North Minneapolis rehab sales spark call for equity

Housing advocates in north Minneapolis are pushing for changes in how the city unloads dilapidated vacant homes, eyeing them as a prime way to reduce racial disparities in homeownership.

The program of "recycling" city-owned vacant homes to those willing to rehabilitate them was little known until this spring, when city staff sought a wider range of buyers as federal subsidies aiding nonprofit developers began to dry up. They've since approved the sale of 16 more homes, some of them for as little as $1, largely to individual rehabbers who intend to prepare them for owner occupancy.

But a number of North Side advocates say the city should be doing more to ensure the homes are targeted to the area's existing residents, particularly minority renters who might not qualify for financing needed to rehab deteriorating houses, which can cost upward of $70,000 to fix up.

"If we as a city want to solve the problem of disparities between blacks and whites in terms of homeownership, what do we need to do?" asked Council Member Blong Yang, who represents the area. "Well, we need to figure out how we can get … people of color into those homes."

The city has sold or approved the sale of 66 homes through the program since 2010. Many of the homes are siphoned from a larger pool controlled by Hennepin County, which gets them after owners stop paying property taxes for several years. These tax-forfeited properties are otherwise sold to the highest bidder at semiannual county auctions.

The city on Friday released the first five of the next 25 homes it will sell, with prices ranging from $1 to $10,000, giving buyers a full year rather than the previous requirement of six months to complete the rehab. Preference is given to buyers who intend to live in the homes, but only three made such offers in the last round.

Hoping to stoke wider interest among prospective homeowners, Yang held a forum in late July featuring fliers emblazoned with "$1 Housing" in English and Hmong.

The discussion comes as the North Side housing market begins to rebound after being slammed by the foreclosure crisis. The median sales price of homes sold this year in the Jordan and Hawthorne neighborhoods — areas hit particularly hard during the recession — climbed by 29 percent and 38 percent to $98,450 and $124,500, respectively, over the same period in 2014, according to the Minneapolis Area Association of Realtors.

"If you don't put stakes in the ground for the existing residents, if you don't do explicit things to support the people who live there now, history shows us that market forces aren't equitable," said Neeraj Mehta, a north Minneapolis resident and director of community-based research at the University of Minnesota's Center for Urban and Regional Affairs.

Mayor Betsy Hodges agreed the vacant homes program could help restore wealth for those who lost it to the foreclosure crisis. She suggested the city could be partnering with local nonprofits already focused on providing financing assistance. Targeting city sales to certain groups is often barred by fair housing laws, she said, but there may be opportunities to make the rehabs cheaper.

"Can we connect people to programs who do the rehab?" Hodges said. "Can we connect with trades training programs, to say, 'Hey can you rehab these homes as part of your training program — either at a reduced rate or with some grant funding?'"

Prospective homeowners with poor credit have some options amid the complex North Side housing ecosystem, including credit improvement programs and a special contract for deed initiative known as Project: Reclaim. Loans to purchase and rehab a home are available to buyers with good credit through a Federal Housing Administration program. The city also offers up to $7,500 in down-payment assistance for low-income residents looking to buy a home, a program 710 people utilized between 2008 and 2014.

"There has to be a deliberate attempt to do outreach to people who live here and then connect them to the financial resources necessary to actually buy and renovate a [home]," Newby said, adding that programs like the FHA loans "can be expanded. We can create local versions of them."

Jeff Washburne, executive director of the City of Lakes Land Trust, suggested the city could use anticipated tax growth in north Minneapolis to subsidize rehab assistance — through a tool known as tax increment financing.
"I think that values are going up and that the market function is taking over," Washburne said. "So it's almost thinking to the next stage to say, 'All right, if we presume these things are going to happen, then what?'"

The city could use more buyers. It was able to sell 16 homes in the last round due in part to one rehabber, Wilson Molina, who purchased eight properties. Seven of those homes received no other bids, despite a number of people touring them.

Molina, who is based on Lake Street, said he hopes to renovate his most recent acquisitions by next summer, at an estimated cost of $60,000 to $70,000 each, and sell them for under $150,000.

Another rehabber who bought two houses, Robin O'Brien, said she will sell them to households making less than $99,000 a year under the terms of her loan through a nonprofit.

But others, like Ancestry Books founder Chaun Webster, are suspicious of outside rehabbers selling homes at prices that may be too high for local residents. Webster helped create a group called the Firehouse Collective to advocate for more local ownership of properties on the North Side.

"This is an investment venture on their end," Webster said. "Why can't a working class, working poor family invest in the same way that a Wilson Molina is investing?"

Eric Roper • 612-673-1732