In an attempt to help stave off blight brought about by a spate of foreclosures in the Belle Haven neighborhood, the city of Menlo Park plans to buy foreclosed homes, refurbish them, and sell them to people on the city’s wait list for low-income housing.
The plan has been gestating since the fall of 2008, when Councilman Andy Cohen began looking for a way the city could turn back a rising tide of foreclosures in the neighborhood. The City Council approved it at its May 5 meeting.
The city will allocate $2 million from its below-market-rate housing fund to buy 10 to 15 foreclosed houses, according to city’s Housing Manger Doug Frederick. The city will also contribute up to $500,000 to a Habitat for Humanity plan to purchase up to five homes, and resell them to residents in a lower-income bracket than the city typically serves through its affordable housing program.
The funds the city plans to use for the program come from fees paid by developers, in lieu of incorporating below-market-rate housing into their projects. The money is distinct from the city’s general operating fund, and can only be used on below-market-rate housing.
Opposition
Real estate agents and some residents have objected to the plan in the past few weeks, saying that the city shouldn’t be in the business of buying homes, and that it was undermining private bidders.
Several Belle Haven residents have said they support the plans, saying they’re a step in the right direction for reducing blight and stabilizing home values.
The Habitat plan received a unanimous vote at the council meeting, but Councilman John Boyle dissented in a 4-1 vote on the city’s plan to buy and resell homes. Mr. Boyle cited conflicting reports on how many homes are currently owned by banks, saying he isn’t convinced that the issue has reached crisis proportions, and that the proposal required further study.
The Web site realtytrac.com indicates that there are 110 properties in some state of foreclosure in Menlo Park. Real estate agents said their figures show that those figures overstate the issue, and that most of the homes that have been put up for sale have been purchased.
Housing Manager Doug Frederick says the city will only purchase homes that don’t appear to have attracted other buyers, noting that he saw inconsistencies in foreclosure data provided by the Silicon Valley Association of Realtors. The main purpose of the program is to help “stabilize the neighborhood,” and prevent homes from falling into disrepair, where they might be taken up by squatters and drug dealers, Mr. Frederick said.
Two Menlo Park real estate agents and a representative from the Silicon Valley Association of Realtors spoke at the council meeting in opposition to the city’s plan to buy homes, saying city officials are overstating the problem, and that they’re skeptical of claims that some homes have not attracted any interest.
Several residents e-mailed Mr. Frederick and the City Council, contending that city funds should not be used for the program. Several housing commissioners replied that the city has more money in its below-market-housing fund than housing projects to spend it on.
There are more than 200 people and families on the city’s wait list for below-market-rate housing.
Prevention tabled
Mr. Frederick said that while the programs might be a step in the right direction, he does not anticipate that they will have a significant effect on the housing market. He has said that the foreclosures have only exacerbated plunging home prices in the neighborhood.
The city’s plan to buy and refurbish homes will move slowly, with the city likely buying and refurbishing only one home at a time, according to Mr. Frederick. The council would have to approve every home purchase, as well as the contract to renovate it, according to City Attorney Bill McClure.
At the meeting, the council tabled a third plan, designed to inject equity into homes that are in danger of falling into foreclosure. Because that plan would likely also rely on funding from the city’s below-market-rate housing fund, the city might have to set a cap on the resale price of the home — a condition some fear homeowners may not agree to. The city will continue to look into the idea, with an eye toward finding a source of funding that would not impose onerous restrictions on the homeowner.
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