Foreclosure Echo

 

David Reiss CC BY-NC-SA

Linda Fisher recently posted a pdf of The Foreclosure Echo: How the Hardest Hit Have Been Left out of the Economic Recovery, a book she co-authored with Judith Fox. It came out before the pandemic, so you might have missed it. The abstract reads,

This book tells the story of the foreclosure crisis from a new perspective – that of ordinary people who experienced it. This angle has not been thoroughly communicated before now. The authors are legal academics who have worked for decades defending low- to moderate-income people from foreclosure and challenging predatory lending practices. They have a wealth of experience representing people whose American Dream was shattered when they were threatened with losing their homes. Using actual experiences – often examined through a legal lens – supplemented by economic, social science and legal research, The Foreclosure Echo explains how people experienced the crisis and how their lenders and public institutions let them down. The book also details the lingering effects of the crisis – such as vacant and abandoned buildings – and how these effects have magnified inequality. Finally, the book suggests reforms that could help avoid another crisis.

It is a timely read, and it resonates with some of the challenges homeowners will face as the consequences of the pandemic work themselves out in the housing market with the expiration of the various foreclosure moratoria that were in effect during the earlier stages of the pandemic.

Affordable Housing and Air Rights in NYC

NYU’s Furman Center released a report, Unlocking the Right to Build: Designing a More Flexible System for Transferring Development Rights. While its title does not reflect it, the report is really about increasing the supply of affordable housing in New York City. It opens,

New York City faces a severe shortage of affordable housing.  . . . Addressing this shortage of affordable housing is one of the biggest challenges facing the new de Blasio administration. The city’s affordable housing policy will undoubtedly require many strategies, from preserving the existing stock of affordable units to encouraging the construction of new affordable units. Over the past decades, the city has managed to subsidize the development of new affordable units in part by providing developers with land the city had acquired when owners abandoned properties or lost them through tax foreclosures during the fiscal crisis of the 1970s. Almost none of that land remains available, and the high cost of privately owned land poses significant barriers to the production of new affordable housing.

In this brief, we explore the potential of one strategy the city could use to encourage the production of affordable housing despite the high cost of land: allowing the transfer of unused development rights. As we describe in further detail below, the city’s zoning ordinance currently allows owners of buildings that are underbuilt to transfer their unused development capacity (often referred to as transferable development rights or TDRs) to another lot in certain circumstances. (1-2, footnotes omitted)

The report estimates that buildings below 59th Street in Manhattan that cannot use all of their development rights because of landmark restrictions could generate sufficient TDRs to produce about 7,000 affordable housing units. That number would be a significant step toward Mayor de Blasio’s goal of producing or preserving 200,000 units of affordable housing, so there is no doubt that this policy is worth a look. And the fact that one of the authors of the report, Vicki Been, is now the Commissioner of NYC’s Department of Housing Preservation and Development will ensure that it does get such a look!

The report acknowledges that loosening the restrictions on TDRs has downsides as well, such as the possible construction of big buildings that are out context of neighboring properties. But the report is intended as a “first step” in the exploration of an innovative land use policy. (19) And it certainly is a step in the right direction.

Don’t Abandon Hope

According to Dante, Hell’s entrance has a sign that reads, “Abandon all hope, ye who enter here.”  As communities face the foreclosure crisis and see their population shrink, they need to come up with a plan to deal with this new reality. I have previously wrote about Housing Abandonment and NYC’s Response and am pretty confident that abandoning hope, and just letting the cards fall where they may is the worst path for a community to take.

I was quoted in a story in Joliet, Illinois’ Herald-Sun, Joliet Grapples with Empty Building Syndrome, that reads in part:

David Reiss, a law professor who teaches community development, property and real estate courses at Brooklyn Law School in New York, agrees. He has written about and studied empty residential spaces, but he’s also watched firsthand how New York state got aggressive about empty residential buildings in the 1980s by acquiring them and selling them to private or nonprofit developers.

“It just paid off in spades,” he said.

Reiss said demolishing empty buildings that can’t be used is better than having “derelict, hulking structures in the middle of the community,” he said. “Better to have open space than crumbling structures. You don’t want these ghosts or boogeymen to haunt a community.”

It doesn’t make sense to throw money into something that won’t pay off, he said.

“So I certainly think a community led by its mayor and city council really wants to have an intelligent plan,” he said. “It’s important to have momentum.”

The worst thing to do is to ignore the problem or not see it, he warned.

“You really need the civil leaders to believe in the community and plan for its rebirth,” he said. “If you don’t have that, you’re kind of on a life raft at sea.”