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Neighborhoods hit by foreclosure look to Cook County Land Bank

Wednesday, June 11, 2014
Medill Reports
by Robin Amer

The morning of the fire, Leona Thompson woke to the smell of smoke. She had been asleep in her Langley Avenue home, an elegant red brick three-flat in Chatham. It was late February, and the winds were brisk.

She got out of bed at 2 a.m., walked into the kitchen and checked the stove. Nothing. She walked to the living room and pulled back the drapes.

The houses across the street were much like hers: stately two-and three-flats in dusty red and golden ochre brick with trim green lawns and wrought iron gates.

But 8136 S. Langley Ave. had been vacant for a while. Now, Thompson was aghast as she stared out her front window. The house was ablaze, and flames were "shooting through the roof," she recalled.

The Chicago Fire Department sent trucks. The city ordered the owner to secure the building. The house was finally boarded up.

More than five years after the onset of the housing crisis, nearly one out of every 25 homes in Chatham has slipped into long-term vacancy, meaning it has been vacant for more than two years, according to data collected by the U.S. Postal Service, aggregated by the Department of Housing and Urban Development and analyzed by the DePaul University Institute for Housing Studies.

The house that caught fire is one of three vacant buildings on Thompson’s street.

“You just missed people coming in and out of there,” she said on a recent Sunday afternoon, nodding to another vacant house just south of hers. “It’s been going on for some time.”

Zoom out from Thompson’s block in Chatham and you get a grim picture of blight. Postal Service data puts the total number of buildings in Cook County vacant for more than two years at more than 51,000 as of the end of 2013.

That’s a slight improvement from the approximately 55,000 vacant houses in the county at the beginning of last year, but still well above the number of long-term vacancies before the housing crisis began. (The Postal Service data dates back only to 2010, so it’s difficult to do an apples-to-apples comparison of long-term vacancy prior to that.)

Illinois state and local governments have taken various stabs at addressing this crisis. In February of last year, Gov. Pat Quinn signed a bill that would fast-track the foreclosure sales process, aimed at helping a portion of the county's 80,000-some pending foreclosures clear the courts in as little as 90 days. (The current average is more than 600 days.)

In February of this year, Chicago Mayor Rahm Emanuel unveiled his five-year housing plan, with the goal of rebuilding the city’s housing markets, increasing population and improving home values. In March the U.S. Treasury gave Illinois $30 million worth of federal blight reduction money to demolish derelict houses.

But no response to this crisis has seemed more promising than the creation of the Cook County Land Bank Authority, a quasi-governmental agency with the broad legal authority -- and some might say moral imperative -- to acquire blighted and tax delinquent property and put it back into productive use.

St. Louis launched the country’s first land bank in 1971. Since then land banks have popped up in Cleveland, Atlanta, Indianapolis and Detroit. None of these cities is stranger to blight, and a new wave of land banks were launched in the wake of the foreclosure crisis as cities across the country struggled to deal with vacancy and abandonment.

In theory, land banks can be powerful tools, allowing governments to function like a property clearinghouse. In go buildings saddled with tax delinquency, homes that have been looted, and overgrown vacant lots, and some months later, out come the properties with their titles cleared and liens paid off, ready for rehab, new development and new ownership.

But in Cook County, there's at least one problem, for starters: the resources at the land bank’s disposal in no way match the scale of the problem. This brand new agency is already facing a tough set of strategic choices about how and where to work.

To begin with, the land bank has no dedicated source of funding -- it has received money only through the generosity of other government agencies.

Last July Illinois Attorney General Lisa Madigan promised the land bank $6 million in startup capital, which came from the state's portion of a $25 billion settlement between the federal government and the country's five largest mortgage lenders. She eventually turned over just $4.5 million, according to county records, and the agency's 2014 budget suggests that this is all the money they have for the year.

Brian White is okay with this pressure. As the land bank's newly minted executive director -- or "staff of one," as he joked on the phone recently -- White is responsible for the agency's day-to-day operations and setting strategic priorities.

"I think the pressure is good," White said. "If [more money] was created for us I wouldn't turn it away. But I'm focused on places where we can add value and earn our own keep, and until that changes that's how I'll run it."

Although the land bank has the power to go after property and has $161,000 in its budget to do so, at this phase, adding value starts with spending as little as possible on acquisitions.

White plans to build a portfolio slowly -- at least until he can hire the rest of his staff – and for now, almost entirely through donations. He hopes to close on 10 properties by the end of the month, all of which would be donations from the National Community Stabilization Trust and Wells Fargo & Co.

Half the properties in this first round are on the city’s far South Side. The rest are on the West Side and in suburban Maywood and Chicago Heights. All of them are distressed, White said.
One of the houses up for consideration is 1110 E. 93rd St., in the South Side neighborhood of Burnside. This community’s long-term vacancy rate is similar to Chatham's. But Burnside is a working class black neighborhood, and signs of the foreclosure crisis are even more visible here.

The house on 93rd Street is a two-story, single-family home with dull gray siding and metal panels over the window. It’s just one of four boarded up houses and 31 vacant lots on a nine-block stretch of 93rd Street. The building has been foreclosed on four times since 1995, according to county records.

On a recent Monday morning, I found Tracy, who declined to give her last name, cleaning out her car just around the corner from the land bank’s potential get. Her grandmother has owned a house here for the last 25 years. The biggest problem with her street, Tracy said, was the way the houses deteriorated over time.

