Published in Economic Development
Grand Rapids shifts to working with nonprofits for tax foreclosed properties MIBIZ FILE PHOTO: Nick Manes

Grand Rapids shifts to working with nonprofits for tax foreclosed properties

BY Sunday, July 29, 2018 07:37pm

GRAND RAPIDS — A change in policy implemented earlier this month by the City of Grand Rapids could boost inventory for affordable housing organizations.

As the volume of tax-foreclosed properties has dipped considerably in the years after the recession, the Kent County Land Bank Authority also has seen demand for its services decline. Because of those new industry dynamics, the group now wants to change how it’s involved in the process of redeveloping foreclosed properties.

Instead of taking title of the properties, the Kent County Land Bank Authority will now work with the city, which will acquire the properties, under the terms of a new contract that went effective July 10. The Land Bank will continue to work with the city to clean up title issues, while the city will then look to sell the sites to nonprofit housing developers.

Since 2013, the Kent County Land Bank had taken possession of all tax-foreclosed properties in the city. Recently, the organization rebranded as Innova-Lab to focus on the development of modular housing, as MiBiz recently reported.

The decision to make the change stems from the sharp reduction in foreclosures, said Jonathan Klooster, an economic development coordinator for the city. In 2013, the city had 162 foreclosures, which fell to 19 so far this year, according to a city memo that notes another 17 properties could be foreclosed on yet by the end of the year.

“It’s feasible and realistic for the city to take advantage of the resources that the Land Bank can offer — the services it can offer like quieting titles — and work directly with the nonprofits,” Klooster said, adding that the Land Bank has always been responsible for making its properties available to nonprofit housing organizations. “That’s going to provide a little more efficient interaction between the city and the nonprofits.”

David Allen, executive director of Innova-Lab and the Land Bank Authority, said he believes that given current market conditions, the decision to sell off the limited number of tax-foreclosed homes to nonprofit developers is the right choice.

“We don’t have the ability to get the subsidies that the nonprofits do, so they’re much better equipped to do that,” Allen said.

The move by the city to get the properties into the hands of local nonprofit development groups such as New Development Corp., Inner City Christian Federation (ICCF) and Dwelling Place comes as part of a larger push to alleviate a so-called “housing crisis.”

A report by the Grand Rapids Association of Realtors showed the average sale price of a home last month in Kent County was $247,108, up 12.2 percent from the same time last year.

Klooster with the city acknowledged that tax foreclosures make up a tiny percent of the overall market and that the new contract won’t be a silver bullet for the overall issue of a lack of affordable housing. Still, he views it as one step in the right direction.

“From the city’s perspective, it’s a responsible use of our resources to ensure that we take advantage of these opportunities,” he said. “You have to start somewhere and this is obviously not going to solve the affordable housing problem, but we’ve got to take advantage of the opportunities we have. In aggregate, we can have an impact.”

While the added inventory is welcome, it also comes with a catch, according to Helen Lehman, executive director of New Development Corp., a Grand Rapids-based housing group focused on the Creston, Belknap and near West Side neighborhoods.

When nonprofits such as New Development purchase and renovate the homes from the city, the properties must be sold at a price deemed affordable for a family of four that makes about $55,900, or 80 percent of area median income. However, many potential buyers who fit those requirement can’t get the necessary financing to buy a home, Lehman said, adding that properties tend to sit on the market for months because of the relatively small pool of buyers.

“It makes for a very small market,” Lehman said. “Again, I’m grateful that the city is making sure these homes are earmarked for affordable housing. There’s no silver bullet for this crisis.”

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