State must cure plague of abandoned homes

May 21, 2009

When a single home is foreclosed, the pain is felt largely within those four walls.

But when the number reaches 115,000, as it did in Illinois in 2008, and foreclosures in a single community reach 1,000, as they did in Austin in 2008, we all feel it.

Foreclosures hurt a city's tax base and generate new expenses when abandoned homes must be cleaned up. For neighbors, abandoned homes almost always mean lower property values, as well as more crime.

But in Illinois, local governments have limited powers to soften the foreclosure blow. They lack effective tools to deal with vacant and abandoned homes, many of which quickly become dilapidated eyesores or, worse, havens for squatters and targets for scavengers.

Two bills pending in the state Legislature would help change that, and we enthusiastically endorse both.

The two proposals, House Bill 1195 and Senate Bill 2101, are supported by the City of Chicago, other local governments and several municipal organizations, including the Metropolitan Mayors Caucus, the DuPage Mayors and Managers Conference and the South Suburban Mayors and Managers Association.

Collectively, the bills give local governments their best shot at taking on blighted, vacant and abandoned homes. The new powers for local governments would include:

• • The ability to force lenders to do more to maintain properties: After a foreclosure filing, mortgage lenders are supposed to inspect a home and keep it safe and secure. Some lenders do this faithfully, but far too many do not -- or do it only half-heartedly. If a lender fails to do the job, the municipality is left holding the bag.

One of the bills would allow local governments to create ordinances, specifically for vacant and abandoned properties, that give explicit upfront responsibility for maintaining these properties to the lender, not the municipality. If the bank doesn't do it, the local government can do the work and recover the costs from the lenders. Now, municipalities rarely recover their costs.

Generally, bankers have opposed similar proposals around the country. They worry about the costs and say they already do enough to keep foreclosed homes secure. But drive down any hard-hit Chicago street and you'll likely draw another conclusion.

The Illinois Bankers Association told us in a statement that it recognizes issues exist with abandoned properties and said it is "working tirelessly" on legislation to address this. We applaud their involvement and urge them to support the legislation as written.

• • Establishing land banks: This proposal, like the property maintenance provision, is particularly controversial. It would allow local governments to create land banks, which can acquire, maintain and sell vacant properties. Land banks have been in existence in the United States since the 1980s and, when well-structured, have proved to be an effective tool in reducing the number of vacant properties.

In a perfect world, we'd like to leave this to the private sector, but the market has failed communities that have a glut of vacant properties. The Illinois Association of Realtors opposes land banks, but could not explain to us exactly why, save for a general philosophical objection to government expansion. The group's spokesman said land banks could affect the real estate market in "some significant ways," but did not cite a single specific negative consequence resulting from the actions of the many land banks already in existence.

• • Early notice of foreclosure action: Local governments often learn of a foreclosure only after a property has already gone bad. One of these two bills requires early notification to a municipality of foreclosure or a tax sale, often a precursor to a foreclosure. And, most important, this would include up-to-date, detailed information on how a municipality can contact the lender. As it is now, strange as this may seem, towns often can't figure out how to contact the lender responsible for a mortgage on a house.