Brookings: Experts - Alan Mallach

Provide a Federal Life Line for America's Destabilized Neighborhoods

Alan Mallach and Jennifer S. Vey — Tue, 11 Dec 2012 15:30:00 -0500

In the years since America’s housing market collapsed under the weight of subprime loans, foreclosures, and the housing bubble, the nation has seen a series of efforts—mostly too little, too late—to help impacted homeowners, creating a new alphabet soup of HERA, HARP, HAMP and HHF. Meanwhile, millions of words have been written, mostly focused on assigning blame to Wall Street greed, homebuyer negligence, and/or regulatory failure.

This wave of collective fingerpointing, however justified, has largely distracted policy makers, and much of the public at large, from realizing how the vitality of many of our cities and neighborhoods has been eaten away by the housing sector’s calamitous fall. After over five years of elevated mortgage foreclosures and collapsing house prices, one city after another is battling a wave of neighborhood destabilization that has turned thousands of once-valued homes and apartments into empty shells. As this has happened, neighborhood housing values have plummeted, deterring investment by developers and prospective homebuyers, discouraging the remaining homeowners from making repairs and improvements, and causing residents to despair for their community’s future. While the housing market in many parts of the country has begun to stabilize, and even improve, far too many areas are still mired in long-term instability and decline.

The scale of this problem is far too great, and the market failures too deeply rooted, for these distressed neighborhoods to recover on their own. Nor do individual cities and states have the resources needed to help rebuild their markets. As Brookings argues in a recent policy brief, these neighborhoods need a lifeline that only the federal government can provide.

More specifically, the brief calls on Congress to establish a new multifaceted Strategic Neighborhood Investment Program that includes both a Qualified Neighborhood Investment Bond program, and a multi-part Neighborhood Investment Tax Credit program. In contrast to many past programs, including the short-lived Neighborhood Stabilization Program, the new Strategic Neighborhood Investment Program is designed explicitly and directly to leverage private investment in rebuilding neighborhood markets.

The Qualified Neighborhood Investment Bond program would authorize $8 billion in qualified state and local bonding authority that could be used for demolition, property acquisition, and rehabilitation, as well as related uses such as improvements to vacant lots. Simultaneously, the Neighborhood Investment Tax Credit program would leverage targeted investment in designated destabilized but still vital neighborhoods. The tax credit program would have three components:

neighborhood investment pools funded by passive investors who would receive a tax credit for investing in the neighborhood
a tax credit for households that buy and restore vacant homes for owner-occupancy, or that buy a home from a developer who has restored it
a special FHA mortgage program for homebuyers

Such a program would be modest in cost, with the potential to leverage four to six dollars in private sector investment for every dollar in federal tax credits. While we project it will fuel the rehabilitation of over 180,000 vacant homes and remove some 400,000 blighting abandoned structures, it will do far more than that by stabilizing the neighborhoods and rebuilding the markets of communities where millions of American families live.

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Image Source: © Kevin Lamarque / Reuters

Cut to Invest: Create New Bond and Tax Credit Programs to Restore Market Vitality to America's Distressed Cities and Neighborhoods

Alan Mallach — Thu, 06 Dec 2012 00:00:00 -0500

To promote market recovery and revitalization of cities and neighborhoods destabilized by recession, job loss, and foreclosures, Congress should authorize the creation of a new, multifaceted Strategic Neighborhood Investment Program that includes bonding authority, tax credits, and a special mortgage program.

These programs, each of which tackles a different aspect of the problem, would together make possible the reuse or demolition of thousands of now-vacant or substandard properties, stabilize distressed neighborhoods, create new homeownership opportunities for young families, foster sustained increases in market value and private investment, and ultimately improve the fiscal and economic health of the nation’s metropolitan areas.

The proposed programs include:

Qualified Neighborhood Investment Bond program. This proposed bond program represents an adaptation of the Restore our Neighborhoods Act of 2012 (HR 4210), introduced in March 2012 by a bipartisan group of representatives. That bill would have authorized $4 billion in Qualified Urban Demolition Bonds to fund the demolition of vacant and abandoned housing in hard-hit communities. The QNIB program uses the same fiscal structure, but provides greater funding flexibility. It would authorize $8 billion dollars in state and local bonding authority, the purpose of which would be to provide a flexible resource for addressing property issues that are hindering the revitalization of distressed cities and towns.

Neighborhood Investment Tax Credit program (NITC). The Neighborhood Investment Tax Credit program (NITC) is designed to be a realistic, cost-effective, market-based vehicle for generating targeted investment in still-vital but severely destabilized neighborhoods. The program would have three elements: neighborhood investment pools; a tax credit for households that buy and restore houses for owner-occupancy; and a special FHA mortgage program for homebuyers. These three elements complement one another, with each playing a clear and critical role in the process of neighborhood revitalization.

