taking back our neighborhoods

[rapturedbyrobots]

literally. i've been playing with an idea about how to take out neighborhoods back from the banks and put our money directly into them instead of it being funneled of as interest payments to the banks. maybe some of you out there with more knowledge about real estate or financing can give criticisms/advice on whether this is actually a viable plan. and if so, if this can be employed as a model for other areas to use, adapt, and improve upon. anything would be appreciated.

i've been thinking about an alternative housing finance structure where we would set up a land trust to buy houses in low income neighborhoods. the trust would own the land (to prevent future sale to speculators) and rent-to-own the house to a prospective owner-occupant. i figure if the trust can buy a house for under $20K (perfectly reasonable price for structurally sound houses in poor parts of this city)...and give the resident a $5K line of credit on materials to renovate the house ($25K total investment). the occupant would be responsible for completing the repairs (creating sweat-equity), and pay a low monthly payment $450 for 10 years ($54K total payback). after 10 years you have a stable community of owner-occupants versus residents, who's houses are post-renovation worth a lot more than the $54 TOTAL they will eventually pay into it....that means an injection of instant equity into the community, without any interest paid to banks. and the investors who front the capital for property purchases would more than double their initial investment in 10 years (slow by many standards, but we're not in this for a quick buck like most real estate investors). everybody wins...except the banks who are cut out of the process. sounds crazy, but i actually have some people who might be willing to put up a few $100K to try it.

could this actually work on a medium-scale...say 20 houses at a total cost of $500K? could that be enough to revitalize a whole neighborhood and protect it against predatory gentrifying development?

[JuniperLea]

1. SOCIALIST!

I applaud your idea!

:applause:

[Sanity Claws]

2. Idea to follow up

I can't help you with evaluating the idea but certain nonprofits who are already into working in the neighborhood you have in mind probably could.

I wish you luck in implementing your idea.

[pitohui]

3. it sounds unlikely to work except in highly monitored situations but if you have donors try it anywa

most of the desperately poor are desperately poor because they don't have the physical and/or mental ability to perform hard physical labor day after day -- it seems like such a plan would be welcomed here in new orleans but then so many of the poorest neighborhoods seem to have a huge population of single moms overwhelmed w. too many childrens, the mentally/physically handicapped, and the elderly -- those who can physically re-build a home using just sweat and $5k by now prob. already have homes, the problem is those who can't do that for reasons of time, skill, physical strength, mental health and so on

it's the same problem you see with section 8 housing -- sounds good on paper but everyone i know who has tried it, the person they rent to has such severe problems that 1) they don't pay their tiny share of the rent or maintain the property and 2) the people who CAN pay their rent/maintain the property for a lowered rent won't stick around in the same neighborhood with a lot of section 8s because too many of them are substance abusers = crimes of violence that spoil the neighborhood -- as a tenant, i myself was guilty of moving out of neighborhoods v. quickly once section 8 came in, simply as a matter of personal safety (i am female)

you would have to be extremely aggressive abt weeding out substance abusers and i'm not sure how you could do that w/out violating people's civil liberties

ok, now that i've given you a lot of negs, i will confess that if you do have donors willing to try it, you SHOULD try it, with a clear eye and a careful choice of who will participate -- i don't think it's an answer to helping a majority of the desperately poor/homeless but there is a certain segment of the population that, truly, all they need is a chance they never had and they'll take it and run with it -- you just have to figure out a way to connect with those people who can seize the chance


are you and your friends willing to live in this neighborhood/participate in this process? in that case, i think you have a much better chance than if you're on the "outside" kinda telling people what to do and who gets the grants...

it's an interesting proposal and i bet everyone here would be interested in a blog following the project, if you decide to run with it.

