Housing Prices Stable, Subprime Lending/Increased Foreclosures in Areas of Economic Decline

Pagedale is a blue collar, post-war community located in northern St. Louis County just outside of St. Louis. In this area, from 36 to 54 percent of mortgage loans originated for home purchase and refinance in 2004 were subprime loans and the payments are coming due. Not a thriving economy to begin with, Pagedale is struggling with an increase in foreclosures, but these days it is getting an extra boost from Beyond Housing.

Beyond Housing is a NeighborWorks® Organization located in St. Louis with a mission to “strengthen neighborhoods, one family at a time.” It takes its family focus seriously, providing them with a comprehensive array of educational, employment, youth development and other support services in addition to housing assistance. It also works to identify and nurture resident leadership in its target communities.

“Pagedale is a community of about 3,600 residents that in 2002, when we started working there, had an unemployment rate of 29 percent,” recalls Chris Krehmeyer, Beyond Housing’s Executive Director. “It was really headed in the wrong direction.” The city initially requested help with new housing construction, but after Krehmeyer took a look he advocated for a more comprehensive approach.

Successful community revitalization requires resident input and good data; in Pagedale, Beyond Housing conducted surveys, focus groups, and stakeholder interviews to lay the foundation for a community plan.

Sound community revitalization starts with good data and resident input, so Beyond Housing staff and Pagedale began with a series of surveys, focus groups, and stakeholder interviews to identify assets and weaknesses and gather input on resident priorities. The plan that emerged from this phase focused on improving the housing stock, strengthening services, building community leadership, and attracting new business investment.

Six years later, Pagedale is a very different community. Beyond Housing has built 90 new homes, renovated 12, and provided grants to over 100 seniors to help them with home repairs. It has helped organize multiple volunteer efforts to help homeowners with limited incomes fix up dilapidated homes. Krehmeyer estimates that in one way or another Beyond Housing has touched 20 percent of the homes in Pagedale. In a recent follow-up survey, the number of homes in good condition jumped from 40 to 80 percent. The newly formed Pagedale Community Association helps to attract, organize, and train neighborhood volunteers to continue the work going forward. With Beyond Housing’s help, residents have attended NeighborWorks® Training Institutes to hone their leadership skills and gather new ideas for local projects.

Improving the housing stock is just part of the story, however. As its name and its mission suggest, Beyond Housing is committed to strengthening families. Another major focus of the Pagedale revitalization effort has been the creation of the Pagedale Family Support Center, which provides a range of services year-round. Recreation teams and after school activities serve over 1,000 youth annually. The Center also offers computer labs, a food pantry, and a variety of programs aimed at seniors.

The final piece of the plan is to attract more economic development. Beyond Housing has worked with the city of Pagedale to create a community development plan for a tax increment financing district (TIF). Plans are underway to open a new, 16,000 SF grocery store, with other new stores to follow. With Pagedale a much stronger community than it was six years ago, Krehmeyer is looking to replicate this model to revitalize a much larger area included within the Normandy School District (population 10,000).

Krehmeyer sees that Pagedale’s positive momentum has been threatened by the foreclosure crisis. Twice they have distributed door knockers informing residents about the Homeowner’s HOPE hotline, but they still see homes lost to foreclosure.

Purchasing foreclosed single-family units and retaining them in its rental portfolio will allow Beyond Housing both to protect its existing units, and expand its capacity to assist single-parent families in need of intensive supports to ensure their long term success.

To fill the vacant units Krehmeyer will turn to another strategy Beyond Housing has been perfecting over many years. The organization currently owns 240 single family homes, scattered in 23 communities through St. Louis County. The houses are rented to single parent families. In addition to the subsidized rents, families receive help establishing long-term goals related to education, employment and homeownership. Beyond Housing staff connects families with a comprehensive array of educational, employment, youth development, and other support services to help them achieve these goals. A key asset building strategy for many families is an Individual Development Account (IDA) that matches their savings. Families average about five years in this program, and at the end of it are frequently able to move on to homeownership or other goals.

Beyond Housing’s lengthy experience with this service-enriched, scattered-site rental approach makes it the right tool for stabilizing neighborhoods, like Pagedale, that have been hard hit by the foreclosure crisis. As Krehmeyer points out, “we already have a template so we know what sort of debt these units can carry as rentals.” That helps manage their risk in expanding this business line. At the same time, strategic purchase of vacant units will help to protect and strengthen their existing portfolio against the negative ripple effects of nearby foreclosures.

To date, Krehmeyer has assembled a fund of $300,000 from the private sector and a local foundation. He and his team are still working through decisions as to how many units they will buy; this will depend in part on the debt structure they are able to assemble. They are also still finalizing the strategic criteria they should use in targeting their investment, beyond protecting their own assets. For example, they could look for properties in highly visible locations, or for eyesores that stand out as significant problems on their block. Krehmeyer is inclined to purchase as many properties as possible, reasoning that it will be a sound financial investment. When prices rebound they can decide to sell them and generate funds for other affordable housing, or retain them as a permanently affordable housing stock.

Beyond Housing’s strategies were in place before the housing bubble burst. Implementing them will not represent a departure from their past practice, but instead an expansion of strategies in which they have already gained considerable expertise. Still, their holistic approach to strengthening individual families as well as the neighborhoods in which they live offers an excellent model for other communities hard hit by foreclosures and economic decline.

Best Practices

• A neighborhood-focused revitalization approach engages residents in planning for and securing their community’s future.
• In a community with low incomes and high unemployment, supporting families through rent subsidies, IDAs, and services protects against further deterioration and decline.
• Beyond Housing will rely on a community stabilization strategy in which they already have considerable expertise; purchase-rehab and resale of single family homes. The scattered-site rental approach allows low-income families to rent affordably in safe neighborhoods. Well-managed housing serves as a model for other property owners and encourages them to invest in maintenance and improvements.