"We've seen at least four families here in the last ten years," she said, pointing to another vacant house across the street with boarded up windows and faux stone paneling crumbling off the facade. "All of a sudden the bottom dropped out and we're left with little pockets."

So why pick this one house, when there are so many to choose from? At a recent board meeting, White said this is a question he’s “been asked pretty consistently.”

Eventually, White hopes to have a mountain of data to support each acquisition. Last year a group of data scientists and graduate student fellows from the University of Chicago built the land bank a prototype database to help them make parcel-by-parcel decisions about which distressed properties to acquire. White is currently looking for a data base analyst and has five groups competing to build the agency a permanent database.

The land bank has also hired Eric Williams, a former vice president at BMO Harris Bank, to be its new senior acquisitions manager. Williams, who managed a $20 million portfolio of distressed property for BMO Harris and helped renegotiate poor-performing loans, will be responsible for guiding the land bank’s acquisition strategy.

For now, the agency will necessarily focus on properties that, for whatever reason, the market has decided it does not want. At the board meeting, White explained that if the land bank passes on a distressed property offered by a group like the National Community Stabilization Trust, “the next step is demolition.”

"It’s sort of a tautology that if investors wanted these properties they would have already bought them," said Ben Keys, an associate professor at the University of Chicago's Harris School of Public Policy. Keys was an informal consultant to the university group that built the land bank’s prototype database.

He said that in places where the market has failed and long-term vacancy is the result, "there's no positive price that people would pay for them."

"To demolish a property in Chicago costs, I've seen numbers like $8,000-$10,000," Keys said. "So there are properties that are in essence worth negative $10,000."

In theory, this is the benefit of having a government agency that can operate beyond the usual market imperatives.

"There are certain places where the land bank is going to be, if not the only game in town, a real boost to people who are trying to work in these neighborhoods," said Keys.

But Cook County Commissioner and Land Bank Authority Board Chair Bridget Gainer has said the agency plans to focus its efforts in neighborhoods where the private market is still functional, if a bit stalled, as a way of stretching those precious few dollars to maximum impact.

Gainer declined to be interviewed for this story (and instead deferred to Brian White) but in a November interview with Crain’s Chicago Business she outlined the land bank's approach to working with the private market.

“We're looking to say, 'Where are there places where there's already some interest in the private market but they're just not executing?" Gainer said. "Why are they not executing? How do we come in and facilitate the execution?' "

Neighborhoods where the market has stalled but not collapsed entirely are called "tipping communities,” said Sara Toering, a land bank expert at the Center for Community Progress in Atlanta.

“Some land bank leadership can help stabilize these communities” and "tip" these places back into full stability, Toering said.

Cook County’s land bank seems to have embraced this approach.

“There are some buildings we’ve identified on blocks where there are few if any other vacancies,” White told the land bank’s board in May. “The idea is that if we don’t accept these properties, we’ve missed the opportunity to save a piece of property . . . that could result in demolition and a vacant lot on a block that doesn’t have one right now.”


Early on, the land bank identified Chatham, with its history of stable, middle class home ownership, as one such community, and Gainer toured the neighborhood with 8th Ward Alderman Michelle Harris last year.

Harris' ward includes much of the eastern portion of Chatham, and she's particularly concerned about a section between 79th and 83rd Streets, just east across Cottage Grove Avenue from Leona Thompson and her neighbors. Although much of Chatham is owner-occupied single-family homes, this portion of Chatham has a high concentration of multi-unit rental buildings, and was harder hit by the foreclosure crisis.

"Some communities sell themselves," Harris said in a recent conversation. Others, like parts of her ward, "need help with someone telling their stories of growth." Harris thinks the land bank can help give that portion of the neighborhood the bump it needs.

While some would argue this is a prudent approach, it also raises difficult questions. One could argue that given the land bank's mandate it should focus its efforts on the hardest-hit neighborhoods -- the ones suffering the most from blight, vacancy and decay.

Take West Pullman, for instance, where nearly one in 16 homes has been vacant for more than two years. On South Prairie Avenue between 119th and 120th Streets there are nearly more empty lots than houses. The majority of homes that are there are boarded up and dilapidated.

The front door of 11928 S. Prairie Ave., for example, is completely gone. The upstairs window has been shattered and broken glass carpets a porch warped by water damage. A “for sale” sign advertises the property at $550 down and $242 a month. But just a few houses down, a family sets up a grill for an afternoon of barbecue.

What can the land bank do for a neighborhood like this?

"If the market has failed in these communities, we need a government agency, and the land bank has been designed to do just that," said Keys. "The problem is the magnitude of the challenge in those communities.”

But with the limited resources at the Land Bank’s disposal, even a full-scale intervention in a neighborhood like West Pullman could amount to a drop in the proverbial bucket.

“You could spend $4.5 million in that area very quickly and have a negligible impact on the county,” White said. “But what do you say to the other 77 community areas and 120 municipalities in Cook County that don't get any attention? You've now isolated all your resources in one area.”

White generally bristles at talk of investing in one neighborhood over another. This, he said, is missing the point. He said he plans to look at every Chicago neighborhood, as well as every part of suburban Cook County, to come up with solutions that are right for whichever community they're in at the time.

"You have to work at a nuanced level," he said.



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