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Alan Mallach

Image Source: © Rick Wilking / Reuters

Laying the Groundwork For Change: Demolition, Urban Strategy, and Policy Reform

Alan Mallach — Mon, 24 Sep 2012 00:00:00 -0400

According to the Census, the total number of vacant housing units in the United States grew by over 4.5 million from 2000 to 2010, an increase of 44 percent. While empty houses are everywhere, they are disproportionately found in many older industrial cities, particularly those that have lost much of their population and job base over the past several decades. Boarded houses, abandoned factories and apartment buildings, and vacant storefronts are a common part of the landscape in large cities like Detroit, Buffalo, and Philadelphia, and a host of smaller cities such as Flint, Gary, and Youngstown.

Many of these vacant buildings will have to be demolished over the coming years. Some may be too far in disrepair to be restored to productive use; in other cases, the demand or the resources for rehabilitation may not exist. Many of these properties are health and safety hazards, blighting their surroundings and devaluing their neighbors’ properties. Still others may need to be torn down in order to make way for new redevelopment important to their cities’ future vitality.

Not all empty buildings need to be demolished: Many can be productively reused, either for the same purpose as before or in new and different ways. At the same time, tearing down those that can’t be reused might not be a high priority, at least in the short term. With limited funds available, localities must be strategic about targeting those demolitions that will most benefit their neighborhoods and residents. Demolition, in short, should not be an end in itself, but rather a step in the process of creating stronger, healthier communities.

The purpose of this paper is to look at demolition in the framework of larger community stabilization and revitalization strategies, and, within that context, to put forth recommendations for how to undertake demolition in the most cost-effective and productive fashion. It conveys three primary messages:

Large-scale demolition, thoughtfully and responsibly carried out, is a necessary step in the process of rebuilding the nation’s distressed older cities. This need is driven by two factors: the macro issue of supply and demand, which has led to a vast oversupply of buildings in many cities, and the more micro issue of how vacant abandoned structures impact their blocks and neighborhoods.
Demolition is a costly, complicated process. Demolition is a complex process involving a variety of steps, activities, and regulatory requirements, each of which adds cost to the final outcome.
Strategic, cost-effective demolition is vital to stabilizing and revitalizing cities and their neighborhoods. Given both the critical need for large-scale demolition in many older communities, the costs associated with it, and the limited resources available, policymakers and practitioners need to be strategic in their decisions about which buildings to demolish, and in what areas—while getting more creative about finding the resources needed to do so.

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Image Source: © Rebecca Cook / Reuters

Recapturing Land for Economic and Fiscal Growth

Alan Mallach and Jennifer S. Vey — Tue, 03 May 2011 00:00:00 -0400

Vacant land and abandoned properties challenge both older industrial metros struggling with the effects of long-term population decline and metros that were booming until the foreclosure crisis and the recession wrought havoc on their economies. These properties are a significant drag on local economic and fiscal health, exacerbating already intense fiscal stress for local governments. Yet they are also major potential assets for business growth, job creation, and neighborhood revitalization.

Unfortunately, weak and antiquated state laws governing tax foreclosure, land banking, code enforcement, and other areas make it difficult for local governments to address vacancy and abandonment, and prevent them from unlocking properties’ productive potential. To give municipalities the tools the need to repurpose distressed land and buildings, states should:

Reform inefficient tax foreclosure laws
Create clear paths to public control of vacant and abandoned properties
Empower effective code enforcement and nuisance abatement
Enhance local government’s power to mitigate the harm created by mortgage foreclosure

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Ohio's Cities at a Turning Point: Finding the Way Forward

Lavea Brachman and Alan Mallach — Tue, 18 May 2010 00:00:00 -0400

For over 100 years, the driving force of Ohio’s economy has been the state’s so-called Big Eight cities—Columbus, Cleveland, Cincinnati, Toledo, Akron, Dayton, Canton, and Youngstown. Today, though, the driving reality of these cities is sustained, long-term population loss. The central issue confronting these cities—and the state and surrounding metropolitan area—is not whether these cities will have different physical footprints and more green space than they do now, but how it will happen.

The state must adopt a different way of thinking and a different vision of its cities’ future—and so must the myriad local, civic, philanthropic, and business leaders who will also play a role in reshaping Ohio’s cities. The following seven basic premises should inform any vision for a smaller, stronger future and subsequent strategies for change in these places:

These cities contain significant assets for future rebuilding
These cities will not regain their peak population
These cities have a surplus of housing
These cities have far more vacant land than can be absorbed by redevelopment
Impoverishment threatens the viability of these cities more than population loss as such
Local resources are severely limited
The fate of cities and their metropolitan areas are inextricably inter-connected

These premises have significant implications for the strategies that state and local governments should pursue to address the issues of shrinking cities.

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Paper on Shrinking Cities Across the United States »

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Lavea Brachman
Alan Mallach

Facing the Urban Challenge: Reimagining Land Use in America’s Distressed Older Cities

Alan Mallach — Tue, 18 May 2010 00:00:00 -0400

The end of World War II heralded an era of urban disinvestment in the United States. Suburban flight, deindustrialization and automobile-oriented sprawl triggered massive population and job loss in the cities that had driven America’s economic growth for the preceding century. While some cities began to rebound in the 1990s, others, including great cities like Detroit and Cleveland, have continued to decline.

