individual homeowners, while improving neighborhood stability and stewarding public resources.

4.2 BENEFITS OF A COMMUNITY LAND TRUST

A CLT’s primary benefit is creating sustainable homeownership for low- and moderate-income households, thus meeting municipal, community, and individual needs. The ground lease agreement grants homeowners a fair return on their investment in the house and protects affordability for future homeowners by restricting resale to income-eligible households. Thus, this model produces a stock of permanently affordable homes that continue to be affordable even when resold, with no additional subsidies required.

The CLT model can also provide affordable rental units, which is particularly important in the context of Dorchester. A rental-oriented CLT can better meet the needs of and retain low-income households that might not qualify for mortgage financing or be able to commit to ownership. Examples of CLTs that provide rental units are Cooper Square in New York, Burlington Community Land Trust (Burlington, Vermont) and Northern California Land Trust (Berkeley, California).

The affordability of CLT rental units may also allow for increased household savings, thereby creating a pathway to homeownership. This responsible and sustainable means of homeownership can address the systemic challenges faced by vulnerable and underserved communities more effectively than the traditional and predatory lending methods used in the 1990s and early- to mid-2000s.

Foreclosures in Bowdoin-Geneva Chapter 4: The Community Land Trust Model

31

4.2.1 Enabling Sustainable Homeownership in Vulnerable Communities

As we try to bring back to the market the foreclosed homes plaguing neighborhoods, we need to develop safer ways to create responsible homeownership that benefits both the individual homeowner and their community. Recent history has shown that the real-estate industry may not always work in buyers’ best interests.

CLT homeowners have not been as negatively impacted by the foreclosure crisis as conventional homeowners. The Lincoln Institute of Land Policy published a study showing that only 1.30% of the mortgage loans held by CLT homeowners were delinquent at the end of 2010, while the delinquency rate for conventional homeowners was 8.57% according to the Mortgage Bankers Association’s National Delinquency Survey (MBA).1 Moreover, at the end of 2010, only 0.46% of CLT homeowners were involved in foreclosure proceedings, while conventional homeowners were experiencing a foreclosure rate of 4.63%.

In the short term, a CLT could help improve the present conditions in neighborhoods such as Bowdoin-Geneva that have been severely affected by the foreclosure crisis, while also avoiding future crises by delivering housing that is permanently affordable.

4.2.2 Retaining and Recycling Public Subsidies for Affordable Housing

Many programs and subsidies focus on financing first-time homebuyers without considering if the new homeowner will be able to remain in that home in the long-run. Unfortunately, the recent housing crisis has shown that many first-time homeowners, particularly those with lower incomes, cannot afford to purchase traditional, market-rate homes.

In 2006, the City of Chicago implemented a citywide CLT, which offers participating homeowners a “network of support.”2 Support includes pre-purchase counseling offered at community-based organizations, pre- and post-purchase workshops, resale assistance, and default/foreclosure prevention assistance. Extra services such as these can be critical for ensuring success for low- and moderate-income first-time homebuyers.

The CLT establishes mechanisms to enforce and monitor occupancy and control for eligibility. Occupancy controls prevent predatory lending and the negative impacts it has on those borrowers. Eligibility controls can prevent the acquisition of property for speculative purposes, which will not put an end to the vacancy issue and its negative impact on the neighborhood.

Moreover, as we have seen in this foreclosure crisis, when a homeowner loses a house to foreclosure, both equity and government subsidies vanish. For an example of this process, please refer to Appendix 7.

4.3 OPPORTUNITIES FOR A COMMUNITY LAND TRUST IN BOSTON

The number of foreclosed homes in Bowdoin-Geneva and the presence of strong community-based organizations offer an opportunity to pilot a CLT in the neighborhood. Based on case studies of CLTs in other cities, recommendations and opportunities to enable and support the management, financing, and operations of a CLT are provided below.

1 Emily Thaden. 2011. “Stable Homeownership in a Turbulent Economy: Delinquencies and Foreclosures Remain Low in Community Land Trusts.” https://www.lincolninst.edu/pubs/dl/1936_1257_Thaden%20Final.pdf 2 City of Chicago, “Chicago Community Land Trust for Buyers,” http://www.cityofchicago.org/content/city/en/depts/dcd/supp_info/chicago_communitylandtrustforbuyers.html


32

4.3.1 Managing a CLT

CLTs have been launched across the country by community-based organizations as well as municipalities and other government entities. There are multiple organizational and management considerations in developing a CLT, and based on the experiences of other CLTs and the existing capacity of community development organizations in this neighborhood and across Boston, building a CLT into an existing organization is recommended.

