Editors' Note: This print feature appeared in the February issue of DS News.
Almost a decade has passed since the housing bubble burst, throwing the mortgage services industry and neighborhoods across the country into a pitched battle with blight. Recovery has been excruciatingly slow. Outdated rules and a public that has little understanding of the true costs associated with neighborhood blight contribute to a status-quo approach that has hindered the industry for decades.
Our residents and communities have borne the burdens that stem from a barely effective approach to combatting blight. But in 2016 and the early days of this year, the industry saw gradual movement that offers improved expectations for the days ahead.
Indeed, a confluence of change, innovation, and enhanced understanding of the widespread costs of blight have propelled the industry forward in efforts to decrease the number of zombie properties plaguing neighborhoods and to begin employing new technology in the form of polycarbonate clearboarding to secure vacant and abandoned properties.
Such progress offers reason for optimism that, finally, we will be able to attack community blight with the appropriate tools. Years from now, the industry will recognize 2017 as a pivotal year in the fight against blight.
Pre-approving Polycarbonate and the Plywood Problem
One of the most significant changes that built positive momentum in the fight against blight occurred in early November 2016, when Fannie Mae made the game-changing decision to pre-approve the use of polycarbonate clearboarding on pre-foreclosure properties. The decision marked the first time a GSE had expanded its reimbursement policies to include a 21st-century technology that is far superior to plywood.
Polycarbonate clearboarding resembles glass, yet it is virtually unbreakable. It can have a tremendous impact on conveying properties more quickly and in a more stable and marketable condition, especially when compared with plywood, an outdated and unattractive material used on vacant and abandoned property for decades.
Plywood announces that a building is vacant and abandoned, encouraging vandals and adverse occupants to break in. These people can become a threat to first responders, who cannot see through plywood to ascertain whether a property is actually vacant. Initially cheaper than polycarbonate clearboarding, plywood is easily broken into, deteriorates from weather conditions, and often has to be replaced three times or more.
Fannie Mae’s decision will likely be a catalyst that prompts the other GSEs and the industry in general to follow suit in 2017 and approve innovations that allow for the use of polycarbonate clearboarding.
The implications of this change will be staggering even if only Fannie Mae participates; if others follow suit, the impacts will be exponentially more significant. Consider that 1.3 million homes in America remain vacant. The national foreclosure rate is 1 in every 1,526 housing units, according to RealtyTrac.
As industry leaders embrace new technology, it will be possible to replace plywood with polycarbonate clearboarding, changing practically overnight the appearance of some of the most distressed neighborhoods across the country. Fannie Mae’s pre-approval policy expansion takes effect this month.
Gaining Legislative Support
Legislators from states and cities across the country are among those closest to witnessing the damage that unsecured and unsightly zombie properties exact on neighborhoods. Properties with plywood on them essentially scream that the neighborhood is in distress.
Ohio is leading all states in its proactive approach to attacking community blight. First, it passed the most progressive fast-track foreclosure law in the country, which in effect can shorten the length of time a property sits vacant during a foreclosure process from two years or more to just six months. This greatly reduces the opportunity for adverse occupants and the chances of non-surchargeable damage.
However, even more noteworthy is the measure Ohio Gov. John Kasich recently signed into law that bans plywood on vacant and abandoned properties. This bold law is the first of its kind in the United States and will have far-reaching implications. Most immediately, the law—which takes effect in March—will lead to far wider use of polycarbonate clearboarding in Ohio, which has the eighth-highest foreclosure rate in the nation, according to RealtyTrac.
This significant advancement in state government’s approach to eliminating plywood and fighting blight also should prove to be a model for states across the country.
Similarly, though not as wide-reaching, cities such as Phoenix and Coachella, California, are embracing the use of clearboarding to improve the appearance and security of their struggling neighborhoods. Phoenix was well ahead of the curve and, in 2015, passed an ordinance requiring all window and door openings visible from the street to be secured with polycarbonate clearboarding if the structure had been vacant and abandoned for more than 90 days.
In November, New York City lawmakers began review on a bill that would prohibit the use of plywood to secure vacant and abandoned buildings. Lawmakers clearly understood the simple yet direct connection between plywood and blight: “This bill would prohibit the use of plywood in sealing openings in vacant buildings,” they wrote when filing the bill. “This prohibition is intended to prevent blight.”
This bill would set a foundational example at the local level for eliminating plywood in communities of all sizes. New York City’s example would accelerate advocacy efforts for a progressive approach to blight remediation at all levels of government.
The True Cost of Foreclosure
Recently, Aaron Klein (no relation to the author) released a groundbreaking study quantifying for the first time the substantial and numerous impacts foreclosures and vacant and abandoned properties have on homeowners and their communities.
Even based on conservative estimates, the typical foreclosed home imposes costs of more than $170,000, he wrote in his paper, “Understanding the True Costs of Abandoned Properties: How Maintenance Can Make a Difference.”
The former U.S. Treasury Department Deputy Assistant Secretary for Economic Policy examines three main areas in which foreclosures and vacant and abandoned properties adversely impact homeowners and their communities: property values, crime, and increased burden on city resources. Among the findings Aaron Klein cites:
The foreclosure of a home will cause a loss of value of at least $130,000 for the home and its neighborhood.
Over half the total cost of a foreclosure’s impact on neighboring properties comes from the fact that the property is abandoned.
Vacant properties lead to increases in violent crime with substantial costs: $14,000 per vacant property per year in increased crime, translating into $795 million nationwide for all vacant properties.
The impact of vacancy on crime increases as the property stays vacant for longer periods, likely plateauing at between 12 and 18 months.
Vacant buildings are major fire hazards; vacant residential buildings account for one of every 14 residential building fires in America.
Community Blight Solutions of Cleveland commissioned this study to help decision makers across the country better understand blight’s true burdens.
Klein concludes that how well a vacant home is secured can have a substantial impact on the total costs associated with that status.
In a second study and paper to be released this month, Klein will examine the problems associated with plywood. His data will add to the growing evidence that plywood must be eliminated from vacant and abandoned properties and polycarbonate clearboarding should be used in its place.
The Year of Clearboarding
For the first time in decades, the housing industry—and mortgage field services in particular—are now armed with the tools they need to seriously and effectively attack community blight. For too long, plywood has served as the standard material for boarding vacant and abandoned properties. It has become the ugly and stigmatizing symbol of a community in despair.
Our laws and policies are now leaning toward a more proactive solution. We are beginning to replace outdated, unsightly, and inefficient plywood with modern-day technology in the form of polycarbonate clearboarding, but we have far to go. Advocacy efforts must continue at the national, state, and local levels. Progressive and effective policies must be adopted.
It is clear that 2017 will be the year of polycarbonate clearboarding. Forward-thinking leaders in government and industry are embracing a more effective solution.