Creating Homeowners, Helping Neighborhoods
The powder blue house on Mott Street might have ended up like scores of other homes repossessed by HUD: boarded up, vacant, a nuisance to the community.
Instead, a miniature basketball hoop sits in the frontyard, neat white curtains hang from the kitchen window, and a family of four calls this home.
The family purchased the Boyle Heights property through a program that transforms renters into homeowners--and addresses long-held complaints about the U.S. Department of Housing and Urban Development’s handling of properties taken over when owners default on government-backed loans.
“We buy assets from HUD that are eyesores,” said Ann Sewill, director of California programs for the Enterprise Foundation. “We fix them up and we turn them into assets for the neighborhood.”
Under the program, the foundation will renovate nearly 1,700 HUD-repossessed homes in Los Angeles over the next three years, then sell them to low- and moderate-income buyers like Juan Gonzalez and Veronica Salcedo, both 28, who recently became the first family in the city to purchase a home through the program.
“It’s perfect,” Salcedo said. “We liked it as soon as we saw it.”
City officials hope the collaborative effort among HUD, the Enterprise Foundation and the city will also help rejuvenate some of the city’s besieged communities.
In some of those areas, the federal agency’s homes have been part of the problem. The Enterprise program grew out of a realization that HUD is good at lending money to buy houses but “wasn’t very good at selling them,” said Alan Greenlee, public policy director for Enterprise in California.
Nationwide each year, HUD repossesses an estimated 70,000 homes. In Los Angeles County, the agency acquires 2,700 to 3,000 properties annually. The properties are managed and sold by Golden Feather Realty Services, a private contractor with headquarters in San Antonio. But the homes sometimes end up boarded up and vacant for long periods, causing neighborhood blight, housing advocates say. In some cases the houses become magnets for all the things homeowners dread: drug dealing, gangs, transients.
“There’ve been stories of women being raped, they become drug havens, all kinds of malfeasance--especially if you had a few on the same street,” said Doug Smith, manager of the home ownership unit of the Los Angeles Housing Department.
In a classic case of one bad apple spoiling the bunch, the entire neighborhood sometimes suffers. Potential buyers shy away from the area.
“Why would you want to own a house next to a crack house owned by HUD, and how do you get HUD to do anything?” Smith said.
The sight of boarded-up homes is especially galling for housing advocates as the city struggles with an affordable-housing crisis.
Los Angeles is home to more renters than any other city in the nation except New York: 61.4% here are renters, while only 38.6% own their homes.
“Our neighborhoods are filled with vacant properties that have Golden Feather signs,” said Peter Kuhns of the Assn. of Community Organizations for Reform Now (ACORN). “Our people want to see a program that will see them move people quickly into the homes.”
A spokesman for Golden Feather said such claims are inaccurate but declined to comment for the record and referred all questions to HUD.
The goal of Enterprise Home Ownership Partners--which carries out the Enterprise Foundation’s work with HUD--is to move the department’s properties back onto the market as quickly as possible.
An agreement with HUD allows designated cities and nonprofit organizations to buy HUD-repossessed properties at a bargain, to rehabilitate the homes and to sell them at affordable prices.
Joseph Bates, director of HUD’s Homeownership Center in Santa Ana, called the collaboration “a very effective tool to ... repair the houses that we acquire through foreclosure and [provide] them to the people who are in most need.”
Enterprise has been designated a preferred buyer of HUD homes in Watts, Canoga Park, Boyle Heights, Highland Park, Pacoima and parts of South Los Angeles.
The foundation has agreed to buy every property that HUD repossesses in those communities. HUD sells the properties to Enterprise at 50% less than the appraised value.
Enterprise, a support organization for local nonprofit groups, expects to spend $32 million to buy and repair the houses each year. A dozen affordable-housing developers oversee construction, and the Los Angeles Community Design Center is the program’s asset manager, responsible for securing and keeping the properties up.
The goal is to produce completely rehabbed houses so families who have spent all their money on a down payment will not soon be saddled with huge repair bills.
Many Homes Need Major Repairs
Of the nearly 200 homes purchased by Enterprise thus far, about a quarter were built before 1923, and most require significant repairs--things like new plumbing, heating and roofs. Bedrooms are added, where possible, to accommodate larger families.
The city has pledged $33 million in “gap” financing to make the homes more affordable.
Juan Gonzalez and his wife placed a $3,000 down payment on the Mott Street house and qualified for a loan of $110,000. But the sales price was $139,000, plus closing costs and fees. The city’s Housing Department closed the gap and covered other costs with a $33,000 no-interest loan that need not be repaid until the family sells the house or refinances.
Local organizations also provide training, which all buyers must receive, in how to purchase and finance a home, said Greenlee, the Enterprise public policy director. The foundation reviews all financing too.
“We don’t want them to get in a situation where they’re in over their heads,” he said.
San Bernardino County officials said a similar arrangement with HUD is helping turn around several communities. There, instead of going through a nonprofit group like Enterprise, HUD is working directly with the county, which has purchased 572 repossessed HUD properties, with 406 already rehabilitated and sold.
The income limit for potential buyers is $55,000. The average house costs about $101,000, he said.
“Most of those houses were boarded up and had been on the market for years before we got involved,” said Tom Laurin, director of economic and community development for the county.
Ownership Improves Neighborhoods
In Los Angeles, HUD-repossessed homes are often concentrated in neighborhoods with few homeowners. More owners in the neighborhood means more people with a stake and more community involvement, said Sewill of the Enterprise Foundation. “It’ll help increase the livability of the neighborhood as a whole,” she said. “It’ll stop neighborhood blight and nuisances.”
Before purchasing their home, Gonzalez and Salcedo paid $600 a month to rent a one-bedroom Highland Park condominium with no yard for the children. After saving for two years, the couple had amassed about $4,000. Gonzalez sells auto parts, while Salcedo cares for their two children.
Months of looking for a home that fit their budget and other needs were fruitless until the family found the house on Mott Street and the special financing. It seemed too good to turn down.
Some of Gonzalez’s friends told him the neighborhood was too rough. But he was eager to avoid repeating his parents’ error.
“When [my dad] was younger, he was making good money and didn’t think about buying a home,” Gonzalez said. “They wanted me to [buy] while I’m young and not make the same mistake.”
Recently Gonzalez did something he had never done before: He mowed the grass of his own yard.
“It was a nice experience,” he said. “It probably won’t be that great later on. But being it was the first time, it was pretty nice.”