● CLT as a program within a CDC: Community Development Corporations in Dorchester have the capacity to develop and manage affordable rental units and homeownership initiatives. A CDC could add CLT units to its housing portfolio and manage them without changing the organizational structure or management. A local non-profit, Dorchester Bay Economic Development Corporation (DBEDC), has been very active in purchasing, rehabilitating, and selling foreclosed homes in Bowdoin-Geneva and other areas of Dorchester. The City could seek to support DBEDC or a similar local organization in the initial creation of a CLT.

Essentially, the difference between the CLT properties and the existing stock of housing is that CLT units would have resale restrictions and alternative ground lease arrangements, but would report under the broad umbrella of the CDC structure and management. Alternatively, a CDC could add a CLT initiative or “arm” to its operations in order to acquire, rehabilitate, and manage the CLT properties. This would be a separate entity for the CDC (though still accountable to the CDC’s Board of Directors)

● CDFI-led CLT: A Community Development Finance Institutions (CDFI) is another player active in community development that could manage a CLT. For instance, Boston Community Capital (BCC) could potentially be a partner in the finance, development, and management of a CLT. BCC has already provided significant resources to deal with the foreclosure crisis and develop affordable housing in Dorchester. BCC or another regional CDFI could provide funding for a CLT (see section 4.3.3 for more details) and/or support the development and management of a CLT.

The Housing Fund, Inc., in Nashville, Tennessee, is a CDFI that, after financing affordable housing development, realized its capacity to finance and manage a CLT. The Housing Fund created a nonprofit within its organization to lead the development of housing units and find and support suitable homeowners.

4.3.2 Land Acquisition and Disposition Strategy

The City of Boston can help to start a CLT’s project by donating or selling city-owned land and buildings and/or by aiding the CLT in purchasing REO properties at a discounted price. The City of Boston may build from some of the following opportunities to enable the land assembly necessary to launch a CLT.

● Land donations: The vacant parcels held by Boston’s Department of Neighborhood Development (DND) in Bowdoin-Geneva could be an initial investment for the development of a CLT. The City could also donate properties acquired through tax foreclosures.

● REO purchase: Purchasing Real Estate Owned (REO) properties via a bulk or short sale agreement with a bank is another method for catalyzing a CLT. These properties should be acquired from the financial institution that owns the greatest number of properties, as this will allow for greater choice in locations and price ranges. In Bowdoin-Geneva, Deutche Bank owns 16 properties and Fannie Mae owns 13.


33

For example, in 2009 the Oakland Community Land Trust used $5 million in Neighborhood Stabilization Program (NSP) funds to acquire over 60 REO homes, which are being renovated and resold at an affordable price to new homebuyers earning between 50% and 80% of the area median income ($45,150 - $64,400 per year for a family of four, in Oakland).

4.3.3 Leveraging Community Finance

CLTs are typically financed by public grants, property contributions, and volunteer labor. CLTs have also been formed with city partnerships, such as in Burlington, VT and the Dudley Street Neighborhood Initiative in Boston.

● First-Time Homebuyer Finance: Boston provides $60,000 to first-time home buyers who are looking to buy foreclosed properties in Dorchester. This financing targets individuals or households that may have previously faced economic barriers to homeownership. However, such increased accessibility does not address homeownership in the long-run, as the home may be foreclosed upon if the owner is unable to maintain the mortgage payments. Furthermore, as market rates will inevitably increase property values, low-income families are likely to require far more than $60,000 to purchase a home.

● CDFIs: We see an opportunity for a CLT in the Bowdoin-Geneva neighborhood to be financed by a Community Development Finance Institution. According to the CDFI Coalition, there are 27 CDFIs in Massachusetts. In Boston and neighboring cities alone there are 15 CDFIs. Among them is Boston Community Capital (BCC), which has been actively supporting foreclosed families by financing re-purchases at market rates through its SUN Initiative. They have had marginal success because many potential recipients of their financing do not meet eligibility requirements. Another potential partner is the Institute for Community Economics (ICE), which has for over 30 years used its revolving loan fund to finance permanently affordable housing across the U.S. ICE’s website advertises that it lends to homeownership-based CLTs.

● Reduction of property tax assessments: Following a best practice established in Chicago’s city run CLT, we recommend that Boston reduce tax assessments on properties located within a CLT. The rates should be based on the resale value of the home, rather than the market value of the property. This would benefit low- and moderate-income households because it would make the land more affordable to maintain and hence reduce the risk of foreclosure.

Once the CLT is actively managing and caring for previously foreclosed or vacant property, the assessed value of the housing stock in Bowdoin-Geneva will increase. Luckily, due to the unique CLT model, homeownership can still be a reasonable and viable goal for low income families. The civic value of increased homeownership while ensuring low foreclosure in the future makes the CLT model an important component for any affordable housing portfolio. As a result, the initial outlay from the city will prove to be a minimal and sound investment in the community's future growth.

