RDA to turn over 200 foreclosed homes

A home in foreclosure is easy to spot.

It's the empty one with the new steel padlock and boarded-up windows. It's the place with the coldhearted sign: "This property is corporately owned."

Fearing that too many unoccupied houses could fall into disrepair and exacerbate blight, Philadelphia's Redevelopment Authority (RDA) will spend $16.8 million in special federal funding to buy, renovate, and resell at least 200 foreclosed properties.

The city project is one piece of the national Neighborhood Stabilization Program, funded by Congress last year at $3.9 billion. This year, it has been expanded by $2 billion as part of the Obama administration's recovery plan.

The 200 properties are a tiny fraction of the 8,694 homes in foreclosure proceedings last year in Philadelphia, according to the RealtyTrac tracking service. But the RDA will be able to use the funds to target neighborhoods most at risk of experiencing spreading blight from foreclosures, said Terry Gillen, the agency's executive director.

Those sections include parts of West Philadelphia, Southwest Philadelphia, East Germantown, Oak Lane, and the Lower Northeast.

"We'd like to find a block where [a foreclosure] is the only vacant house, or one of only two," Gillen said.

Before it hastens the demise of the entire block, the vacant house would be improved, with the stabilization money used for basics such as roof repair and installation of energy-efficient windows.

The 2100 block of Medary Avenue in West Oak Lane is the type of neighborhood the authority has in mind. All of the two-story homes, fronted by porches and patches of green, are well-tended - save the one property in foreclosure proceedings. Its cement steps are chipped and the wood porch is sagging.

Neighbors, who are mostly elderly homeowners, complain that the sight of one vacant house brings down the value of everyone's property. They worry, too, that if the home fell into the hands of an investor instead of a resident owner, the block could tilt toward rentals.

"We need people to move in," said Nellie Gregg, who has lived on the block since 1981. "We try to keep our houses up. That's what we're all about."

All 50 states, and 250 cities and counties, are getting neighborhood stabilization funds from the U.S. Department of Housing and Urban Development. Although future funding will be based on competitive bidding, the first round used a formula of population, poverty, and foreclosure rates.

The number of foreclosure filings in Philadelphia in 2008 was up 50 percent from the previous year; by HUD estimates, 5.7 percent of homes in the city are in foreclosure.

Still, the problem here is not as severe as in other urban areas.

Detroit, with a 16 percent foreclosure rate, is getting $47 million from HUD and will use much of it to demolish vacant properties. The Miami-Dade area, with an 8.8 percent foreclosure rate, is receiving $62.2 million.

Under federal guidelines, the $16.8 million for Philadelphia must be spent in the next 18 months. "We're comfortable we can do that," Gillen said.

The RDA is lining up developers - including nonprofit community groups and private firms - and has approval from its board to begin work immediately on the first five houses.

From HUD funds, the RDA will make loans to the developers to buy properties from banks. For their services, the developers would get a $15,000-per-house fee. Their goal will be to resell properties as soon as possible in order to put new residents into vacant homes - and to repay the RDA loans.

The agency finds itself in a race with investors and speculators, who are scanning the same neighborhoods for properties to acquire.

"There are too many other people playing in the market," Gillen said.

While banks are on board with the concept, she said, the RDA is "a little nervous about how quickly the banks can move," especially ones with out-of-town ownership.

The city has identified about 20 zip codes with the most foreclosed properties. "Eighty percent of the money will go to those zip codes," Gillen said.

Bill Sales, head of the Hispanic Association of Contractors & Enterprises, a nonprofit developer in the Fairhill section of North Philadelphia, said certain neighborhoods are hot spots for foreclosures: Juniata, Olney, and the Lower Northeast.

A vacant house is "like the bad apple in a barrel," he said. "If you leave one, the others will go bad."

HACE has applied to be one of the developers. The challenge will be turning around and reselling homes in today's slow market, Sales said. The difficulty of that "remains to be seen."

The New Kensington Community Development Corp. in Kensington also is seeking a role in the program.

"The worst thing is if a house starts getting vandalized," said Sandy Salzman, executive director of the nonprofit developer.

"We want to get good vacant houses back into the hands of people again."


Contact staff writer Jennifer Lin at 215-854-5659 or jlin@phillynews.com.

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