Minneapolis Lures Buyers for Foreclosed Homes Faced with a wave of foreclosed properties, Minneapolis moves to create incentives for people to buy and live in the houses in a largely poor area of the city. But the city faces competition from private investors, whom it fears will buy up houses to rent cheaply.
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Minneapolis Lures Buyers for Foreclosed Homes

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Minneapolis Lures Buyers for Foreclosed Homes

Minneapolis Lures Buyers for Foreclosed Homes

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All you have to do is drive around the streets of North Minneapolis, Minnesota, and you can see the foreclosure crisis. Hundreds of houses have been abandoned; property values have plummeted.

Investors are starting to return to this area. They buy up cheap properties to rent out, and that has sparked a debate about how to revive this area, really. NPR's Jim Zarroli has the second of two reports on the way the subprime mortgage meltdown is affecting one area.

JIM ZARROLI: After Lynn Albright survived cancer, she decided to do some of the things she'd been thinking about doing. One was to buy her and her daughter a house.

Ms. LYNN ALBRIGHT (Homeowner, Minneapolis): This is my daughter's room. I gave her the big suite, you know.

ZARROLI: You're a good mother.

(Soundbite of Laughter)

ZARROLI: The place she bought was this foreclosed, two-story, stucco house in North Minneapolis. The neighborhood was pretty rough, and vandals had stripped out the stained-glass windows, but the neighbors were friendly. Albright used to live in a fast-growing suburb.

Ms. ALBRIGHT: When I moved out there, there was nothing, just cornfields, and now it's all built up. And it seems nice to come back into the city, where it's a little quieter, I guess. It's like going out there when it was nothing, you know. I don't know, it seems kind of odd in a way, but it is really a lot quieter right here.

ZARROLI: Quieter in part because so many properties are in foreclosure. There's a vacant house next door, another one across the street. Albright also liked the price. She bought the house for $49,000. Just two years ago, it sold for more than $200,000. It's part of the city's effort to address the foreclosure crisis.

North Minneapolis has become a bargain-hunter's dream, and investors like Howie Gangestad have been snatching up houses.

Mr. HOWIE GANGESTAD (Real Estate Investor, North Minneapolis, Minnesota): Honest, legitimate properties that were worth $150,000, $200,000, can be picked up on sheriff sales and depressed bank sales for $10,000, $20,000, $30,000, $40,000, $50,000, $60,000, $70,000, $80,000. It all depends. I mean, 20, 30 cents on the dollar.

ZARROLI: But neighborhood activists like Roberta Englund worry that too many of the properties being bought will end up rented to the city's poorest residents.

Ms. ROBERTA ENGLUND (Neighborhood Activist, North Minneapolis, Minnesota): We have people who did buy, and today are buying, the worst kinds of properties for the least amount of money, to cash flow at the greatest rate, to house people who have no other choices.

ZARROLI: City officials say too many cheap rentals will disturb the delicate balance of property types needed to make the neighborhood work, so they're trying to lure more owner-occupants back to the north side.

One thing the city's doing is strategically buying up foreclosed properties. Some of these, it tears down; others, it renovates and resells. Stephanie Gruver of the Greater Metropolitan Housing Corporation stands outside one of the latest acquisitions, a Tudor-style cottage. Inside, workers are polishing the floors. There's a large dumpster in the yard. Gruver says a single vacant and rundown house can scare buyers away from a neighborhood.

Ms. STEPHANIE GRUVER (Greater Metropolitan Housing Corporation, Minneapolis, Minnesota): If we can take care of one or two or even three houses on a block, and it'll help tip the entire block into stability, that's a huge, huge win.

ZARROLI: The city's also pressured lenders to surrender vacant properties as cheaply as possible. Still, funds are limited, and Mayor R.T. Ryback says the city sometimes gets outbid on houses by private investors, some of them little better than slum lords.

Mayor R.T. RYBACK (Minneapolis, Minnesota): I'd like us to see state and federal legislation that would make it easier for us and not put us on the same plane as somebody who's trying to destabilize a neighborhood.

ZARROLI: But the idea that the city can lure stable families back to the neighborhood has skeptics, like landlord Howie Gangestad, who has long clashed with the city over the condition of his buildings. Gangestad says of course it would be good to have the right mix of people in North Minneapolis, but he adds…

Mr. GANGESTAD: Why would somebody live in North Minneapolis, with all the drugs and crime going on? I've had five tenants killed in my property. I mean, why would anybody want to live in that neighborhood if they could afford a million-dollar home or even a $250,000 home or a $100,000 condo someplace? The reason they're over here is because I'm the only person in the world who will rent to them. And if I don't, where are they going to be?

ZARROLI: City officials say they don't want to drive all low-income renters out of the north side, even if they could. But they say foreclosures are changing the area for the worse, and with more and more empty houses, they need to act fast to reverse the damage. Jim Zarroli, NPR News.

INSKEEP: You can hear the other part of Jim's report at NPR.org.

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