Lit Review: Interesting Articles from the Boston Federal Reserve

Reposted from the "Stabilize" blog of the NeighborWorks America Stable Communities program.
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The latest issue of New England Community Developments from the Federal Reserve Bank of Boston has a couple of articles particularly interesting for those engaged in stabilizing neighborhoods.  In the first, the author discusses preliminary findings from ongoing research exploring the effect of foreclosure and NSP intervention on neighborhood social stability, with surprising results. The second presents a logical framework for deciding what REO is best marketed as rental property.

In "What Do the Neighbors Think? Assessing the Community Impact of Neighborhood Stabilization Efforts," author Erin M. Graves describes her research assessing residents’ perspectives on neighborhood-level social capital and social disorder.  She hopes to assess the impact of foreclosed properties on those residents before and after NSP intervention.


Graves used a standardized “Sense of Community” survey administered door-to-door, and also assessed property conditions of all parcels in the subject neighborhood.  In the article, Graves describes three themes that emerged from the first round of the survey. The first theme was that residents did not view the vacant foreclosed homes on their street as the primary threat to stability in the neighborhood; nor did they often realize which were due to foreclosures.  If they did know of a foreclosure, they saw it as an individual problem rather than a community problem or trend.

Second, existing crime and gun violence were the main concerns of these neighborhood residents. Residents in this neighborhood did not see vacant properties as attracting crime, and they viewed vacant lots as a greater threat to their sense of community than vacant homes.

Third, residents did believe in the efficacy of government institutions, including the police, to solve community problems, but felt underserved by them.  In order to deal with the safety and property abandonment issues on their streets, Graves says residents defined ever-smaller boundaries for what they consider their [good] part of the community – a street, a section of a street, or sometimes only their house.  These carefully drawn boundaries allow some residents to enjoy and stay in their unstable neighborhoods longer than outsiders would expect them to.

For Graves’ discussion of policy implications, see the full article.

In "New Ideas for Old REOs : A Disposition Framework for Marketing REOs for Rental Properties,"  Prabal Chakrabati and Mariana Arcaya propose a four-step rationale for sorting a community’s REO portfolio to find those properties that are the best candidates for disposition as rental units.  The criteria include:

• whether or not the property is GSE-owned,
• whether the property has been REO for less than or greater than one year (greater than one year means it is unlikely to  be taken up as a homeownership property),
• whether the property is located in an area of high need for affordable rental units (vis a vis Massachusetts’ 10% mandate for municipal subsidized housing inventory),
• whether or not the property is also located in an area that lacks rental housing options (since rental housing demand is on the increase, the model assumes places without those options need them, and that mixed-income communities are a goal).

Additional considerations, such as proximity to transit and jobs, are also mentioned. The article includes an easy-to-read chart, and a specific analysis of Massachusetts REO inventory.

New England Community Developments is published by the Federal Reserve Bank of Boston.  Free subscriptions are available here.

Creating an Opportunity from All of the Empty Houses? An Affordable Housing Response by NeighborWorks America to the REO Crisis

by Thomas P. Deyo,
Deputy Director, Green, National Real Estate
and Community Stabilization
NeighborWorks America


This home was once foreclosed and abandoned.
NHS of New Haven rehabilitated it and sold it.



The growing number of empty houses in neighborhoods hit hard by foreclosures presents a huge challenge for residents still in these neighborhoods — and for the banks and government entities that now own many of these properties. Property values have plummeted for homeowners; homes have become shells of shelter having been stripped of their copper wire, plumbing or anything of value; communities have become health hazards or magnets for crime. (See The New York Times Foreclosures Empty Homes, and Criminals Fill Them Up.)

Many responses have been launched to address the situation.

An early public policy response to the crisis was the Neighborhood Stabilization Program (NSP) that offered support to local initiatives to stabilize high-foreclosure communities, mitigate impacts on neighborhoods and families, reduce blight, and offer affordable housing choices to residents. Many NeighborWorks organizations participated in NSP efforts and their initial efforts with local government entities and many other nonprofit organizations have shown successes and positive impact of their work in many communities across the country.

While various responses have been important efforts in establishing a foothold, gaining large scale control of properties and achieving significant gains for affordable housing have been difficult.

But now maybe an opportunity presents itself. The federal government is investigating ways to encourage private investment in significant holdings of “REO” or “real-estate owned” properties held by FHA and the GSEs, and the Federal Housing Finance Agency (FHFA) requested comment on strategies for disposition, including as rental properties. (see FHFA, Treasury, HUD Seek Input on Disposition of Real Estate Owned Properties.)

The opportunity is the potential of adding a substantial amount of affordable rental and for-sale houses for low and moderate income families at a time of desperate need for such housing in our nation. The risk is that a unique opportunity to produce public benefit of longer-term stabilization of fragile communities and increasing supply of affordable housing may be missed in favor of quick disposition without regard to community interests. We believe it’s time to seize the opportunity at hand.

Local nonprofit housing corporations and community residents should be central to any long-term viable solution. In partnership with FHA, the GSEs, and the private market, these groups can deliver on meeting the needs of communities for housing and stability.

The time is now to respond with a plan that takes the available resource that is impacting community strength and turn it into a community opportunity. In simple measure the plan calls for nonprofits to acquire, rehab, and maintain properties, rent at affordable rents to low- and moderate-income community residents, and when markets return sell at affordable prices to these same households and return to government a share of the proceeds to compensate for lower acquisition costs. (See NeighborWorks America comment letter.) This is not easy or simple but requires commitment and recognition that to make an opportunity requires taking some risk.