The neighborhood will continue to deteriorate unless the vacant and blighted properties are not appropriated for a CLT to create a long-term sustainable and affordable community. Furthermore, the city will benefit from the increased private investment this will attract. Overall, not only will the city and the CLT reap benefits, but so will other homeowners via increased home values.

● Federal funding sources: Among federal programs, Community Development Block Grant (CDBG) and HOME funds have provided the most financial support for CLTs.3 Since the City of Boston receives CDBG

3 Burlington Associates, “Starting a CLT - Chapter 7, Funding,” http://www.burlingtonassociates.com/resources/archives/7%20Funding%200107.pdf


34

funds every year, a percentage could be earmarked to support the CLT. To receive HOME funding, the CLT must be designated as a Community Housing Development Organization (CDHO).

Rental-oriented CLTs could use Low Income Housing Tax Credits (LIHTC) and Historic Preservation Tax Credits. Other potential HUD-sponsored funding options include Housing Opportunities for People With Aids (HOPWA) and Section 108 loan guarantees.

The Federal Home Loan Bank’s Affordable Housing Program (AHP) has financed CLTs across the country.

Additional financing options include loans from private financial institutions for both development and mortgages, the Massachusetts State Housing Finance Agency, Tax Increment Financing, and private foundational support.

4.4 POTENTIAL MODEL FOR A COMMUNITY LAND TRUST

Building on the institutional and financing mechanisms previously discussed, an analysis using existing programs in Bowdoin-Geneva is undertaken to demonstrate, at the household scale, that a CLT is possible and would have community and household impact. Below is an example of how this would operate:

Step 1 A home is purchased at a reduced value, for $200,000, either through a bulk sale or an individual REO purchase

Step 2 Assume the separation of value between land and the physical structure, which is a hallmark of the CLT model

2a: 20% land value, held by the CLT ($40,000)

2b: 80% home value, held by the owner ($160,000)

Step 3 Subtract the available public payment/subsidy of $25,000, resulting in $135,000

Step 4 Add 10% of value as a financing cushion ($148,500)

If we apply the $60,000 first time homebuyer funding, and add a small additional subsidy of $5,000, this home could be a responsible and sustainable investment for a household with an annual income of $33,200, with total monthly payments of $1,050.

Contrast that model to the home ownership and finance structure of that same $200,000 house, without the CLT. With a purchase price of $187,875, and total monthly payments of $1,330, this home requires a household income of $42,000.

This is scenario illustrates the increased and sustained affordability that can be attained using a CLT model. The potential positive impact to households can be bolstered with additional support from the City and other community partners.


35

PRO FORMA: HOME PURCHASE OF A CLT VERSUS NON-CLT PROPERTY

Source: Marcie Parkhurst. 2012. Massachusetts Institute of Technology - Department of Urban Studies and Planning.

AssumptionsInterest 6.5%Assumed/markup/for/taxes/+/insurance 12%Assumed/back<end/income/% 38%

Scenario)1 Scenario)2 Scenario)3$200K)home)value $42K)h/h)income CLT)Home

Purchase)price)for)homebuyer 200,000$)))))))))))))))))))) 187,875$))))))))))))))))) 148,500$)))))))))))))))))Monthly)P+I)payment 1,264$))))))))))))))))))))))) 1,188$)))))))))))))))))))) 939$)))))))))))))))))))))))Monthly)taxes)+)insurance) 152$)))))))))))))))))))))))))) 143$))))))))))))))))))))))) 113$)))))))))))))))))))))))Total)monthly)payment 1,416$))))))))))))))))))))))) 1,330$)))))))))))))))))))) 1,051$))))))))))))))))))))Required)monthly)income) 3,726$))))))))))))))))))))))) 3,500$)))))))))))))))))))) 2,766$))))))))))))))))))))Required)annual)income 44,710$)))))))))))))))))))))) 42,000$))))))))))))))))))) 33,198$)))))))))))))))))))

Calculation*of*CLT*Home*ValueAssumptions

Sale%Price%(out%of%REO) 200,000$%%%%%%%%%%%%%%%%%%%%Land%Value 20%Property%Value 80%Available%public%payment/subsidy 25,000$%%%%%%%%%%%%%%%%%%%%%%

CalculationsCost%of%home%to%potential%family 135,000$%%%%%%%%%%%%%%%%%%%%+%10%%cushion%for%financing? 148,500$%%%%%%%%%%%%%%%%%%%%Cost%to%city%per%home 65,000$%%%%%%%%%%%%%%%%%%%%%%

Foreclosures in Bowdoin-Geneva Authors: Rachel Alonso, Jenny Larios Berlin

36

CHAPTER 5: Additional Recommendations: Social Issues in Bowdoin-Geneva

5.1 CONTEXT

A lot of work is currently being done to address social needs in the Bowdoin-Geneva neighborhood. We have been fortunate to participate in walk-throughs, community meetings, and foreclosure prevention flyerings to develop a sense of what the current issues are in the area. A description of our findings can be found below. Although this information is not directly related to foreclosure policy or crime in the neighborhood, issues such as unemployment do play a role in crime and neighborhood attachment and safety. This chapter has been provided to make a case for attacking the foreclosure problem from another angle: jobs and social services.

