Lessons from Phoenix
An Interview with the City of Phoenix’s Deputy Neighborhood Services Director, Kate Krietor and Jesse Garcia, Project Manager for the City of Phoenix
General Background
Q. Please describe how the City is targeting areas for its neighborhood stabilization activities?
Kate & Jesse:Target areas were areas where neighborhood revitalization was already occurring. They were also determined using HUD’s [risk] scores, and knowledge of community leadership in an area. Phoenix is data poor, so considering a track-record of community action can be as valuable as analyzing data.
Q. How did the City develop its neighborhood stabilization strategy to combat the most pressing effects of foreclosure and abandonmentfaced in Phoenix communities?
Kate & Jesse: We took a three-tiered approach to NSP-1, which followed Phoenix’s consolidated plan. Unlike a lot of other cities, Phoenix’s foreclosures were pervasive [rather than concentrated in one area], so we don’t have clear-cut areas of foreclosures. The three tiers [we used] are:
1. Making available consumer products city-wide (for example, buyer assistance, foreclosure mitigation, etc.);
2. Offering city-wide rehab and consumer products; and
3. Concentrating acquisition, rehab, and resale in the worst areas (which were already being targeted).
We incorporated five HUD NSP program activities into the program. The three-tier approach was especially advantageous, because it covers nearly one-third of the city. People didn’t look to see if they were included in the program, because a large majority of people’s neighborhoods were included. Rather [they] looked at the map and said, “Where’s my neighborhood?”
It also helped address community pressure from politicians, community groups, and realtors in particular neighborhoods. Also, this approach allowed flexibility between consumer-driven approaches and strategic approaches, because we didn’t know what would work. We thought purchasing REO properties would be easy: We didn’t think we would need to rely on specific servicers. Reverse offers have been fruitless. We encountered unanticipated competition—not just from investors.
Q. Please tell us about the conditions experienced on-the-ground in hard-hit neighborhoods, and how did this correlate to the timing of the City undertaking concerted neighborhood stabilization efforts?
Kate & Jesse: Neighborhood stabilization was occurring prior to Phoenix receiving NSP dollars. LISC [Local Initiatives Support Corporation]took the lead in creating the Sustainable Homeownership Program, documenting vacant properties, working with housing counselors, and establishing a data system.
Phoenix had already started neighborhood redevelopment and revitalization: It included demolishing properties in blighted areas, code enforcement, infill housing, creating community capacity, and improving infrastructure. Three years ago, foreclosures were insignificant. NSP-1 funds provided a good opportunity to focus on energy efficiency, transportation, and job centers.
Q. How are the problems of neighborhood distress in Phoenix as place-specific, or unique to local market?
Kate & Jesse: Public perception of the market in Phoenix is very important. Compared with the East Coast, where home values and sales are sluggish, the market in Phoenix is fluid, volatile, unstable, and vulnerable to market changes. Phoenix’s economy is also dependent on construction.
Within the approach [we’ve developed], there’s built-in flexibility as new information comes in. It allows buyers several options, too, because we don’t want to hold properties. We can also use two or three funding sources for projects, because we have voter-approved bond initiative to support capital improvements.
Impediments
Q. What are the most difficult obstacles your organization has encountered when addressing foreclosure and abandonment in your community and how are you responding or changing your stabilization strategy?
Kate & Jesse: [The obstacles include] competition for properties on a property-by-property basis; aligning pricing with REO pricing structures; [and] the constant process of negotiation.
As time passed, we had to change the definition of ‘strategic’. Our strategy became more localized, meaning we tried to cluster properties in “pockets of strength,” where neighborhood revitalization was already occurring. We could no longer take a block-by-block approach. We also created back-end connections between the communities and the activities taking shape – like bringing in participation from block watch groups and schools.
Successes
Q. What outcomes would your organization consider its greatest successes within its neighborhood stabilization strategy to date?
Kate & Jesse: Acquiring the “barracks” from Fannie Mae was a major achievement. This 52- unit structure built during World War II was a “problem property” for more than 10 years. The city had already acquired the adjoining property and it’s already near a transit center.
A broader successful outcome is West Phoenix, which encompasses 151 square miles, where our strategy is foreclosure mitigation. The city is trying to link up with the state to get homeowners state funds. We also have undertaken a pilot program with our preservation department to go door-to-door to distribute housing counselor information to homeowners who are 90-days past due on their mortgages.
In this area, it’s very difficult to buy REO properties; investors are buying them all up for as little as $40,000. The area is a well-established area and full of post-war housing, and homeownership rates were high here 30 years ago. But now those rates are trending downward, in the wrong direction. We see very few First Look listings from the Stabilization Trust in this area and to date, we’ve only bought about 8–10 properties [in it].
Q. Did partnerships with other nonprofits, developers, municipalities, or government agencies contribute to this success? If so, how?
Kate & Jesse: We just started a partnership with an investor-partner to match consumers with REO. It’s being run by a former mayor of Phoenix so he understands the city, as well as the importance of neighborhood sustainability. The organization first came to our attention through a request for proposals. But we were also looking for ways to work with other investors, because Phoenix has a lot of “mom-and-pop” investors and a local professional association of investors.
Q. Last words of wisdom for other organizations undertaking neighborhood stabilization work benefit based on your experience?
Kate & Jesse: NSP enabled us to advance existing programs that would have taken us much longer [to implement without these funds]. We completed a $2 million project for one-third of that cost. It also caused us to rethink on a micro-level, [especially] how to build on these pockets of strength. In three years, we rehabbed more than 100 homes, but the Stabilization Trust encourages the government to do things faster.
Build internal capacity that will carry projects beyond NSP (especially acquisition and rehab capacity).
Act like an investor: We’ve learned to think and fund projects like an investor would, even though we are more concerned about neighborhood health.
