A rising tide floats all boats, and conversely, a waning tide sinks all boats. This truism applies to the vacant and foreclosed property crisis in American cities. Each foreclosed house in one-eighth of a mile radius reduces the value of neighboring houses by nearly 1%. foreclosure+notice+imageMultiple vacancies in a neighborhood compound the reduction in property values for the neighborhood, creating a downward spiral. Further, according to a study by the Government Accounting Office unattended vacant properties impose costs on local governments and communities while also reducing revenues due to the decline in property values. Thus, it is in everyone’s best interest to reduce the number of vacant houses and ensure that vacant houses are properly maintained. Historically, Youngstown, Ohio had a high homeownership rate. In fact, Youngstown was heralded as “The City of Homes” in a 1931 promotional brochure boasting the fifth highest homeownership rate in the country. Now Youngstown has become a city with too many vacant and abandoned homes — 10% by some measures. The slide began in the 1970s and 1980s due to loss of jobs from deindustrialization, migration to the suburbs and continued more recently as a result of the foreclosure crisis.  Each round of property value reductions reinforces the downward trend.

How to break the cycle?

One effective tool that is beginning to make a difference in Youngstown:  the foreclosure bond. At the beginning of 2013 the Youngstown City Council adopted an ordinance requiring lenders filing mortgage foreclosures to post a $10,000 bond for each property that is vacant, or subsequently becomes so. The purpose of the bond is to ensure banks will maintain vacant properties in foreclosure until such time as the titles are transferred to new owners.

Vacant properties often become victim to vandalism and poor maintenance, causing rapid deterioration to the property and negatively affecting the whole neighborhood. In Youngstown, if a bank initiates foreclosure and the property becomes vacant, the bank must maintain the property. Otherwise, the City of Youngstown will access the foreclosure bond in order to pay for maintenance and, if necessary, demolition.

Youngstown is only the second community in the US to enact and enforce such a law. The Youngstown ordinance came about due to the efforts of the Mahoning Valley Organizing Collaborative  (MVOC), working with the City officials in Youngstown and local banks. The local banks signed on, describing the need to ensure all properties are maintained in order to stabilize property values. The City has collected nearly $1 million in foreclosure bonds to date.

Through this program everyone’s interests are protected:  the banks, which continue to have collateral through the stabilized property values for the mortgages they hold; property owners whose properties maintain value; and the citizens, through stabilized property taxes and funding for blight remediation. In addition, proponents of the new law suggest that banks will more carefully consider all the costs before initiating foreclosures, especially if the outcome will be further hits to a neighborhood already in decline.

What’s not to love about that?