[rapturedbyrobots]

4. i take your advice seriously

one of the things NO ONE around here is willing to talk about...whether about this project or not...is security. no one is willing to discuss and deal with the real problem that drugs and crime play in keeping people, land, and community wealth/resources susceptible to predation.

part of the problem is finding people to live in troubled areas. i am willing to...and have for the past 3 years. part of the inspiration for this came from a program that i took advantage of to get my first house. a local credit union teamed up with financing from the local university to rehabilitate a 'problem' neighborhood right off campus. they offered good financing to low-income first time home buyers and managed to turn over a couple dozen properties to owner-occupants in what used to be almost entirely a renter neighborhood. this has had a HUGE effect on the area. crime is down, property values are up. but in the end the money is still funneled to the banks via the traditional mortgage financing system. we still end up paying 3X what our house is 'worth' at purchase to cover the interest owed to the bank. and that's only those of us who qualified for the mortgage benefits to begin with...you know how hard it is to have good credit and be low-income?

needless to say, it helped, but didn't go far enough to address the housing needs of the more needy, and didn't keep the wealth where it belongs.

as far as people who are willing to work on their house. around here, the young hispanic population is suffering severely. many young males are out of work, but have lots of experience in construction and remodeling. this is a labor base just waiting for the opportunity to work (this is where the sweat equity idea first came from). they could work on their own houses, and maybe there could be ways to get them working on other houses in the project as well for pay. another way to keep the money circulating and working in the community. this is something we want to pursue...and another reason i say this kind of thing will have to adapt to the needs and abilities of the local population.

thanks for your comments.

[pitohui]

7. it sounds like you have some great ideas and experience...

if you go ahead w. this, seriously, blog it or make a documentary film because i honestly believe it's something people would be interested in following -- i would love to follow the story

[clear eye]

10. Credit unions are not "traditional banks".

They are member owned and managed, can't make business loans, and can only make loans to individuals who would qualify for membership according to their elegibility criteria (usually geographic or by employer). They keep the money in the community. If a person can't pay a low-interest mortgage, they probably can't be counted on being able to keep current on rent for the same property. For really poor people, subsidization is the only answer, especially when jobs are scarce and job training doesn't guarantee an income. Unless there are subsidies in your state or county for housing that your prospective "rent-to-owners" could avail themselves of, I don't see how you could reach a different group of people than the credit union project did. (Sounds like it was very successful.)

Perhaps you can cultivate connections through the state legislators, etc., for houses in your project to qualify as low-income housing so people getting housing assistance could participate.

[rapturedbyrobots]

11. credit unions

i realize credit unions are not traditional banks. but they operate similarly, and the requirements and rates for mortgages are the same. my credit union would only offer FHA loans. so they were no help. the other credit union (where i eventually qualified for the low-income program) also had stringent requirements on credit/employment history for their loans. and regardless of who secures the mortgage, you end up paying 3 times the value of your home after 30 years of interest payments. the point is to avoid this entirely, and keep the real wealth (not debt-based interest wealth) in the community. nothing against credit unions...i use them for all my banking.

but i disagree entirely that someone that can't keep up on a traditional mortgage can't keep up on the rent. firstly, the payment is much lower than a traditional mortgage would be. secondly, there is the incentive of eventual ownership (much faster than a traditional mortgage). i think you underestimate the number of people who can and will succeed given a small chance. of course, there is a large population who this will not work for. but like i said...the point isn't to help everyone directly, but to get a start in creating and keeping wealth in the community.

[clear eye]

14. If you are planning to keep the rental payment very low,

you should be able to qualify as low-income housing and be able to take some people who are elegible for housing subsidies, depending on the programs in your area. Sounds like you were planning on requiring the rent-to-owners to keep up the houses themselves so you could keep the rents low. You may hit legal snags there as landlords are legally required to maintain their properties. As long as the deed is in the name of your group, the law would see it as the landlord. Charging enough rent to cover maintenance but getting subsidized rents may be a more workable plan, but it depends on what's available in your area.

[clear eye]

5. Maybe.

I like your real estate trust idea, but see a few hitches. It would need pretty extensive initial financing and it would be a hard sell. Odds are you would have to involve a foundation who might have their own stipulations.

