Rehabbing foreclosed properties

Nearly two years ago, the Obama administration passed the federal Housing and Economic Recovery Act. With that came some $4 billion for state and local governments to buy and rehab foreclosed properties.

So far, Chicago has received two federal grants totaling more than $153 million to use as part of the Neighborhood Stabilization Program, a program that basically subsidizes developers for their work on foreclosed or abandoned properties. One non-profit organization is hoping to compete with the bigger developers while at the same time tackling issues of crime and unemployment.

Last week, Melvin Bailey took us on a tour of just one of the properties the city has acquired to turn into livable housing.

“It’s been abandoned right about nine years,” he said, standing in the middle of the West Side property in Garfield Park. “You can see that’s why you get the floors buckling here. And then you get all this old paint and crackling, falling off the wall and you got mold here. So, we know that it’s been this way for a while.”

Bailey says this house is a total gut rehab.

He’s the head of the Community Male Empowerment Project, a non-profit organization founded in 2002 whose aim is to get ex-offenders off the streets of inner-city neighborhoods and working.

“I want to put to work the hardest-to-serve people who struggle with social profiling, ex-offenders, and people who’ve been Xed out of the process,” Bailey said.

Bailey, who says he turned his own life around after a troubled past, is now one of 55 developers who have applied and been accepted by the city to work under the Neighborhood Stabilization Program. They purchase vacant and foreclosed homes to put them back into productive use.

According to RealtyTrac, an online property data service, some 72,000 properties in Cook County are currently in some stage of the foreclosure process.

“Last year in 2009 there were some 20,000 foreclosure filings in the city of Chicago,” said Ellen Sahli, first deputy commissioner of the Department of Community Development. “Not all of those become vacant properties, but nonetheless, it continues to represent an increase over the 2008 numbers.”

To combat the problem, the city has identified some 28 neighborhoods in Chicago that are eligible to receive the federal funding.

The city has identified 73 properties so far for rehabilitation. The hope is that within the next three to five years, up to 2,500 units will be rehabbed, constructed, or demolished in the hardest hit neighborhoods with the highest levels of foreclosures.

Last week, Bailey and his contractors got their first opportunity to walk through some of the other properties they will be rehabbing.

While these units appear to be in better shape than others, there are challenges.

Copper plumbing and wiring in one unit have been stolen and the furnace has been completely stripped.  To make sure this doesn’t happen again, Bailey says somebody from the project will stay in the home as it’s being rehabbed.

Late last month, Sahli and other officials toured properties on the South Side where some Neighborhood Stabilization Program homes are already going up for sale.

“This community here in Chicago Lawn is a perfect example of how that’s come together,” Sahli said. “There’s been a lot of investment along 63rd, a lot of private investment, and homeowners who have really invested in their homes and are trying very hard to keep them, so our efforts are really complementing the efforts that have been underway for a number of years, and I think were getting some good traction.”

“They get to earn a modest developer fee and in fact…many of the developers that we’re working with are very much community-minded and are seeing the opportunity to redevelop the foreclosed homes as a real opportunity to get ready for the next wave in the market,” Sahli said.

And while single-family homes can’t be sold at a profit, they can be sold with a reasonable developer fee, providing affordable housing for those who never may have dreamed of owning their own home.

Bailey says he hopes to complete renovation on the four properties he’s working on within the next six months. According to federal guidelines, the city must spend all the funding allocated in the two grants by March of 2013.

Melvin Bailey says he’s glad it’s time to finally start work on rehabbing his units.

But he knows it won’t be easy.

“Well, I’ll tell you – once you ask for it, you better be prepared,” Bailey said.

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