As explained in the introduction, Bowdoin-Geneva is a low- to moderate-income neighborhood with a median household income of $43,542. However, there is some income variability within the neighborhood, with the eight primary census blocks within Bowdoin-Geneva ranging from $25,186 to $59,649. The neighborhood has a very high percentage minority population (93%), including 49% black or African American and 21% Hispanic or Latino. The neighborhood has a relatively high population density (47.18 persons per acre versus the city wide average of 19.98) due to the predominance of three-family dwellings commonly referred to as “triple-deckers.” Lastly, it is important to consider Bowdoin-Geneva’s 2010 unemployment rate of 15.94% (as compared to the citywide average of 8.64%), as unemployment is often times a key underlying condition influencing neighborhood stability.1

Graph 2: Bowdoin-Geneva Race & Ethnicity Graph 3: Boston Race & Ethnicity

!!!!!!!!!!!!!! !Source: Boston Redevelopment Authority; Census 2010

!!

!

1 Boston Redevelopment Authority. Boston by the Numbers: Land Area and Land Use; Demographic and Socio-economic Trends in Boston. www.bostonredevelopmentauthority.org/; Internal analysis using Esri and Census 2010 Data. Values for Bowdoin-Geneva are estimates based on data from the neighborhood’s eight primary census block groups.

Foreclosures in Bowdoin-Geneva Chapter 5: Additional Recommendations: Social Issues in Bowdoin-Geneva

37

One of Bowdoin-Geneva’s key strengths is the multitude of community institutions operating in the neighborhood, including but not limited to:

• Bowdoin-Geneva Main Streets • Bowdoin Street Community Health Center • Bowdoin-Geneva Violence Intervention Program • Saint Peter’s Church • Dorchester Bay Economic Development Corporation

A lot of work is currently being done to address social needs in the Bowdoin-Geneva neighborhood. Every Tuesday the Neighborhood Response Team (NRT), composed of various neighborhood and city organizations meet to address area issues. Last November, Mayor Menino created the third NRT in Bowdoin-Geneva to address rising crime and other issues the neighborhood faced. The NRT is a forum for various city departments, including Inspectional Services, Code Enforcement, Human Services, and Police, to bring city departments and resources together around the neighborhood. To better understand the neighborhood, we attended their neighborhood walk-through on February 28, 2012 and their group meeting on March 6, 2012. Crime is one of the biggest concerns facing residents of the Bowdoin-Geneva neighborhood.

5.2 OBSERVATIONS

On our walk-through, we saw locations of two recent shootings. During the one-week between the walk-through and the NRT meeting, two robberies and two cases of breaking and entering occurred in the neighborhood. When we questioned city employees as to what they saw as primary crime contributors, many cited the jobless youth population. Other factors mentioned included gangs, liquor stores, drug use, and vacant buildings. Residents specifically pointed out Maymom Liquors at the corner of Bowdoin Street and Norton Street, stating that it often engenders loitering and has been the site of many altercations. For example, the first shooting was on Norton Street, right by the store.

It was also pointed out that youth are unable to enjoy the area’s after school programs due to being bused to schools in South Boston. This is a major source of friction for concerned parents who do not have the resources or transportation to allow their children to participate in enrichment programs in South Boston. By the time the children return home from school, most community programs are underway or over. Some youth are still bused out of Bowdoin-Geneva and driven to other schools in Boston. An employee of the Mayor’s Office stated that teenagers in the neighborhood failed to feel safe due to turf issues. This forces families to either limit activities after school or not allow their children to patronize them at all. Additionally, some youth are discouraged from riding certain bus lines across the neighborhood.

The Foreclosure and Neighborhood Revitalization Workshop at MIT was tasked with addressing the foreclosure crisis in the neighborhood. However, during our encounters with the NRT, we observed that the foreclosure issue or how to address it was not often mentioned. Instead, much of the group’s work was focused on employment and engaging the community through fairs, meetings, and other neighborhood events. On the walk-through, we did visit several vacant lots and abandoned properties, such as 181 Bowdoin Street, for which code enforcement had been used to improve the appearance of these lots and properties. Below, images 1 and 2 show the condition of 181 Bowdoin Street before code enforcement made the property owners remove the vehicles collecting on the site. Images 2 and 3 show the benefits the NRT has in coordinating municipal efforts and improving the quality of life in the Bowdoin-Geneva neighborhood.


