The City Council is considering measures to address Oakland’s foreclosure crisis. A leader of Urban Strategies, a local community advocacy organization, is making the rounds of the Council members advocating a Land Trust as part of a solution. The proposal is fairly complicated and requires a great deal of money so it’s tempting to believe that it must do a great deal of good. It does not. The Land Trust is an attempt to use the foreclosure crisis as an opportunity to advance Urban Strategy’s ideological agenda of bringing additional deed-restricted scattered-site low-income housing to some of the most distressed neighborhoods in Oakland.
As an East Oakland homeowner, I have seen the effects of the foreclosure crisis, and have seen my home equity evaporate. I know the issues facing this area, having been involved with the Central City East Redevelopment Project Area Committee (CCE PAC) since it was organized in 2003. I am currently honored to serve as the Chair of this Committee.
The measures being considered address the high concentration of foreclosed, bank-owned properties, particularly in Central East Oakland, Elmhurst and West Oakland. The high concentration of foreclosures in these areas has depressed home prices by 60% and more from market high, fueling further defaults and foreclosures. Vacant bank-owned property is subject to vandalism and looting, blighting the neighborhood and further depressing values. The downward spiral must be stopped.
The foreclosure crisis is a credit crisis. Money is not circulating. Home prices are dropping in search of buyers. There is no other solution than to connect buyers with these homes. The question is how government can most effectively assist in that process. I suggest that responsible government first and foremost should focus on attracting and qualifying buyers in order to stabilize prices thereby slow the rate of default.
The Land Trust does not seek to restore this dynamism to the housing market which the credit crisis has taken away. Instead, it proposes intervening in the market as an alternate buyer, and freezing these houses at their current depressed value. If the Land Trust gets the huge subsidies (the last number I heard was $20 million) Urban Strategies is requesting, it would buy foreclosed properties after they have been renovated. Then the Trust would retain possession of the land, while selling only the house to a low-income household. The housebuyers will not have clear title. Instead the property will be subject to affordability restrictions in perpetuity. When the houseowners want to sell the property, the Land Trust would tell them who they could sell them to, and at what price.
Bank-owned properties in the target areas are selling for $170,000 or less. With a moderate down payment and a reasonable fixed mortgage, houses at these prices could cost less than $1,300 a month, including taxes and insurance. Average household income in the flatlands of Central East Oakland is $48,000. Houses in this area are affordable to the people who live in this area now, using HUD’s definition of affordability. You don’t need a land trust to make these houses affordable. The market has made them affordable. A relatively inexpensive homebuyer assistance program would help the people who already live in these neighborhoods into fee simple homeowners with the opportunity to build equity, to build household wealth, and even to trade up if they need or want to.
The houses in the targeted areas are commonly 50 to 100 years old. I can testify that old houses are expensive to maintain. Land Trust buyers will not have access to home equity loans first of all because they are not gaining equity. Land appreciates but houses depreciate. The Trust owns the part that goes up in value and the houseowners are stuck. Secondly, lenders will not be interested in the houseowners because they do not have clear title. When major repairs come up, the houseowners, because of their low-income with limited access to credit, will have no means to pay for them. They are less motivated to fix up their homes, since they don’t benefit from market appreciation. The houses will deteriorate. The land trust is a road map to blight.
The CCE PAC is involved with low-income housing. The guidelines for redevelopment come from the US Department of Housing and Urban Development (HUD). HUD requires the districts to use 20% of their funds on low-income housing. When we as a Committee discussed building new low-income housing, members from the Central East Oakland and Elmhurst stressed with a passion that would cause the paint to peel off the walls that their areas did not need more low-income housing. Their areas were already supersaturated with low-income housing. Maps produced by the Oakland Housing Division later substantiated this claims. CCE PAC is trying to attract new retail to the area. Retailers are already deterred by the concentration of low-income housing in these areas. These neighborhoods don’t want more deed-restricted low-income housing and they don’t deserve to have the Land Trust forced upon them.
In short, Land Trusts as proposed do not even address, much less mitigate the foreclosure problem. They will further depress what are already some of the most distressed neighborhoods in Oakland. They hurt the neighborhoods they portend to help and they hurt the people they portend to help. Land Trusts are very expensive subsidies that are unnecessary because the market has already made these houses affordable to the people who now live in the neighborhood. For a relatively modest cost, a homebuyer assistance program could put lots of homes in the hands of current Oakland renters. A hugely expensive Land Trust could put a few homes in the hands of a massive bureaucracy managed in part by an ideologically driven private agency.
Tom Thurston is an East Oakland resident and Chair of the Central City East Redevelopment Area PAC.