HOA Nut House

NY Times

Across the United States, neighborhoods are littered with an estimated 900,000 vacant homes, the result of foreclosures, bank repossessions and abandonment. And with defaults rising nationwide, the number is expected to grow well into next year.

Such blight is contagious. Empty houses pose fire and health hazards, attract crime and prolong the housing slump by depressing the value of nearby homes and adding to the nation’s already bloated unsold inventory. No one is immune. Even if your neighborhood looks fine — and you are financially secure — foreclosures in your metropolitan area mean less property tax revenue and, as the downturn deepens, less state sales tax revenue.

If the hardest-hit communities do not get help soon, the damage may be irreparable. Most foreclosed houses would sell eventually, but not in time to halt the decline in the quality of life that is already under way, or the fracturing of the areas’ tax base.

The federal government is only limping to the rescue. The Department of Housing and Urban Development is expected to release a plan next month for funneling nearly $4 billion to states and cities, mainly to buy and redevelop foreclosed homes.

The sum is far too small to have a broad impact. Properly targeted, it could stanch the decline in some of the neediest areas, and ideally, begin to revive them by attracting private investment. Success stories could serve as examples for other communities, when, as is likely, a future Congress has to provide more relief.

Success is not assured. The White House opposed the redevelopment effort as a bailout of speculators. It finally dropped its objection, but Congress must guard against delay or any other political games.

HUD must avoid the temptation to spread the money far and wide, an approach that would score points with varied constituencies but would fail to target the neediest areas. To make sure the money goes where it is needed most, HUD should share the data it is using to devise the distribution formula. State and local officials must also carefully target the money they receive.

Even if government officials perform well, the redevelopment effort could still fail. The law requires that the local governments buy up foreclosed houses at a price that is below the current market value. That could still be a good deal for sellers — generally lenders or mortgage firms — since property values are continuing to decline. But if lenders are not willing to take a loss upfront, the sales will not go through and the unspent money will revert to the Treasury.

If the mortgage industry is not ready to deal, Congress and state and local officials should assert the public interest, giving homeowners and communities more leeway to counter the industry’s stance. Localities could raise the costs for registering empty homes and the charges and fines for maintaining them, increasing the incentive for a quick sale.

The best outcome would be for government officials and lenders to make deals, soon, that strike a balance between the best possible prices and the highest possible public good.

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