7. Acquiring and Redeveloping Vacant or Foreclosed Properties for Immediate Reuse
Although cities have always had vacant property, the scale and complexity of the problem now is much greater and requires new, aggressive strategies to bring properties back into neighborhood-friendly use. Acquisition-rehab strategies are time consuming and expensive, and need to be targeted in neighborhoods where there is strong opportunity for stabilization and where new occupants can be attracted. Because owner-occupant markets are so weak in many places, government and nonprofits are also exploring scattered site rental, lease purchase (e.g., Colorado Rural Housing Corporation’s Lease to Own Program), and shared equity homeownership (e.g., Washington, DC) strategies to reuse vacant property.
There are a number of challenges in this strategy that should be anticipated and addressed to maximize success:
- Choosing neighborhoods where there is a likelihood of success in treating enough homes to make a difference and to attract occupants.
- Choosing properties that have the potential to change market perceptions (e.g., highly visible properties, chronic problem properties).
- Finding owners who are able to sell.
- Negotiating a price in a market where comparables are absent.
- Negotiating a price that allows for rehab and resale in a weak market.
- Establishing rehab needs and deciding what is a reasonable amount of rehab to warrant taking on the project at all and to ensure that the property will attract new occupants.
- Assembling enough property to achieve economies of scale.
- Developing capacity to manage multiple rehab construction projects.
- Developing capacity to manage scattered site rental or lease-purchase.
- Assembling financing and subsidy to take on enough properties in one area to create a tipping point of market change.
- Identifying markets of qualified buyers for the resulting sale.