38

Images 1 & 2: 181 Bowdoin Street – before code enforcement

Source: Google Map Streetview


39

Images 3 & 4: 181 Bowdoin Street – after code enforcement

Source: Personal photographs taken February 28, 2012

5.3 DIFFICULTIES ENCOUNTERED

One of the factors contributing to the foreclosure crisis is the inability for people to make their mortgage payments. Some people fall behind due to predatory and relaxed lending; perhaps they received loans with adjustable rates, or simply entered loans that they could not afford. Now let’s consider the homeowners with manageable mortgages – manageable, that is, is until the recession struck, causing people to lose their jobs, thus making their mortgage payments unaffordable. The country is suffering from high unemployment, which prevents people from being able to make mortgage payments.

The foreclosure crisis cannot be considered separately from larger economic forces at hand. There are multiple macroeconomic issues contributing to the situation dire situation in Bowdoin-Geneva, such as social programming; job skills, availability, and access; and safety. The bursting of the housing bubble has fueled the larger economic crisis and affected residents of Bowdoin-Geneva through both foreclosures and job insecurity.

Trauma from violence and the threat of foreclosure-related displacement affect youths in a unique way. Targeting skills training and actual employment towards adolescents can have a positive effect on the Bowdoin-Geneva neighborhood as a whole. A recent study from Northeastern revealed that year-round employment for teenagers helped result in decreased reports of negative behavior.2

2 Meena Ramakrishnan. “Northeastern study links youth jobs to lower violence.” Dorchester Reporter. March 8, 2012. http://www.dotnews.com/2012/northeastern-study-links-youth-jobs-lower-violence


40

5.4 POTENTIAL POLICY RECOMMENDATIONS

5.4.1 Jobs

• Research where jobs are for the neighborhood’s base. Can residents get to those jobs? Why or why not? • Youth training programs • Clue people in to government jobs

5.4.2 Busing and Youth Engagement

• Analyze the impact of busing to determine if it should be continued or ended OR • Subsidize transportation so children can stay after school • Subsidize transportation for parents for social events so they are more involved • Create a cross-jurisdictional educational partnership to create solutions for the extracurricular needs of

youth in all neighborhoods

5.4.3 NRT Organizational Structure

• Board and representatives appoints for each organization mandated to participate by the Mayor’s office • Creation of subcommittee • Bi-weekly meetings focus on three (or more depending on bandwidth) areas of intervention (e.g. comm.

outreach, econ. development, safety/beautification) • Walks are great, everyone should participate and maintain short-term deliverable list from walks that

each responsible group must complete and inform the following team meeting • Plan of ongoing results presentation to the Mayor’s Office • The Mayor should or high-level should plan to attend 1 comm. event per year

5.4.4 Programmatic Funding

• Allow community organizations to apply for funding through the NRT for projects related to education, youth programs, and teenager/high school age engagement, drug rehab, etc.

Foreclosures in Bowdoin-Geneva Author: Jenny Larios Berlin

!

41

CHAPTER 6: Conclusion

The foreclosure crisis is not an easily solvable problem for hardest hit communities, such as Bowdoin-Geneva. To improve the situation it requires a thoughtful strategic approach. First it must begin with extensive qualitative and quantitative analysis. Second an unbiased survey of the current support infrastructure in the public, non-profit, and private sectors. Third identification of existing best practices that can help overcome the obstacles identified during the analysis process. The research completed delivers detailed findings and recommendations that taken together can not only address the current foreclosure concerns, but also subvert future housing shortfalls.

The data suggests that although there isn’t a statistically significant relationship between crime and foreclosure there is a slight increase in small crimes in and around abandoned properties. The broken windows theory is relevant in this case because petty crime such as vandalism, littering, and loitering may increase where properties seem unkempt. In isolation it would be a non-issue, however when dealing with a community nothing happens in isolation. As a result, it is imperative that the City continues to respond quickly to 311 reports so as not to create the impression that it is acceptable to mistreat empty buildings and thereby engender a community identity of disrepute. The Bowdoin-Geneva residents deserve to know that no matter what, their space will be cared for and protected against misdemeanors that degrade the urban fabric.

The research elucidated the fact that its not just homeowners that are affected by foreclosure. Qualitative interviews revealed that triple-decker rental properties that fall into the foreclosure process continue to house tenants up until the property is sold in auction. And, even then tenants may not be aware of what is happening. Information and knowledge distribution is key. Defining the rights, as well as educating the tenants caught in these situations, especially if they are in Section 8 housing, would potentially accomplish a two-fold goal- maintaining people in their homes and keeping neighborhoods in tact.

