Report: Foreclosed Home Costs Exceed $170,000
A white paper from Community Blight Solutions, Cleveland, Ohio, estimates that the typical foreclosed home imposes costs of more than $170,000 and that simple remedies can effectively mitigate declines in property values and increases in crime.
The paper, Understanding the True Costs of Abandoned Properties: How Maintenance Can Make a Difference (http://www.communityblightsolutions.com/white-paper/), by former Treasury Assistant Secretary Aaron Klein, attempts to quantify the “substantial and numerous impacts foreclosures and vacant and abandoned properties have on homeowners and their communities.”
The study asserts of the $170,000 in costs imposed by each foreclosed home, $85,000 is directly attributable to a property being vacant and the condition in which that vacant house is kept, creating an adverse impact on property values, crime and increased burden on community resources.
Key findings:
–The foreclosure of a home will cause a loss of value of at least $130,000 for the home and its neighborhood.
–More than half the total cost of a foreclosure’s impact on neighboring properties comes from the property being abandoned.
–Vacant properties lead to increases in violent crime with substantial costs: $14,000 per vacant property per year in increased crime, translating into $795 million nationwide for all vacant properties.
–The impact of vacancy on crime increases as the property stays vacant for longer periods, likely plateauing at between 12 and 18 months.
–Vacant buildings present major fire hazards; vacant residential buildings account for one of every 14 residential building fires in America.
“How a building is secured can have a substantial impact on the total costs that its vacant status imposes on its neighbors, the community and society,” Klein said. “It impacts future foreclosures and the costs of those foreclosures.”
Ohio this month passed legislation banning the use of plywood on properties certified as vacant and abandoned. Fannie Mae, which eschews plywood in favor of clear polycarbonite windows and doors, in November said it will no longer allow banks to use plywood in securing vacant properties.
“Economic study is important but should not be considered in a vacuum,” Klein said. “Given the magnitude of vacant buildings, some forward-thinking public and private enterprises have already begun to experiment and will reap the benefits.”
Klein added that the benefits that spill over beyond the vacant property to neighbors, communities, local and state governments and society have not been fully appreciated. “Broader appreciation of those benefits start with a greater understanding of the costs of vacant houses,” he said.
