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MANAGING I N TOUGH ECONOMIC TIME S
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<br />The nationwide foreclosure crisis has devastated Minnesota neighborhoods
<br />in cities across the state. In response, the City of Brooklyn Park implemented
<br />a strategy to aggressively combat foreclosures and protect its neighborhoods.
<br />By Jamie Uerbrugge, Jason Aarsvold, and Kimberly Berggren
<br />ew things happen in a vacuum.
<br />The foreclosure crisis is a prime
<br />example of how intertwined and
<br />complex our economy is and, by
<br />extension, how the challenges fac-
<br />ing local communities are linked
<br />to regional, national, and global
<br />trends.
<br />In the late 1990s and early 2000s the
<br />nation participated in an unprecedented
<br />housing boom. Relaxed underwriting
<br />criteria and cheap, available credit con-
<br />verged to initiate and sustain this boom
<br />for several years. The consensus among
<br />many was that the housing market
<br />could continue this growth in perpetu-
<br />ity. We now know that this logic was
<br />flawed, and have seen the housing mar-
<br />ket come crashing down.
<br />Two years ago when indications
<br />pointed to increasing defaults resulting
<br />from Alt-A and sub-prime mortgages,
<br />few were predicting dire outcomes.
<br />After all, most of us shook our heads
<br />and asked why these folks hadn't
<br />learned from the experience of people
<br />who'd re-financed with "exploding
<br />ARMS" just a couple years before?
<br />Fool me once ...
<br />Fast forward. Only now do we
<br />understand that these mortgages were
<br />bundled and sold using complicated
<br />financial instruments and what
<br />amounted to fictitious securitization.
<br />Pretty soon our largest banking, invest-
<br />ment, and insurance institutions are all
<br />hemorrhaging money, laying people ofl,
<br />freezing vital investment capital,
<br />requesting taxpayer bailouts to avoid
<br />total meltdown, and-ta-da!-we have
<br />a global recession on our hands, the
<br />likes of which few of us have seen.
<br />But none of that affects our neigh-
<br />borhoods, right? It's something that's
<br />happening out there, far away, in New
<br />York City and Washington, D.C. Right.
<br />At home
<br />The nationwide housing boom and
<br />subsequent bust have had a very real
<br />impact on the City of Brooklyn Park
<br />and its neighborhoods. During the
<br />boom, investors saw great opportunity
<br />in Brooklyn Park's real estate market.
<br />Inexperienced property owners specu-
<br />lated in the community's neighbor-
<br />hoods, drove up prices, stripped equity
<br />from homes, and contributed little in
<br />the way of reinvestment.
<br />During this period of time, the
<br />number of licensed rental properties
<br />that are traditionally owner-occupied
<br />nearly tripled. Neighborhood disinvest-
<br />ment started to become evident and
<br />livability problems proliferated.
<br />The foreclosure epidemic com-
<br />pounded these neighborhood livability
<br />problems. By early 2006, Brooklyn Park
<br />saw its number of foreclosures creeping
<br />up. To local officials, this was a very
<br />troubling sign requiring immediate
<br />attention. Before the terms "sub-prime"
<br />and "mortgage-backed security"
<br />entered the nation's vernacular, Brook-
<br />lyn Park set about to aggressively com-
<br />bat foreclosures and protect its valued
<br />neighborhoods.
<br />As was said at the outset, things don't
<br />happen in a vacuum. Our foreclosure
<br />numbers are indeed startling, but
<br />Brooklyn Park's numbers represent only
<br />one piece in a much larger puzzle. Left
<br />unchecked, the destabilizing force of
<br />foreclosures in neighborhoods will very
<br />quickly doom any community. Putting
<br />together a foreclosure response plan is a
<br />first step in gaining a handle on the
<br />foreclosure issue. A response plan
<br />requires amulti-disciplinary approach
<br />and, in our case, it is part of a larger,
<br />unified, comprehensive approach to
<br />reclaiming our community.
<br />The numbers
<br />As the sixth most populous city in the
<br />state and fourth largest in the Twin Cit-
<br />ies metro area, Brooklyn Park is home
<br />to roughly 75,000 residents. Over the
<br />past two years, nearly 1,600 of the city's
<br />22,719 non-apartment residential prop-
<br />erties went through foreclosure.The
<br />rate of foreclosure in Brooklyn Park has
<br />increased steadily each year since 2005.
<br />This increase has finally leveled off in
<br />recent months. We hope this most
<br />recent trend continues, but a predicted
<br />nationwide "second wave" of foreclo-
<br />sures is looming.
<br />As of March 31, 2009, approximately
<br />820 Brooklyn Park homes were sitting
<br />vacant. In addition to foreclosed and
<br />vacant properties, nearly 1,500 tradi-
<br />tionally owner-occupied residential
<br />units have converted to rental status.
<br />Meanwhile, residential values are plum-
<br />meting, with 2009 values (pay 2010)
<br />for single-family residential properties
<br />down approximately 10 percent.
<br />These numbers mean significant
<br />community challenges and call for new
<br />and creative problem-solving, particu-
<br />larly in a time of declining resources.
<br />The response
<br />Brooklyn Park is placing a high prior-
<br />ity on the preservation and enhance-
<br />ment of its residential neighborhoods.
<br />These neighborhoods are critical to the
<br />MINNESOTA CLTIF.S MAY 2009
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