Real estate owned (REO) properties are only part of the problem. The analysis found that the foreclosure process is an extensive and convoluted one. As a result, it may be difficult to determine what properties are being foreclosed, in danger of being foreclosed, or recently foreclosed. On the policy side we suggest to have a register of homes in danger of being foreclosed because it enables proactive actions versus reactive scrambling to help a family change their debt terms or belabor the foreclosure procedure in hopes of a short sale. Furthermore, there is vacant land owned by the Department of Neighborhood Development that can and should be developed. The concern is careful writing of a request for proposal that does not allow the developer to land bank or develop out the existing community. These are important considerations, but should not negate the real sense of urgency to create more of a neighborhood through new developments in the community. This is another way to show the community that time, attention, and capital is being infused to Bowdoin-Geneva.

Realizing that certain organizations have mobilized to address the foreclosure issue, we looked at how to improve those organizations’ operations. Of all the organizations analyzed such as City Life/Vida Urbana, Boston Legal Aid, area CDCs, and Boston Community Capital (BCC), we found that BCC’s SUN Initiative has the highest potential of keeping people in their house in a stable and sustainable manner. There are three strategies proposed: using tax servicers to identify more potential participants, using Neighborhood Stabilization Program funding to increase the eligibility pool, and using bulk purchasing of properties to convert to rental. All of this is contingent on BCC’s willingness to participate. If they were willing to respond to the suggestions put forth it would increase the amount of people that BCC could help. Acknowledging that they may not want to take part in the recommendations submitted our research identified another opportunity, community land trusts.

Foreclosures in Bowdoin-Geneva Chapter 6: Conclusion

42

Since the inception of community land trusts (CLT) in Vermont as something more than shared allotments, multiple municipalities and organizations have considered the value of CLTs as a way to avert foreclosure and indeed reduce the long-term risk of mortgage default. Recent studies show that the risk of foreclosure is significantly reduced in CLTs. Homes are simply more affordable because families are paying for the physical form, and not the land where the home rests. Additionally families participating in community land trusts have the social support from the founding organization. As such the financial framework is more sustainable and the social dynamic is more supportive, which produces a couple of gains to the community. The first is a fully occupied and stable housing stock. The second is community engagement and empowerment through the coordinating organization. The toughest sell is not the concept, rather, it is inspiring established organizations to take on the work required to introduce a whole new product. However with the strong encouragement from the Mayor’s Office to introduce home ownership stabilizing programs such as this, we believe a CLT can come to fruition in Bowdoin-Geneva.

The complete coordination, collaboration, and in some instances integration of parties working in Bowdoin-Geneva is required to address the foreclosure crisis. At this time the Neighborhood Response Team has assembled key public and non-profit organizations. They have the potential to provide significant value to the community. However, it appears that coordination could be even further increased to improve collaboration among all parties. We recommend creating a governance structure to wield all the participating organizations to focus the efforts that will generate realistic and tangible results on a consistent basis. Qualitative research finds that each organization is well intentioned, however may be acting independently thus creating silos or areas of redundancy, which waste time and resources. For example, the Family & Job Fair in Bowdoin-Geneva earlier this year, was poorly attended because of the lack of coordination between the planning and community organizations. Consequently, we suggest that the Neighborhood Response Team have a board and committee governance structure.

In conclusion, the data identified policy opportunities as well as how to structure the recommendations aimed at BCC, CLTs, and the NRT. The proposal takes a holistic approach considering the spatial, social, and economic conditions affected by the foreclosure process and how each can be improved. There is no single silver bullet solution, but a few of them are highlighted in this proposal. We recommend working on each simultaneously with the understanding that each suggestion has its own timeline for completion.

Foreclosures in Bowdoin-Geneva !

43

Appendices

Appendix I

While non-owner occupied deeds have steadily decreased since their peak in 2008, owner-occupied foreclosures remained relatively steady (aside from a dip in 2009) and have increased significantly as an overall percentage of total foreclosure deeds (46% of total deeds in 2010). This may be due to a change in lending practices for investment properties or other economic effects such as job loss.

Graph 1: Owner-Occupied Households Affected by Foreclosure

!

Data Source: Foreclosure Deeds from Warren Group; Boston DND

Appendix II

The overall trend indicates that REOs are declining in Bowdoin-Geneva, from a peak of 45 in 2009, with 21 unsold REOs remaining (as of January 1, 2012). However, while the REO numbers are diminishing, they are doing so at a much slower rate than during the REO boom of 2007–2009.

0!

20!

40!

60!

80!

100!

120!

140!

2006! 2007! 2008! 2009! 2010! 2011!

Owner/Occupied!Yes!

Owner/Occupied!No!

