Jason Grow

Abandoned homes lined the streets of Olneyville in Providence, R.I., sad, steadfast tattoos of the Great Recession, stubbornly staining the landscape, daring to be removed.

The neighborhood, one of the oldest in the capital city, looked very much like what it was: an area hit hard by the foreclosure crisis of the past half decade.

To help heal the scars from the boarded-up, vacant buildings, locally based Olneyville Housing Corp. redeveloped 12 of the town’s foreclosed properties, along with several vacant lots, into 40 affordable homes.

“We had hundreds of properties to choose from, but these were focused around an elementary school,” says Frank Shea, ­executive director of the 25-year-old nonprofit. “Rather than the school being surrounded by abandoned buildings and nuisances, we wanted to provide well-maintained community assets.”

Gretchen Ertl

Olneyville Housing acquired the properties—mostly small ­infill developments with just a few units—using Rhode Island Housing’s Land Bank program, which purchased nine foreclosed properties for about $416,000 and held the sites while the housing developer applied for low-income housing tax credits (LIHTCs) and other financing.

The housing finance agency’s program is helping other affordable housing developers in the state, as well, overcome one of their toughest challenges­—acquiring sites to build on or preserve. Entities such as Olneyville Housing are saddled by the need to piece ­together multiple sources of financing for their deals, a long, time-­consuming process. The Land Bank program snatches up desirable properties before they’re bought by market-rate interests and the opportunity to use them for affordable housing is lost.

Land of the zombies

While the number of foreclosures has ebbed since the housing crisis, the problem is still pervasive. One in every five U.S. homes in the foreclosure process remains a “zombie” property: still vacant, abandoned by the homeowner but not yet repossessed by the lender, according to RealtyTrac, a real estate data firm based in Irvine, Calif. Sitting in limbo, unmaintained, these sites continue to drag down their neighborhoods.

Some developers are targeting these foreclosed properties and brownfield sites for development opportunities. Local land bank programs and new acquisition funds are aiding their quest for land.

Rhode Island Housing’s Land Bank program not only acquires properties but also provides acquisition loans to nonprofit developers. In ­every case, the applying nonprofit must present a development plan for the property it wants. The program, which began years before the housing crisis, earned an award for excellence and innovation from the National Council of State Housing Agencies in 2004.

“Rhode Island Housing recognized a long time ago the value of community-based development and the special challenges the nonprofit community faces in acquiring land and holding it for the extended periods of time needed to assemble financing and secure approvals,” says Richard Godfrey, the organization’s ­executive director. “Creating a land bank was a way to preserve our assets but also use them to directly advance our mission.”

Since 2006, the agency has closed $16.9 million worth of Land Bank investments, with repayments of $18.7 million. The program has generated 777 affordable homes and provided a net return to the agency of about $1.8 million. About $5.1 million in outstanding investments is expected to generate another 450 affordable homes.

“The Land Bank allows a small, neighborhood development corporation like ours to move quickly on properties and strategically assemble them for a larger initiative,” Shea says.

The program has been especially useful in assembling enough blighted urban properties to create a viable development that would be competitive for other funding, like housing tax credits.

Olneyville Housing strategically sought foreclosed properties near D’Abate Elementary School.

By focusing its redevelopment efforts close to the campus, the developer was able to stabilize and transform the overall neighborhood. Had the properties been spread too far apart, the impact would have been ­diminished.

Shea’s group identified the sites it wanted and negotiated with the sellers. Rhode Island Housing then bought and held the sites from about six months to a little more than a year until the developer could buy them. More than just holding the land for the developer, the agency was part of the project’s checks and balances.

“They were another set of informed eyes,” Shea says. “It was great to have someone else look at the deal.”

The team was able to acquire the properties quickly, often closing a deal in about a month. “Without speed, you may lose the properties,” Shea says.

Known as Olney Village, the project’s 40 units are in small multifamily buildings spread over a five-block area. Financing for the $11 million deal included housing tax credits, HOME funds, a voter-supported housing bond, and Neighborhood Stabilization Program funds. The city of Providence, National Equity Fund, and TD Bank were financing partners, and LISC Rhode Island provided predevelopment funds.

In addition to Olney Village, Shea’s group has redeveloped three single-family homes and 12 units in five foreclosed and abandoned buildings using similar financing tools and strategies.

New day in Dayton

In Dayton, Ohio, Miller-Valentine Group and St. Mary Devel­opment Corp. have been targeting vacant and foreclosed properties for redevelopment. Together, the two developers have been working with the city to turn around dilapidated housing in the Roosevelt neighborhood, one of the areas where the city has already made a significant investment.