How these cities acknowledge the reality of being a smaller city, reconfigure their physical environment, reuse surplus land and buildings, and target their resources to capitalize on their assets will likely determine whether they will continue to decline, or will achieve vitality as smaller but stronger cities.

Reflecting that these cities will look very different in the future from what they were in the past, regeneration efforts need to focus on three complementary goals: strengthening core areas by building on key physical, economic and institutional assets; preserving viable residential neighborhoods and housing; and identifying long-term non-traditional and green uses for vacant lands and buildings. The federal government can play a major role in this process in five key areas:

Strategic planning. If the different elements that figure in the revitalization of older cities are to achieve that goal, they must be grounded in plans that can help cities and metros make difficult choices about allocating resources, managing land inventories, building on assets for economic growth, and linking central cities to their metro areas. By rethinking existing federal planning requirements, including the Consolidated Plan requirements under the CDBG program, and providing support for new comprehensive planning efforts, the federal government can help cities better plan to address population loss.

Reutilizing urban land. Large and growing areas of vacant and underutilized land and buildings with little development demand are a part of all distressed older cities. Any strategy for rebuilding these cities must incorporate a vacant land reconfiguration approach that both reflects market realities and the need to improve the community’s quality of life, integrating land banking and site remediation with strategies for using urban vacant land in creative new ways. The federal government should help cities plan and carry out land management and reconfiguration strategies, support brownfields remediation, help develop green stormwater management systems, and foster the growth of urban agriculture.

Investing in transformative change. Distressed older cities and their regions need to stabilize their economic base, provide jobs for their residents and scope for businesses to grow. For that to take place, they must focus on transformative change – spotting the opportunities to integrate these cities into the post-industrial economy. Federal support for economic revival should help them build on core physical assets; reinforce or retool economic clusters and skill bases, and maximize institutional assets, their universities and medical centers. The federal government should pursue opportunities to make catalytic investment in transformative projects and maximize the potential of the cities’ anchor institutions to build the local and regional economy.

Revitalizing neighborhoods. The long-term vitality of older cities equally hinges on building sustainable residential areas, yet many cities lack effective strategies to maintain and strengthen their neighborhoods. Local governments and CDCs need access to tools to stimulate market demand in at risk neighborhoods. The federal role in this area that began with the Neighborhood Stabilization Program should be expanded and given a new strategic focus, using NSP to leverage other federal programs, restructuring existing federal programs to focus on neighborhood stability, and initiating new targeted neighborhood revitalization programs for distressed older cities.

Addressing affordable housing. Federal affordable housing programs should better balance the need to provide housing for these cities’ low income residents with the need to improve the cities’ economic vitality, and retain and attract middle income households. Federal policy should move away from producing more housing in distressed older cities and focus on upgrading the existing housing stock, by restructuring the Low Income Housing Tax Credit program and providing new resources to support private rental housing and foster sustainable homeownership opportunities.

Beyond these areas, three cross-cutting tasks are of critical importance:

Better coordinate federal resources directed to the distressed older cities . A strong federal policy commitment to the distressed older cities demands the ability to coordinate multiple federal programs. The Office of Management and Budget should lead a systemic effort to foster greater coordination of federal programs and enable states and localities to use federal resources in an integrated fashion.

Use federal resources to leverage state policy change . State governments create the opportunity framework for their cities through their laws, policies and use of resources. States create—or thwart—regeneration by fostering fiscal fairness or perpetuating fiscal inequities; by enabling regional action or blocking it; and by targeting resources or distributing them “like peanut butter.” The federal government should push the states to take more constructive steps to support urban change, while recognizing them as essential partners in revitalizing their distressed older cities. Rules governing how states spend federal dollars should be revised to ensure that funds are used to further urban revitalization, and while new programs are framed or existing ones evaluated, federal officials should identify and incentivize state policies to maximize the outcomes of each program.

Build the capacity of local government and others to carry out effective strategies for change. Local governments in distressed older cities are severely limited in their capacity to deliver effective strategies for change. The federal government should initiate efforts to build their ability to plan and carry out effective revitalization strategies. In the short term, cities need help building their skills to implement urgently-needed programs and use available resources wisely. In the long term, they need help to transform themselves into stronger, more resilient and responsive organizations.

The next few years may be some cities’ last opportunity to begin rebuilding before the cumulative weight of abandonment, poverty, and disinvestment engulfs even their strongest neighborhoods. This, then, is the moment for bold federal action, but this action should reflect a different approach to using federal resources, fostering transformation based on a new vision of the future of these cities.

Full Paper on Shrinking Cities » (PDF)
Paper on Ohio's Shrinking Cities »

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Alan Mallach