Foreclosures in Bowdoin-Geneva Appendices

!

44

Graph II: Bowdoin-Geneva REO Properties (total stock)


Of the properties that are currently REO, Fannie Mae is the leading foreclosing entity with 6 properties, with a number of other entities with two or fewer properties. The reduced amount of REOs, the lack of a clear concentration of properties by foreclosing entity (outside of Fannie Mae), and the dispersed spatial distribution across the neighborhood (illustrated in Map 1) limits the impact of strategies that focus on partnerships with key entities or the acquisition of property portfolios to spur large scale change – as a result, targeted, smaller scale strategies may be more effective.

Map 1: Unsold REOs and DND Owned Properties

!Source: Warren Group; Boston DND

!

0!

5!

10!

15!

20!

25!

30!

35!

40!

45!

50!

2006! 2007! 2008! 2009! 2010! 2011! 2012!


!

45

Appendix III

Map 2 shows the density of all 311/Mayor’s Hotline calls relating to abandoned vehicles, graffiti removal, illegal dumping, improper storage of trash, poor conditions of property, and sign repair. There is a significant clustering of deterioration issues along Bowdoin Street and Devon Street.

Map 2: Density of Selected Mayor’s Hotline Calls since January 2011

!

Appendix IV

Map 3 overlays the density of foreclosure with the density of 311 calls (deterioration issues). We can see that the primary area of overlap is Hamilton Street; otherwise, foreclosure density and deterioration issues are clustered in different areas of the neighborhood.

Map 3: Overlap of mayor’s hotline call density & foreclosure density hotspots

!!


!

46

Appendix V

When walking around a few of the areas of the Bowdoin-Geneva neighborhood where crime & foreclosure tend to overlap, a major theme was the lack of visible deterioration in the physical environment. There were some homes that were visibly vacant, as pictured in images 1 & 2 below but overall there didn’t seem to be significant swaths of the neighborhood where distress was extremely visible. One interesting exception was a small section of Olney Street.

The pictures below are of two adjacent homes on this street. Image 3 shows a home that according to residents has been vacant for at least 15 years. Image 4 shows a home that experienced a fire in the past couple of years. That homes in this condition exist in an area that has high densities of crime and foreclosure is potentially an indicator of the effect of vacancy on crime and the relationship of foreclosures on crimes like arson.

Image 1: Deteriorated Home Image 2: Deteriorated Home 2


!

47

Image 3: Olney Street House 1 Image 4: Olney Street House 2

Another interesting observation from walking around the neighborhood was that there might be some relationship between the physical characteristics of the housing structure and vulnerability to foreclosure. For example, Coleman Street is one area of the neighborhood that has been particularly affected by foreclosure. Walking on the street you can observe that many of the buildings there are attached multifamily homes as pictured in Images 5 and 6 below. It is quite possible that the adjacency of these structures left households more vulnerable to foreclosure as they saw their neighbors default and deterioration ensue.

Image 5 Image 6

!!!!!!!! !! !


!

48

Appendix VI: FINANCIAL MODEL AND ASSUMPTIONS

The attached financial model presents an example of the potential income that could be realized from a bulk purchase of REO-owned properties in the Geneva-Bowdoin neighborhood for reuse as income-producing rental properties. The purpose of this model is to use example properties in the Geneva-Bowdoin neighborhood as a litmus test to assess the financial feasibility of the bulk sale to rental model.

The model uses FY 2012 data on REO sales of 115 properties in the Geneva-Bowdoin neighborhood in order to get a proxy for a sample portfolio price. The total price of the 115 REO properties sold from FY2006 to FY2011 was $20,128,799 . Note that no adjustment for this simplified model has been made for the year in which the property sold. We have discounted the purchase price by 10% to reflect the current discount in the market for foreclosed homes purchased through bulk sales. Three scenarios are modeled: 5 – year holding period, 7 – year holding period, and 10 – year holding periods with rental income throughout and sale at the end of the holding period. The overall expected returns for each are summarized below:

! 5-year 7-year 10-year Unleveraged IRR 8% 10% 11% Leveraged Before-Tax IRR 27% 24% 21% Leveraged After-Tax IRR 35% 30% 25% NPV (@ 10% cost of capital) $26,832,836 $32,536,478 $38,115,635

Other underlying assumptions are as follows:

Financing:

Rehabilitation costs have been estimated at 15% of total asset price.

Annual debt service is based on an anticipated requirement of a minimum 1.20 debt service coverage ratio of Net Operating Income in any given year. This annual debt service payment is then used to calculate the total loan amount available at project start, assuming a 25-year amortization period and a conservative 6.00% interest rate.

City or other public agency grant is assumed at $35,000 per property, for a total grant of $4,025,000 for the 115-property sample.