The tenants would have to be supervised or at least taught by people who know how to do a renovation, a la Habitat for Humanity, since most people wouldn't have the vaguest, especially first-time prospective homeowners. (For instance, the only things I know how to do are paint a wall and change a washer. If some concrete porch stairs needed repair or roof tiles needed replacing--forget it.)

And would your organization be responsible for insuring your tenants who you've instructed to make sometimes hazardous repairs against injury? Your group would more likely than not be bankrupted almost immediately by a costly lawsuit from the first tenant who got hurt working on the house.

The organization should walk through each house, decide what absolutely needs doing as opposed to what the tenant might want to upgrade later, buy (or get donations of) the materials and give those rather than money. I wouldn't know the difference between good and crappy lumber or roof tiles, for instance, or what is a good price, and would probably make poor decisions. Also $5K is a lot of money, and some might respond to the temptation by trying to multiply the money in Las Vegas or on a horse w/ predictable results.

A related hurdle would be implementing a rigorous way of screening the lucky recipients. Most people couldn't handle that much responsibility w/ so little resources. Either they'd be too busy trying to earn a living to get the work done in a timely fashion, or they'd be inept (like me), or they'd have character flaws and would try to make money out of the situation instead of fix up the house (sublet it to large #'s of desperate immigrants, for instance). There would not only have to be extensive background checks, but thorougly checked references, and a social worker (or someone w/ similar experience evaluating people) would have to interview them to see if they were up to such an extraordinary challenge. Then there would have to be ongoing follow-up checks which you are probably uncomfortable w/. The alternative would be rapid bankruptcy of the project as people, most w/ the best intentions, found themselves overwhelmed.

Anyway you get the idea. It could be done, but only w/ much more oversight and assistance than you have envisioned.

[rapturedbyrobots]

6. good point.

it may be a better idea(and easier) to just go with a licensed and bonded contractor that is willing to work for a reasonable price knowing what the project's mission is. the trade off would be a good number of guaranteed contracts. they could even maybe employ or take on people from the program as apprentices so they can learn to maintain their new house. these are just ideas right now, so keep them coming. thanks!

[clear eye]

12. You could go further than that.

You could make winning the contract contingent on hiring x number of those young men in your neighborhood w/ remodeling experience. You'd need a lawyer to help you draft a contract w/ enforcement provisions, but it could be done. Creating local employment would make this effort worth more to the community than even the project you got your house from. You will also have to deal w/ the reluctance of good contractors to work on a large project in an area where there are even more security issues than usual--potential thefts of materials and equipment. Perhaps you can dig up a good security co. to contract w/ as well, and offer prepaid security as an inducement to the better contractors?

Again, having amateurs from the rent-to-own group participate would create liability problems for both the contractor and the project itself. Unless your lawyer can figure out a solution, you might have to give that up. You can't underestimate the potential a lawsuit would have to bankrupt the whole project.

[Tejas]

8. low-income to pay 450/mo + utilities?

And still have $ left over for food/clothing/transportation/etc?

I don't see it happening.

[rapturedbyrobots]

9. that's substantially less

than my 'low income' mortgage payment of $700/mo. and less than any of the apartments in these neighborhoods. plus...you pay off a house in full in 10 years. it might not work for everyone, but we're thinking of starting small anyway. we only need a couple dozen to start.

but your point is taken. thanks.

[Name removed]

15. Deleted message

Sub-thread removed by moderator. Click here to review the message board rules.

[defendandprotect]

13. k

[cali]

16. there are models for this

Who We Are

Community starts here.
mission

The Champlain Housing Trust is a community land trust that supports strong, vital communities in northwest Vermont through the development and stewardship of permanently affordable homes and associated community assets.


Burlington Community Land Trust and Lake Champlain Housing Development Corporation were each founded by the City of Burlington, Vermont in 1984 to provide affordable, safe, and decent housing to families and individuals with low to moderate incomes. As geographic territory, services, and funding sources increasingly overlapped, the two organizations decided to combine their assets and resources into Champlain Housing Trust. In 2006, the merger was complete.

http://www.champlainhousingtrust.org/who_we_are