RENEE MONTAGNE, host:
Here in the U.S., the economic crisis is visible in the growing number of homes in foreclosure. Today we go to one city that's fighting back against the wave of abandoned properties. Officials in Lancaster, California, a city on the desert fringe of Los Angeles, are buying foreclosed properties. They hope to turn them into affordable housing. We found out more from Rob Schmitz of member station KQED who recently visited Lancaster.
ROB SCHMITZ: They wanted to, number one, diminish blight that was happening because of a lot of foreclosed properties in the city. And they also wanted to offer affordable housing to those who qualified as low and moderate-income buyers.
MONTAGNE: Describe the town a little bit more.
SCHMITZ: It's about an hour and a half's drive northeast of Los Angeles. It's really the last town in what is the L.A. metro area before you hit the Mojave Desert. And because of its distance to Los Angeles, houses here have actually been affordable for the middle class during the last housing boom. But as we've learned, for many they really weren't affordable enough. Local realtors say that there are more than 2,000 vacant homes in this valley alone. Now, the guy in charge of making sure these homes aren't vandalized or squatted in is Scott O'Connor(ph). And he took me on a tour of the hardest hit neighborhood in Lancaster.
(Soundbite of car door closing)
Mr. SCOTT O'CONNOR: If you stand right here in this front yard, you can see five foreclosures. We could actually throw a baseball into the yard of any one of them from where we're standing.
MONTAGNE: So five of many foreclosures. And what happens to these empty homes?
SCHMITZ: Well, Lancaster plans to buy as many homes as it can, fix them up, and then sell them as affordable housing. And so far they've spent $8 million to fix up 91 homes, and they plan to buy more next year. You know, the city's housing director, her name is Elizabeth Brubaker, is also, conveniently, a real estate agent. She took me to a three-bedroom ranch home that the city just bought and is now fixing up.
Ms. ELIZABETH BRUBAKER (Director of Housing & Neighborhood Revitalization, Lancaster, California): This house, when we walked in, all the walls were painted black. This carpet had cigarette burns in it. The whole kitchen was just absolutely destroyed. And this is just really beautiful.
SCHMITZ: That's Brubaker's rosy, real-estate agent style coming through. It's OK, though. They've put drought-tolerant landscaping in, and they put a tankless water heater to cut down on the water costs. And they're also pulling up the carpet. And they're putting in ceramic tiles. And it looks a little nicer. Now, five years ago, this house sold for $260,000. The city bought it earlier this year for 90,000, and they're spending around a $100,000 to renovate it. And they plan to sell it for around $175,000.
MONTAGNE: Wait a second, let me just do the math here. If the city bought it for $90,000, spending 100,000 to renovate it, and then selling it for 175,000, that adds up to losing. That's a minus, losing $15,000.
SCHMITZ: That's exactly right. And I asked Brubaker about this. And this is what she told me.
Ms. BRUBAKER: Redevelopment agencies are not in the business of making money. If we sell a little bit below what it cost us to buy the home and rehab it, it doesn't matter. We're supposed to be providing affordable housing, removing blight, and preserving neighborhoods.
SCHMITZ: So the city of Lancaster, actually, is able to do this because the state of California requires cities to use a certain percentage of the property taxes to pay for affordable housing. And Lancaster is also going to get an extra chunk from the U.S. Department of Housing and Urban Development.
MONTAGNE: So it's the city, and also the federal government is helping out.
SCHMITZ: Yeah. The federal government is helping out in this way. Earlier this year, President Bush signed the Housing and Economic Recovery Act, and that allocates $4 billion to help out cities across the country that are in the same straits that Lancaster is in.
MONTAGNE: OK. Now who do they expect to buy these refurbished houses?
SCHMITZ: What Elizabeth Brubaker told me is that those who are going to be qualified for these loans are going to be low-income buyers. And in Los Angeles, that's a family of four that makes less than $75,000 a year. And these qualified buyers are going to obtain a loan insured by the Federal Housing Administration and would only have to put down a down payment of equal to about three percent of the home's value.
MONTAGNE: Have they managed to sell any refurbished homes so far?
SCHMITZ: No, but these homes have only been on the market for a couple of weeks. We have yet to see whether this is going to work out.
MONTAGNE: Rob, thanks very much.
SCHMITZ: You're welcome. Thanks, Renee.
MONTAGNE: Rob Schmitz is a reporter based in Los Angeles for member station KQED.
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