Minneapolis is looking for more Charlie Brownings.
The contractor bought a dilapidated city-owned former orphanage on the North Side and recently converted it into a side-by-side duplex fit for a home improvement magazine. The house had been sitting empty since 2007, but a couple from south Minneapolis will be moving in this April.
“A lot of people look at me and think I’m [an idiot] for some of the projects I do,” Browning said of his razor-thin profit margin on the project. “But I love doing this.”
Minneapolis officials are intensifying efforts to persuade people to buy abandoned homes, hoping to boost homeownership and reinvestment in some of the city’s most distressed neighborhoods. The effort follows years of a massive government effort to buy, build, rehab or demolish housing on the North Side, much of it paid for by more than $33 million from the federal government’s Neighborhood Stabilization Program.
That program is now drying up, and with the foreclosure crisis receding, the city took the unusual step this winter of inviting the public to sessions on how to buy and rehab city-owned vacant houses. Though largely the domain of nonprofit developers in recent years, Minneapolis officials say they will give preference to buyers who intend to live in the homes.
The effort has given rise to criticism that the City Hall bureaucracy and extra financial hurdles still make the process too difficult for all but the most dedicated rehabbers.
“There’s a lot of stuff that needs to happen for folks to move up to the North Side and actually help us to rebuild,” Council Member Blong Yang told a packed meeting in Powderhorn Park last week. “I’m putting a lot of pressure on [city staff] to make this process a lot easier.”
City assessor records indicate that home values in even the hardest-hit areas are starting to creep upward, potentially making the area more attractive to home buyers looking to take a chance on an abandoned house.
About 314 of the 550 vacant properties in the city are located in the North Side’s two wards, based on an analysis of city records. Many of them are privately owned, but more than 100 belong to Hennepin County or the city — largely due to unpaid taxes. The city primarily acquires its homes from the county and is now in the process of trying to sell the 24 homes in its inventory.
Critics say the homes aren’t moving back onto the tax rolls quickly enough.
“What we’re doing is not working,” said Council Member Lisa Goodman, who chairs the city’s community development committee. “So any option that would get these homes into the hands of people who want to restore them and live in them has to be something we think about differently.”
Hennepin County is also rethinking how it unloads vacant properties it gets through unpaid taxes, which are auctioned off if cities don’t claim them first. Records show the county has sold about 185 properties in Minneapolis through that process over the past five years, including both homes and parcels of vacant land.
They are considering a new program to sell some homes for $1 to those who agree to rehab and live in them for a number of years. “The one thing we heard in north Minneapolis over and over again is, ‘We don’t care who’s here, we just want reputable people coming and going out of these houses,’ ” said Mark Chapin, the county’s director of resident and real estate services. “Vacant houses don’t benefit anybody.”
The city has also demolished more than 260 homes since 2008, almost entirely on the North Side. About 31 of those empty lots later became new houses, often with the help of government subsidies. The city now has 250 empty lots for sale, about 86 percent of which are located on the North Side, in addition to its inventory of homes.
Nonprofit developers and others passed on the old orphanage because the financial numbers didn’t work, city staff said. But after hearing about it from a friend, Browning took a chance.
Browning spent $222,000 on the project — including the $17,500 purchase price from the city — and is selling it to a south Minneapolis couple for $252,000. Six percent of that goes to the Realtor, leaving him with a $15,000 profit. He now has his eye on an empty, city-owned home across the street, which sits boarded. But the price would need to be $1, he said, given the money it will take to repair it. “There are so many vacant properties over here. … We need to get the word out,” Browning said.
Yang agrees the prices need to be lower. Asking for fair market value has scared off some prospective buyers, he said, leaving the properties empty and attracting vandalism that costs about $3,000 a year. “We need to find a better price range … so that it’s an incentive for people to get into the market,” Yang said.
The city has sold 40 homes for rehab since 2010, almost all to nonprofit developers relying on public subsidies for the project. But as they solicit more people to buy, city officials are also careful to warn do-it-yourselfers to bring expert help since some of the houses have structural damage, missing plumbing, lead-based paint and asbestos. “Frankly, someone who doesn’t have experience working with the level of rehab that’s required on these houses could be surprised by how expensive and how challenging it can be,” said Roxanne Kimball, a senior project coordinator at the city’s development agency.
But many say the process needs to improve if average people are going to participate.
Kameron Alexander has wanted to buy a small home on his block on Queen Avenue for his mother ever since a real-estate agent’s sign went up in late 2013. But the city scooped up the property, which had slipped into foreclosure, for $40,000.
Alexander spent months getting bounced around the city’s development department. The City Council finally approved the sale to him this February, for $8,000.
“If I wasn’t buying the house for my mom and I already wasn’t a resident of the neighborhood … I would never have gone through that process for nearly two years,” Alexander said. He estimates the house, which suffered tornado damage and has no functioning kitchen, needs $20,000 worth of work.
The city’s manager of residential and real estate development, Elfric Porte, said they had begun marketing the property before learning of Alexander’s interest. But the nonprofit developers wouldn’t bite even with potential subsidies, he told a council committee in February.
“By opening up the process we have more individuals that are going to be looking at these,” Porte said in an interview. “And as a result, we’ll be able to accomplish the goal of trying to put these properties back” into private hands.
Porte said they intend to tweak the process as they identify areas needing improvement during their first sales this year.
Unlike buying from a private party, the city process includes extra hurdles, such as requiring a 10 percent refundable deposit above the purchase price. Even after the city markets the property and holds open houses, its approval process takes more than three months.
Mike Atlas, a general contractor who lives in Brooklyn Center but wants to move back to the city, is discouraged by the remaining obstacles. “It doesn’t really leave room for someone like myself, who’s been born and raised in north Minneapolis, a self-proprietor, to really get in and take part in it,” Atlas said.
Eric Roper • 612-673-1732