Depreciation:

Depreciation assumes a 27.5-year asset life for residential properties and is calculated on the building value only, estimated at 80% of total acquisition price.

Reversion Value:

A 5% Cap Rate has been assumed based on area data published Reis, Inc.

For market valuation purposes, the NOI used to calculate reversion value is based on rental income from market rate units only, and does not include the affordable housing program that is assumed for income calculations throughout the holding period.


!

49

Rental Income:

Market Rent: Preliminary market research for the Geneva-Bowdoin neighborhood indicates that 2 – 3 bedroom housing units can be rented for $1,800 per month.

Affordable Rents: This example assumes that thirty percent of the housing units will be maintained as affordable. Affordable rental payments are based on the BRA Inclusionary Development Policy 2012 Maximum Affordable Rents for families earning 70% of Area Median Income.

2 bedroom: $1,414 3-bedroom: $1,491 4 bedroom: $1,768

A significantly higher year one vacancy rate (17%) over steady state vacancy (8%) has been included to allow for lease-up delays.

Expenses:

Residential operating expenses are estimated at a 20% premium in order to account for the higher cost of management for scattered-site housing units.

Next Steps for BCC:

While this illustrative model rests on numerous specific assumptions, it does indicate that the general unit purchase prices and potential resulting rental incomes in the Geneva-Bowdoin neighborhood could provide a financially feasible investment opportunity for BCC. This would allow BCC to complement its SUN foreclosure prevention program with a strategy that would both help stabilize neighborhood housing prices while also providing rental opportunities for foreclosed-upon residents.

BCC’s purchase strategy should be to first target multiple properties owned by a single entity in order to lower transaction costs and to negotiate a lower purchase price. For example, in our sample of 115 recently-sold REO properties, the top three largest seller organizations were as follows:

Deutsche Bank: 30 properties $4,634,300 U.S. Bank: 15 properties $2,736,699 Fannie Mae: 9 properties $1,223,000

In the current portfolio of 45 REO properties, FNMA owns 26.67% and would be a natural target as a partner for a negotiated bulk sale.

BCC might also capitalize on the recent institutional investor interest in the bulk sale for rental model by entering into a joint-venture partnership. The attached partnership distribution indicates a sample breakdown of returns based on a 5% preferred return for the institutional investor. As the sponsor, BCC would not realize a return on its investment until sale of the property at the end of the holding period. Note that the model assumes a price appreciation of the entire portfolio of 20% over the five-year holding period, 25% over the seven-year holding period, and 33% over the ten-year holding period. This partnership not only allows BCC to access the capital necessary for the initial bulk purchase, but ensures that BCC can leverage its own local knowledge and relationships to ensure that the program is both financially feasible and appropriate to the overall neighborhood stabilization strategy.


!

50

Sample Partnership Distribution:

!

5-year 7-year 10-year BCC 36% 33% 27% Investor Partner 39% 30% 25%

!

!


!

51

Appendix VII: HOW COMMUNITY LAND TRUSTS PRESERVE PUBLIC INVESTMENTS1

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!1 Lincoln Institute of Land Policy, “The City-CLT Partnership,”

http://www.burlingtonassociates.com/resources/archives/clt_101/000637.html!


!

52

APPENDIX VIII: COMMUNITY LAND TRUSTS IN MASSACHUSETTS2

Name Location URL

Andover Community Trust Andover, MA www.andoverclt.org

Bread & Roses Housing Lawrence, MA www.brhousing.org

CLT of Cape Ann Gloucester, MA www.wellspringhouse.org/landtrust.html

Commonwealth Land Trust Roxbury Crossing, MA

NONE (ph: 617-445-4075)

Community Land Trust in the Southern Berkshires

Great Barrington, MA

www.clandtrust.org

Dudley Neighbors, Inc. Roxbury, MA www.dsni.org/dni

Falmouth Housing Trust Falmouth, MA www.falmouthmass.us/depart.php?depkey=fht

Framingham Community Land Trust* Framingham, MA NONE

Gardner Community Land Trust Gardner, MA NONE (ph: 978-630-4011)

Holyoke Community Land Trust Holyoke, MA www.holyokeclt.org

Housing Land Trust of Cape Cod Hyannis, MA NONE (ph: 508-771-5400)

Island Housing Trust Corporation Vineyard Haven, MA

www.ihtmv.org

Valley Community Land Trust Greenfield, MA www.VCLT.org

Worcester Common Ground Worcester, MA www.wcg-cdc.com

*Affiliated w/ Area Planning Department

!

!

!

!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!2 CLT Network, “U.S. Directory of CLTs,”

http://www.cltnetwork.org/index.php?fuseaction=Main.MemberList&state=MA!

foreclosures in bowdoin-geneva_analysis&recommendations

Documents