Strategies for Distressed Properties

Tools & techniques to help municipalities stabilize neighborhoods

Cities and towns throughout Massachusetts are being challenged by rising foreclosures and abandoned properties. If unchecked, this disinvestment can depress property values, drag down neighborhoods and wreak havoc on local budgets. To combat this, MHP has put together a web page to help municipalities develop a step-by-step strategy that will help them:

Assess the health of their neighborhoods
Define and quantify particular problems
Develop and implement specific strategies to combat disinvestment.

Included are information tables that can be downloaded so municipalities can develop a punch-list of action items that will help them respond effectively. If you have any questions not addressed here, please email MHP.

Step 1: Interpret economic indicators

Awareness of key economic indicators can help municipal officials anticipate problems before they become intractable. The data sources are readily available and can be used by municipal officials, planners, housing and economic development officials.

This Economic Indicators Table (Table 1) lists indicators that should be tracked, where you can find this data, and how the analysis can inform your community on how to respond. These indicators are only available at the municipal level. How to find more specific neighborhood and property-level data is explained in Step. 2.

Step 2: In-depth data analysis

Before embarking on a strategy to deal with disinvestment in neighborhoods, municipal officials should go beyond anecdotal information and analyze the nature of the housing problem. For example, it is important to understand who is being impacted by disinvestment and foreclosures. Is it homeowners, renters or investors? Finding the data that will tell you this will increase your chances of crafting effective strategies.

Alan Mallach, a senior fellow at the National Housing Institute, has written extensively on neighborhood disinvestment and revitalization. Through this research, he has come up with a list of questions to help determine a community's housing picture:

What types of property are being abandoned in the community and are they concentrated in a particular neighborhood?
Are there properties not yet foreclosed or abandoned that might be at risk?
What are the market conditions in the neighborhoods where properties are either already abandoned or at-risk?
What are the abandonment triggers at work in the community?

The Community Data Analysis Table (Table 2) shows the type of data that a community should collect, where you can get the data, and ways to analyze it.

Step 3: Prevention & stabilization strategies

With this data analysis, your community is now able to diagnose disinvestment and whether it is concentrated in certain neighborhoods. This can be a solid basis for developing strategies that are specifically tailored to the problem and the neighborhood.

For example, knowing that foreclosures are increasing for investors and not homeowners might lead you to adopt a strategy that focuses on the specific problems associated with absentee ownership. Solutions such as creating a Vacant or Foreclosed Properties Registration Ordinance have been used in many Massachusetts communities to discourage abandonment and to track disinvestment patterns.

To help you sort out which strategies might work best, MHP has created two tables that offer both preventative and stabilizing strategies. The tables are:

Prevent Neighborhood Distress/Increase Stability Table (Table 3): This focuses on preventative and stabilizing strategies for neighborhoods.
Support Homeowners/Tenants Table (Table 4): This focuses on preventative and stabilizing strategies for problems faced by homeowners and tenants.

Step 4: Comprehensive municipal strategy

Creating an overarching strategy across municipal departments is a crucial part of stabilizing neighborhoods. The strategy should include all levels of government from the chief elected official to municipal departments such as health, inspectional services and the police. A broad-based strategy could include:

Prevention activities to help homeowners and tenants remain in their foreclosed properties, thereby preventing problems like crime, property abandonment
Use techniques like receivership and strict code enforcement to help identify, stabilize and improve properties so as to prevent further neighborhood deterioration
Programs to help new homeowners purchase foreclosed or distressed properties, thereby boosting owner-occupancy and responsible homeownership.

To give you a better picture, MHP has written brief profiles on strategies that Framingham, Salem, Springfield and Worcester have implemented to combat distressed properties and increase neighborhood stability.

Ongoing MHP programs to support neighborhood stabilization

In adopting an overall strategy, keep in mind that MHP has several ongoing efforts to help communities stabilize neighborhoods. These efforts include:

Receivership: MHP and the Attorney General's Office have been helping communities use receivership to stabilize distressed and foreclosed properties. MHP has worked closely with Worcester and Springfield, and their designated non-profit administrators to take temporary control of troubled properties. MHP has produced a receivership guidebook to help communities understand how to set up a program.
The Neighborhood Stabilization Loan Fund: A $22 million loan pool funded by MHP, private lenders and non-profit foundations to support the acquisition of properties in neighborhoods hard-hit by foreclosures. This is for non-profit and for-profit developers who are investing in lower-income neighborhoods that are part of a targeted municipal stabilization effort. For more information, click here.

For more information on municipal strategies to promote neighborhood stabilization, contact MHP.