In 2013, the team completed the first phase of its Roose­velt Homes development, featuring 43 single-family lease-to-­purchase homes financed with the help of LIHTCs.

The project started with the purchase of abandoned and foreclosed properties acquired from the city of Dayton, which utilized Montgomery County’s Real Estate Acquisition Program process for foreclosing on vacant, abandoned tax-delinquent properties.

The developers’ strategy has been to decrease the density in the neighborhood by replatting the existing lots. For example, three 30-foot-wide lots would be reconfigured into two 45-foot lots to reduce the overall housing stock and enhance the neighborhood, says Brian McGeady, partner and president of Miller-Valentine Affordable Housing Development.

This plan was designed for a neighborhood that has had a large number of foreclosures and is seeing a declining population. To stabilize and improve the neighborhood, the team ­demolished two blighted homes for every one it built.

“It’s been a tremendous improvement,” McGeady says. “If you look at the neighborhood before and today, it’s a night-and-day difference.”

The team purchased about 80 to 90 properties over a seven-block area to develop the first phase. The vast majority involved foreclosed homes the developers acquired mainly for the costs of the foreclosure process and the title clearance. Other lots were purchased through private sales. On average, lots and homes to be torn down were acquired for about $11,000 per home.

Although the land was purchased at low prices, the development of Roosevelt Homes came with many challenges, one of which was to create a project at a large enough scale to have a meaningful impact, says McGeady. The developers wanted to avoid having a redeveloped home sitting in the middle of dilapidated structures. That’s why they worked to acquire privately owned lots.

Prior to Roosevelt Homes, the vacancy rate in the project area was 35 percent. Since the new development was completed, the vacancy rate has dropped to 19.8 percent, a decline the city attributes to the investments made to develop the project.

Other challenges facing Roosevelt Homes included working through the foreclosure process and clearing titles, steps that can add to a development’s time line and go beyond buying an empty lot ready for development.

With its many lots, the project was also very labor intensive. The developers weren’t only buying a large number of properties; they were also managing multiple construction sites.

Because the LIHTC development features a lease-to-­purchase program, its homes may be purchased after the 15th year. Residents will have the first opportunity to buy the homes, at below-market value, based on the number of years during the 15-year period they occupied the home.

Ohio Capital Corporation for Housing syndicated the housing tax credits that were allocated by the Ohio Housing Finance Agency, and Key Bank was the construction lender. The approximately $9.9 million development also used federal Neighborhood Stabilization Program funds.

The Roosevelt Homes team has its eye on developing a second phase of 30 homes.

Land banking for affordable housing

Developers are also teaming with regional land banks, which acquire blighted properties to return them to productive use. These organizations often have the authority to enforce local codes, ­demolish structures, and sell properties to new owners.

Interest in land banks has grown since the foreclosure crisis, which left communities with swaths of vacant and abandoned properties. The Philadelphia Land Bank and the Cook County Land Bank Authority in Chicago are among those to emerge recently to help combat the problem and promote redevelopment.

In Flint, Mich., Communities First is redeveloping the former Oak School into a 24-unit development for low-­income seniors. The nonprofit organization bought the property for $1 from the Genesee County Land Bank Authority, which has been a model since its formation in 2004.

After the school closed in 1976, the century-old building was occupied by other tenants until about 1998. The land bank acquired the school in 2005 as a donation from Greater Flint Mental Health Facilities. Previously, Genesee County Community Mental Health Services had run a program at the location for a short time.

Communities First is working to bring new life to the old building, says Glenn Wilson, president of the nonprofit group. The project is important to the community and to seniors in the Flint area.

The $5 million Oak Street Senior Apartments, currently­ under construction, is being financed by a HUD Sec. 202 Supportive Housing for the Elderly grant, a Michigan State Housing Development Authority grant, and a grant from the city of Flint. Communities First partnered with New Samaritan Corp. of New Haven, Conn., on the project. Construction is ­expected to be complete in September.

The local school district has moved to close more than 20 schools during the past decade, due to shrinking enrollment and aging facilities. This is a chronic problem for both the school district and the communities where the vacant buildings are located.

Acquiring Oak School from the land bank was significant, says Wilson. It provides his organization a key site in Flint’s Grand Traverse District neighborhood, and it will restore a local landmark into needed affordable housing for seniors.

A number of former students have shown support for the project, and a few are even interested in moving into the apartments when they are completed later this year.