Hundreds of Atlanta-area homes have been rehabbed in the past three years thanks to more than $68 million in federal grants aimed at stabilizing neighborhoods hard hit by the housing bust.
DeKalb, Cobb, Gwinnett and Fulton counties and the city of Atlanta used the initial round of federal grant funding to buy up vacant houses, replace broken windows with energy-efficient ones, make other repairs and install new appliances. They then sold the homes and used the proceeds to help rehab other vacant houses.
Money also went to eliminate homes too far gone to save. Atlanta demolished 27 rundown houses. DeKalb tore down an apartment complex and replaced it with a neighborhood walking park.
Local government officials say that the Neighborhood Stabilization Program has proven a success. Its goal was to prevent rundown, vacant houses from dragging down the housing market in neighborhoods across the country.
“This program has had a very positive impact on portions of communities that would’ve been worse off without the investments we’ve been able to make,” said Lanii Thomas, a spokeswoman for the city of Atlanta, in an email. “NSP has provided the opportunity to impact properties that were abandoned and foreclosed and in many cases vandalized. Returning these distressed properties back to the housing market as high quality homes and apartments is a plus for those communities.”
But critics say the numbers are insignificant in the face of the tens of thousands of foreclosures in the area. The initial round of funds here rehabbed 445 single-family houses and 366 multi-family housing units. That’s not enough to stabilize the housing market, they say. Instead, it can be a way to funnel money to banks by purchasing some of their foreclosures at higher prices than the banks could have obtained otherwise.
“This was always going to be a drop in the bucket,” said Mark Calabria, director of financial regulations and studies at the CATO institute. “I do think this just became a Christmas tree and everyone got the policies they wanted.”
Keema Newsome, who lives in a Lithonia neighborhood studded with foreclosed homes, is also unsure the program will make much of a difference. A house in her neighborhood was rehabbed using NSP funds, but she can’t see that has boosted nearby housing prices. Her home has lost 36 percent of its value since she bought it in 2001.
“Yes we want the houses to be sold, yes we don’t want them to be empty,” Newsome said. “But this house next door that just sold for $52,000 after being empty for five years is still sitting over here, and the house across the street is empty.”
A glut of foreclosures in the Atlanta region caused by the real estate crisis of 2007 through 2009 dramatically increased the number of vacant houses. While there is no comprehensive list of vacant and foreclosed properties, DeKalb County alone has a registry of 7,000.
After a bank evicts a property owner, the house can go uncared for over months or even years. This triggers a cycle of abandonment and decay.
These rundown properties lower the value of surrounding homes, said Dan Immergluck, a professor at the Georgia Institute of Technology’s School of City and Regional Planning. Houses within a quarter mile of a vacant or foreclosed property can lose up to 9 percent of their value.
Prospective home buyers don’t want to live near a boarded-up building covered in graffiti, Immergluck said. Nearby owners who want to sell often have to take what little they can get when the house across the street has an overgrown yard and broken windows.
As these dilapidated properties depress the tax base, they also use more government services. A vacant house typically requires more code officers, police officers and firefighters than occupied properties, Immergluck said.
Erica Alford has seen the effects. A few years ago criminals used the vacant houses in her Lithonia neighborhood to hide goods stolen from surrounding houses, she said.
“If it’s vacant, that’s an eye sore and I would rather they do something with it than leave it vacant,” said Alford, who has a neighbor in a NSP house.
To encourage people to move into vacant properties, local governments tapped the NSP fund. The program allowed them flexibility to devise strategies to meet their particular real estate problems.
Atlanta tore down older, blighted properties, either building new houses or leaving the lots empty.
Rather than tear down any properties, Gwinnett used millions of dollars to rehab abandoned houses in newer subdivisions that were left partially vacant when the housing bubble burst.
Then they sold them to people who met income criteria.
The federal Department of Housing and Urban Development requires that 25 percent of NSP funds be used to assist individuals or families that meet income criteria. They must meet minimum income standards but can make no more than 25 percent of the county’s median income.
HUD also caps use of NSP funds. They cannot be used for any program that benefits people making more than 120 percent of the county’s median income. For example, in the Atlanta-Sandy Springs region, a family of four must have an income of at least $34,600, but no more than $83,150 to purchase a property rehabbed using NSP money.
NSP funds can also be used to provide loans to home buyers.
But critics like Calabria don’t think the project provided enough bang for the buck.
Among the program’s flaws, they say, is that the rehabbed homes aren’t sold for enough to recoup the taxpayer investments.
A three-bedroom, three-bathroom house on Creekside Place in Decatur cost $108,636 to purchase and rehab, according to DeKalb NSP records. The county replaced four light fixtures and added an efficient air-conditioning unit, refrigerator, dishwasher and hot water heater.
The house sold for $56,837.
Local officials say that’s not a cause for undue concern.
“We expected that to happen,” said Chris Morris, director of the DeKalb County Human and Community Development Department.
She said the NSP requires that rehabbed properties are outfitted with expensive, energy-efficient appliances. This greatly increases the costs.
Plus, DeKalb sold many of these houses at the bottom of the market rather than leave them vacant and vulnerable to vandals while waiting for a better price.
It was important to act quickly to prevent the house from rotting again, rather than wait for the market to turn, officials say.
“It’s had a stabilizing effect on the communities we’ve gone into,” said Bill Kingsbury, the director of the Gwinnett County Neighborhood Stabilization Program. “It also shows communities that the government is interested in doing something.”
But critics say that the program helped banks more than neighborhoods.
NSP funds allowed financial institutions to sell a property they foreclosed on to a municipal government for more than they could probably have received on the open market, Calabria said.
“To a small extent, this was a backdoor bailout for the banks,” he said.
And while the rehabbed house might help stabilize property values for the immediate neighbors, there is no regional effect, he said. The program would have to rehab and tear down thousands of houses to have any impact.
The municipal officials running the program acknowledge they do not have data that shows a broad regional impact on the housing market. Such a study would be expensive and time consuming, Morris said.
“I know that it’s had an impact, but it’s hard to measure,” Morris said.
She agreed that simply rehabbing 81 houses in DeKalb is not enough to address the problems caused by the 7,000 vacant and foreclosed houses in the county.
But she said the NSP plays a role in stabilizing the housing market, along with the other tools.
For example, DeKalb made home loans of $8,000 available to first-time home buyers and teachers and first-responders like firefighters and police officers. The hope is to encourage these people to live in the county.
DeKalb also strengthened its maintenance code and hired two additional code compliance officers.
Municipal officials also helped relieve the area’s housing woes by putting people to work. Cobb County officials said each of the 54 houses the county rehabbed employed 12 to 18 workers.
“The end result is not only improving a neighborhood aesthetically, but also increasing workforce job opportunities,” said Cindy Faler, the NSP manager for Cobb County.
The deadline for spending the first round of NSP funds is in March. But the counties and city of Atlanta have millions of additional NSP funding to work with as well.
Municipal officials hope the next round of funding will provide a stabilizing force for a strengthening housing market.
“We have to start somewhere,” Morris said.
Support real journalism. Support local journalism. Subscribe to The Atlanta Journal-Constitution today. See offers.
Your subscription to the Atlanta Journal-Constitution funds in-depth reporting and investigations that keep you informed. Thank you for supporting real journalism.