The Journal is reporting:
Over the next three years, Barrett said raze orders in the city are expected to grow to 1,600 homes, with a cost of $24 million. “We have a very severe problem right now,” Barrett said.
No kidding we have a “severe problem ” This a problem that continues to grow rather than moderating. The number of abandoned and foreclosed houses was bad nine months ago and with fresh snow on the ground you can see even a greater number of unoccupied properties than ever before. At least here on the Southside of Milwaukee these numbers are far worse than what is being reported by the city.
How much of the $24 million of anticipated razing costs could be avoided by making it more favorable to rehab properties and restore them to the tax rolls?
Perhaps the city would do better by working with, instead of against people willing to invest their own money, time and effort into putting foreclosures back in service. I’m not even suggesting a hand up, just not the current beat down attitude. Not only would there be less spent on bulldozing, but more of the tax base would remain plus the positive economic impact for the community due to spending by owners to maintain and operate this housing.
Between taxes and the sewer and water bills the city gets at least $5-6 million per year from 1600 functional properties. In the three year period Barrett defines this is a potential of $18 million in city revenue if the buildings were returned to occupancy. Add this to the $24 million to bulldoze and you are north of 40 million dollars.
Can every property that is deemed to be worthy of razing able to be salvaged, of course not. But many that are in the pipeline today can be. Every day that a property sits unattended is a day closer to the wrecking ball being the only option for that property. There are many properties sitting vacant today that are worthy of repair, but will not be so six months or a year from now.
Additionally every time someone like you or I take on the challenge of putting properties back in service the local economy sees a benefit through the wages and materials we pay to get the job done. All but one of my employees live in the city. While the money you spend at the Home Depot doesn’t stay in Milwaukee, the person who is employed by the Home Depot lives in the area and spend their wages here.
A downside for us, but an upside for the community is a greater amount of housing stock available holds rents down. A more competative market also forces owners to do more to properties to get and keep them rented.
Once the property is back in service ongoing maintenance similarly impacts the local economy in a positive manner. It is estimated that repairs and improvements to rental properties represent $90 -120 million a year in the city of Milwaukee alone. (These numbers are derived from our company’s experiences, the experiences of other long term owners that I’ve discussed this with and data from the Census Bureau’s Property Owners and Managers Survey. Our data and that of many other owners indicate a slightly higher number than the Census)
Our company has the capacity and had the will to do 10-12 such projects a year without any government monies. Heck if the environment was more favorable I could see us doing two properties a month. We have not made an offer in MIlwaukee since November due the unfavorable policies adopted by the city. See my prior post on buying foreclosures in Milwaukee. I talk to a lot of other owners with similar capacities that say the same thing.
Milwaukee acts like they are the only girl at the dance – as though real estate investors need to accept their petty obstructions and poor treatment because they are the only game in town. But there are many other places to invest that treat owners much better. One of our members is doing a big rehab in Beloit. When I asked his project manager how it was going with the city he said they were unbelievably nice and truly seem they want to see the project succeed. We are actively looking at the South Florida market today.
A few notes:
These 1,600 properties must be city owned or near to being city owned. If they were bank owned the city could and would force the banks to demo the properties on the bank’s dime. A growing trend is banks that simply walked away from the mortgage rather than be subjected to the bad side of city regulations and fees. In another instance I spoke to an owner who the bank sued- he thought he lost the properties to foreclosure only to find out later that it was a money judgment only suit. This adds to the zombie housing effect. And you though only borrowers walked away. 😉
Our police chief is in the news speaking about the link between foreclosed and abandoned housing and crime. I am certain he is correct on this. But the Milwaukee Police do not do what they should in cases of property vandalism. See my prior post on property vandalism and the lack of police response. This vandalism accelerate the rate of properties that are no longer viable for rehab.
