Newark's Cleanup Mission

AFFORDABLE HOUSING FINANCE • June 2008

New mayor aims to turn abandoned properties into affordable housing

BY BENDIX ANDERSON

NEWARK, N.J. - The latest chapter in Newark’s battle against abandoned properties can be told by three houses on a quiet block in the city’s West Ward.

One is brand new, built by speculators on a vacant city-owned lot during the real estate boom here. Now it stands empty. Tidy metal for-sale signs cover the windows to keep out vandals. The second house, just a few doors down at 185 S. 10th St., is swarming with construction workers. Its owner is fixing up the property, after more than 10 years of neglect, in response to city threats to seize the property. A hundred feet away, a third house was sold by the city this January to qualified redevelopers to become moderately priced workforce housing.

Newark has struggled with foreclosures and abandoned properties since riots tore through the city in 1968. As yet another wave of foreclosures breaks, a new mayor has ambitious plans to work with developers, especially those who specialize in affordable housing, to reclaim abandoned housing and put vacant properties back into service.

“We are enthusiastically looking for partners,” said Mayor Cory Booker. The 39-year-old took office in 2006 after years as a tenant rights activist and a contrarian voice on the City Council.

As of March, 557 units of affordable housing were under construction in Newark, up from just 137 units two years earlier. To help finance this development, the city is providing affordable housing projects with tax abatements and much of Newark’s $4 million allocation of federal HOME funds.

This spring, Newark developers will turn in six applications for low-income housing tax credits (LIHTCs). A seventh application is expected to be submitted in the fall. That’s up from just one or two applications a year for the last four years, according to Michael Meyer, the city’s director of housing and real estate.

This spring, local developer New Community Corp. will submit its first application for LIHTCs since 2001. The nonprofit plans to co-develop 60 affordable apartments at Roseville Commons with Montclair-based RPM Development Group. For the last several years, land and construction costs have been too high to develop affordable housing here, said Mary Rigby Abernathy, the organization’s director of project development.

But that’s changing as Newark signs over some of its own land to workforce housing developers and takes action to reclaim vacant properties from speculators and neglectful owners. In January, the city sold 100 small properties under a new policy that requires all city-owned real estate to be sold at fair market value unless the developer plans to provide “significant, visible community benefits,” such as new affordable housing. The city plans to accept detailed proposals for 12 to 20 large properties in July and to sell another 100 smaller lots in the fall.

The new land policy is a big change for Newark, where corruption and connections used to rule the day. The city’s last mayor, Sharpe James, was convicted of fraud in April for helping an ex-girlfriend with no development experience purchase nine vacant, city-owned properties for a total of $46,000. The woman later resold the properties at a profit of more than $600,000.

“We are a city that seemed to be a very closed shop, where you had to know somebody to get a deal done,” said Mayor Booker. Before he was elected the city’s top official, Booker won a lawsuit to stop the sale of land from the city’s portfolio of 1,400 vacant and abandoned properties at prices below market value.

Private real estate speculators have built thousands of two-family structures over the last 10 years, in some cases in incongruous locations. The result: A brand-new home selling for $400,000 can stand next to a vacant house where smoke stains rise in broad black stripes over the windows. Badly chosen locations and oversupply have already forced many sellers to lower their prices more than $100,000, according to local experts.

Throughout Essex County, home loan foreclosures are on the rise. More than 1,200 homeowners lost their properties in 2007, including many who paid too much for houses built by speculators. The city is bracing itself for more trouble. Between now and September, the interest rates on more than 600 subprime, adjustable-rate loans will reset in Newark. The following year, from October to September, another 628 loans will adjust.

As the air leaks out of the real estate bubble, some land speculators are walking away from their properties, which in many cases are vacant and have been allowed to decay, according to officials. Last fall, the city seized 125 properties for unpaid property taxes—Newark’s first tax foreclosures in two-and-a-half years.

To help revive neighborhoods with abandoned properties, Newark has enacted a cluster of laws under New Jersey’s Abandoned Properties Rehabilitation Act that allows officials to quickly take possession of “legally abandoned” buildings that are behind in their taxes, uninhabitable, or infested with vermin.

In the city’s West Ward, for example, the city threatened to seize several dozen properties last July. About half of the owners have chosen to rehab the buildings themselves, said Meyer.

One of those buildings is the brick townhouse at 185 S. 10th St., which is now halfway through a gut rehab. The 100- year-old home has been vacant since at least 1998, with boarded-up windows and a collapsed roof.

This summer, the city will take possession of the remaining unrenovated vacant houses in the West Ward. The seized properties will be rehabilitated by a local developer, the Tate George Group, under a plan created by the Urban League of Essex County.

Newark has also identified 350 more vacant and abandoned properties across the city. Officials sent another round of letters in December to notify those owners that they stand to lose their buildings. Meyer expects to see construction crews on about half those properties later this year.