Markets and know-how block greening foreclosed homes

 

Many communities have become quite passionate about the greening of foreclosed homes as a part of revitalization.

Especially since its an area that received lots of funding attention in the American Recovery and Reinvestment Act, via Neighborhood Stabilization Programs, Weatherization and other programs.

We have been following the efforts of community groups here in the San Franciso Bay Area throughout this year, as they have been applying for ARRA funding in order to purchase and retrofit foreclosed homes to green standards. Afterwards, these homes would be sold to low-to-moderate income residents, preserving housing opportunities for residents in those income groups.

Unfortunately, my latest information is that this market niche only limps along at best, despite having access to better funding than many other types of real estate these days.

A mission-based capital source active in this sector indicates that the problems plaguing these programs are the misfires of painfully basic assumptions overlooked at all governmental levels and community groups alike, during the rush for ARRA funding:

a) Banks not motivated to deal: Most folks assumed that banks would be so injured by the credit crisis, that they would just dump foreclosed homes to community groups at very deep discounts. In reality, realtors are reporting that foreclosed homes sell pretty quickly here in the Bay Area, removing bank motivation to discount their prices. The problem with that is that many groups of homes in the hardest hit areas are actually lumped into portfolios with faster selling homes — and the banks don’t differentiate. The sad result? In some communities, foreclosed homes resell relatively quickly. In lower income, more distressed neighborhoods, the foreclosed homes sit vacant and deteriorating, since the bank does not differentiate their sales practices within pools of homes straddling multiple communities.

b) Lack of experience with scale green home retrofitting: Most groups and their municipal partners overlooked the actual operational process of purchase and green retrofitting. My investor colleagues report frustrating conversations with municipalities, community groups and their partners, as it has become evident that none of these groups have actually ever run any type of scalable existing home purchase/retrofit program — let alone incorporate green remodeling within their training and operational planning. Groups such as Build it Green offer training assistance on the remodeling of existing homes to the GreenPoint Rated standards, however there is a significant business coordination aspect of operating and incorporating these processes within the larger purchase and resale platform that just gets overlooked. Many community groups simply underestimate the level of staff training and time which needs to accompany these type of programs.

For now, the aquisition purchase problem looms (much!) larger than the operational issues for foreclosed homes. Hopefully we can learn from this and not get caught by surprise when needing to adopt scale green retrofit initiatives within our own property portfolios.

*     *     *

Things you might want to know:

• Do you like this post? We’d love to hear your comments and suggestions.
• You can contact us to discuss or initiate a project here.
• You can get Our Green Journey by email or via RSS.
• Sometimes you can see what we’re doing on Twitter.
• Photo credit: Webking on istockphoto.com