Neighborhood Stabilization: 1 Year Later

A Year in the Life of a Foreclosure Rehab

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Three years ago, the Obama administration passed the federal “Housing and Economic Recovery Act.” With that came some $4 billion for state and local governments to buy and rehab foreclosed properties.

In the spring of 2010, we caught up with first-time contractor Melvin Bailey, who took us on a tour of three properties in the West Side neighborhood of Garfield Park.

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At the time, he showed us an abandoned two-flat that looked like a bomb had gone off in the living room.

“It's been like this possibly about maybe nine years. It’s been abandoned about nine years,” said Bailey. “So, once we knew it was abandoned for nine years, as you can see, that’s why you get the floors buckling here. And then you get all this old paint and crackling, falling off the wall and you got mold here. Yeah, this is a total gut rehab.”

Bailey is the head of the Community Male Empowerment Project, a nonprofit organization founded in 2002 whose aim is to get ex-offenders off the streets of inner city neighborhoods, and working.

“I want to put to work the hardest to serve, people who struggle with social profiling, ex-offenders and people who’ve been X’ed out of the process," he said.

Over the past year and a half, Bailey has been working as a developer under the Neighborhood Stabilization Program. It’s a federal program that subsidizes developers for their work on foreclosed or vacant properties.

“We identify properties in targeted areas. We work to get those acquired from the banks that own them, and then we work with our development partners, for profit and nonprofit, to get those properties up to code and occupied as quickly as possible,” said Katie Ludwig, Assistant Commissioner with the Department of Housing and Economic Development.

Ludwig, who is with the Housing Preservation Division, says Chicago has received three federal grants to date, totaling more than $169 million for use as part of the Neighborhood Stabilization Program. But that, she says, is just a drop in the bucket.

“We are immensely grateful for those funds, but we all know that given the immensity of the crisis in the city, it’s just a start,” she said.

According to RealtyTrac, an online property data service, last month nearly 67,000 properties in Cook County were in some stage of the foreclosure process.

In Chicago last year, 10,000 homes were foreclosed upon. To combat the problem, the city has identified some 29 neighborhoods that are eligible to receive the federal funding.

So far, Bailey has completed and sold two of the three properties he took on last year. But the one in the worst condition was the two-flat that had gone unoccupied for 10 years.

Slowly but surely, Bailey and his team of contractors tore out the innards of the property and began to re-frame the interior. New ducts and wiring were installed. Once the drywall was put in, and paint and carpeting, the remnants of that burnt-out unit were erased.

“And the last time we were here we were standing right in here looking at the walls and the floor buckling,” he said. “We replaced all of that.”

On the outside tuck pointing and paint, as well as some structural restoration was necessary.

In total, the rehab cost about $210,000, but will only be listed on the market for $150,000. The results were dramatic.

The property now has new plumbing, fixtures, central air, an updated kitchen and bathrooms, as well as a completely re-constructed back deck.

Now that the house is complete and given its desirable location -- right across from the Garfield Park Conservatory -- Bailey says it’s not likely to last on the market very long.

“Yeah, we have five buyers interested,” Bailey said. “Actually, we didn’t even put it up for sale. When we started rehabbing it, people were coming by saying I want that building. They were just waiting. They were just waiting because of the area.”

NSP administrators say the hope is that while they can’t tackle the foreclosure crisis with just this one tool, it can spark change that will affect the entire community.

“Our hope is that if you can stabilize this area, that will spread to neighboring areas, and you can build on that and it will radiate from there,” said Ludwig. “And we are seeing that a little bit in some of the properties, that one that Melvin’s rehabbing, the owners next door just started rehabbing their property and that was really great to see. It was like we always wanted that to happen. Now it’s happening. This is spurring other investment in the communities.”

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