Cities fight blighted bank-owned homes

Activists stand in a living room of a foreclosed home during a blight tour that the activists say highlights how big banks are hurting local communities. (PHOTOreuters, JONATHAN ALCORN)

June 08, 2012, Friday/ 16:34:00

The smell of rotting food and decay inside 10956 South Wilmington Avenue, Los Angeles, was overwhelming.

A burst pipe in the kitchen ceiling leaked water onto a floor littered with half empty cans, razor blades, odd shoes, stained clothing and an upturned, mold-ridden sofa. Windows were smashed and boarded up. The vacant home was foreclosed on in August 2011 by Bank of America, which has done nothing to repair it. And in a cruel twist that underscores the connection between the housing meltdown and the fiscal crisis afflicting many local governments, the city of Los Angeles lacks the wherewithal to force the property owner to clean up the mess.

Across America, bank-owned, blighted houses sit untouched, sometimes for years, disfiguring what in many cases are already troubled neighborhoods. Activists say the problem is particularly acute in minority areas. And many cities do not have the resources, the will or the power to force banks to maintain their properties. The house on South Wilmington Avenue and the heavily African-American south Los Angeles neighborhood where it is located offer a case in point.

Of roughly 400 bank-owned homes surveyed in the area, half are in a state of blight, with a third “seriously blighted,” according to two activist groups, Good Jobs LA and the Alliance of Californians for Community Empowerment. Yet even though the city of Los Angeles, with some fanfare, passed an ordinance two years ago compelling banks to repair blighted homes they own, or face fines, not a cent in penalties has been collected.

“My people don’t even have time to go to the toilet anymore,” said Luke Zamperini, head of the Los Angeles Building and Safety department, which is responsible for enforcing building codes and collecting fines.

Zamperini said his department had been cut by 60 percent over the last five years as a result of a non-stop state and local budget crisis. He now has a code enforcement team of just five people responsible for the entire city of Los Angeles, which has a population of nearly four million. The tiny group deals with everything from vacant buildings to outdoor advertisements to land-use issues. “We don’t even have time to visit these houses,” Zamperini told Reuters. “Basically, we just throw paper at the owners saying there may be some implications.”

In a statement, Bank of America apologized for the deteriorating condition of 10956 Wilmington Avenue. “When a vendor was sent to secure the property following the foreclosure, he was met by a man with a pit bull and was not able to complete the work,” the bank said. “The property preservation department is working with our vendors to address the situation and secure the property as quickly as possible.”

If it is a lack of resources that is part of the problem in Los Angeles, across the country in New Jersey it may be partly a lack of legislation.

Three cities in New Jersey - Newark, Camden and Edison - rank in the top 60 U.S. municipalities for foreclosures, as measured by the percentage of homes in foreclosure, according to the office of state Senator Ronald Rice.

He has introduced a bill that would empower cities in New Jersey to force out-of-state banks to appoint a local entity to care for the properties.

“By holding creditors’ feet to the fire in terms of maintaining these properties, we can avoid some of the blight which is infecting our communities,” Rice said.

Jason Butkowski, a spokesman for Rice, told Reuters: “Right now in New Jersey, there is no mechanism at all to force banks to repair these properties.”

Butkowski said even if Rice’s bill becomes law, they might still have to see “if we have the resources to enforce it.”

Cities with large minority populations, including the three in New Jersey that are near the top of the foreclosure rankings, face an especially difficult challenge. A report last month by the National Fair Housing Alliance (NFHA) found that banks poured many more resources into maintaining bank-owned, or “real-estate owned” (REO), properties in largely white neighborhoods than in African-American and Latino areas.

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