Minneapolis keeping an eye on foreclosures

Although the Twin Cities area is a leader in responding to the foreclosure crisis, it needs more tools for dealing with the neighborhood challenges created by some new investor landlords who don't manage their properties well, according to a report to be released Wednesday.

Many of the best practices for responding to waves of foreclosures already are in place in Minneapolis or St. Paul, but Minneapolis leaders now want to focus on investors who are snapping up foreclosed single-family houses.

"It's very hard to manage them well," Mayor R.T. Rybak said at a meeting with housing officials.

According to the city, more than 1,500 single-family homes were converted to rentals in the past two years, a number up sharply from 2007. And those are only the conversions the city knows about. It dedicates one housing inspector to searching for unlicensed rental homes.

The report by PolicyLink, a national nonprofit advocating social equity, was commissioned by the Northwest Area Foundation and Family Housing Fund, which advocates for and helps fund affordable housing. The report's authors met Tuesday with east-metro housing officials and plan to meet Wednesday with their Minneapolis counterparts, to begin selecting strategies they want to pursue.

HousingLink, a local group, reported Tuesday that foreclosures rose 28 percent statewide in the first three months of 2010, compared to a year earlier.

Minneapolis foreclosures had dropped 27 percent in 2009 compared to a year earlier, but they're running slightly higher so far this year. Analysts say the latest round seems to be driven more by the recession's impact on jobless homeowners.

But problem investors are still out there, the report's authors said, citing buyers who make only minimal repairs before flipping houses, those who buy with little investment and either rent the property or hold it vacant until the market improves, and some who try fraudulent rent-to-own schemes.

The report recommended focused housing code enforcement, which Minneapolis already is doing with landlords whose properties pose problems. The city is also analyzing whether to target code enforcement at landlords who own multiple single-family homes. "Those have proven to be particularly problematic," said city inspections director Henry Reimer. "We want to get out in front of them."

It also urged that the new privately funded Twin Cities Community Land Bank be used to acquire properties ahead of investors, because the nonprofit can act more nimbly than cities and nonprofits that are hampered by red tape. Minneapolis and St. Paul should also try to expand the number of lenders who offer them right-of-first-refusal on foreclosed properties, it recommended.

Other recommendations include keeping incentives for homeowners to buy foreclosed homes, requiring training for all landlords, figuring out ways to buy and rehab small multifamily rentals when they're foreclosed, and reducing concentrations of housing for people with federal housing vouchers in low-income areas.