Five Questions With: Nellie M. Gorbea

The executive director of HousingWorks RI talks about the effect that the foreclosure crisis is having on housing affordability in Rhode Island. More

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Five Questions With: Nellie M. Gorbea

COURTESY HOUSINGWORKS RI
DAMAGE DONE: According to HousingWorks RI Executive Directo Nellie M. Gorbea, foreclosed homes bring down the value of the homes around them, and as a result, dragging down the neighborhood.
Posted 3/30/12

Nellie M. Gorbea is executive director of HousingWorks RI, a coalition of nearly 140 organizations with the goal of making sure Rhode Island has enough affordable homes to satisfy the need.

Earlier this week, the organization issued a report that analyzed data on the state’s foreclosure problem and its implications for housing in the Ocean State.

PBN: The report you released yesterday said that the foreclosure crisis has affected 6,324 housing units in multi-family properties. What does that mean and is that effect permanent?

GORBEA: Nearly one-third of the residential foreclosure deeds filed from 2009 through 2011 were multi-family properties. Central Falls, Cranston, Pawtucket, Providence and Woonsocket had the highest numbers of multi-family foreclosures. This is important to our state, because nearly 40 percent of Rhode Islanders are renters. Losing apartments to the foreclosure crisis has helped sustain high rental prices across the state.

We released an issue brief last month that showed 1 in 4 Rhode Island renters is extremely cost burdened, spending more than 50 percent of their income on housing. This means those renters have less to spend on other necessities such as food and health care.

The effect of the foreclosure crisis does not have to be permanent. With the right policies and investments, Rhode Island can emerge economically stronger from the foreclosure crisis. For example, our report highlights the work of the Smith Hill CDC in Providence to rehabilitate foreclosed multi-family properties into long-term affordable rental homes. That work is being supported by the state’s affordable housing bond and is not only growing the supply of affordable apartments, but jobs as well.

PBN: How large a part of an affordable housing strategy is the purchase and rehabilitation of foreclosed properties?

GORBEA: About $19 million of Building Homes Rhode Island funds, from the [$50 million] 2006 housing bond, were used to create over 530 long-term affordable rental and 40 ownership homes out of what were once foreclosed units.

Federal programs such as the Neighborhood Stabilization Program have also been helpful in rehabilitating foreclosed properties.

The foreclosure crisis does present a unique opportunity for the state. The five communities targeted through Gov. Lincoln D. Chafee’s Main Street Initiative have been among the most heavily impacted by the state’s foreclosure crisis. Rehabbing foreclosed properties into long-term affordable rental and ownership homes for local workers is an essential component in building vibrant and unique main streets.

We already know that state investment in such strategies is helping our economy. Our economic analysis shows that the full $50 million housing bond has multiplied nearly 16 times, generating close to $800 million in economic activity in Rhode Island. The housing bond also supported 6,100 jobs. In fact, our report showed how the rehabbing of foreclosures in Smith Hill alone employed between 175 and 200 workers.

PBN: Aside from a new bond to support the creation of affordable housing, what else can Rhode Island do?

GORBEA: Rhode Island needs to elevate affordable housing into its overall economic development strategy. For example, in Massachusetts and Connecticut housing issues are handled in cabinet-level executive branch departments, and both states have proposed increasing their states’ investments in affordable housing as a driver for economic growth. If Rhode Island is to remain competitive in attracting and retaining businesses and growing a vibrant workforce, the state needs to develop a consistent funding policy for the development and operation of long-term affordable housing.

In past sessions, the General Assembly has been a strong supporter of investments in affordable housing development, and we are looking forward to working with them to see another housing bond on the November ballot as well as figuring out how to develop a consistent approach to funding affordable housing.

PBN: Are there many employers who have trouble attracting workers because of the high cost of housing in Rhode Island? Do any of them have programs to help new employees find appropriate housing?

GORBEA: HousingWorks RI has not done a specific study on Rhode Island employers, but there are regional and national studies that cite high housing costs as deterrents to attracting workers to local economies.

For example, research by the Federal Reserve Bank of Boston suggests that Rhode Island may be losing qualified labor due to housing unaffordability, and that unaffordable housing slows growth in local employment.

Our Fact Book on housing has consistently shown significant challenges due to incomes levels in Rhode Island and the cost of housing. If Rhode Island is to build a strong and diversified economy, state and local policymakers must invest in strategies that will ensure a long-term supply of homes that are affordable to our state’s workforce.

PBN: Does the presence of any foreclosed homes degrade a neighborhood, or does that happen only above a certain percentage threshold? For example, in Providence, nearly 10 percent of homes went through foreclosure in 2009-2011. What does that mean for the housing that was not foreclosed?

GORBEA: We took an in-depth look at this in last year’s special report on foreclosures. Homes within a 300-foot radius of a foreclosed property may lose up to 1 percent of their value. A conservative estimation quantifies the damage at $5.6 billion in lost wealth for Rhode Island families, just from the spillover effects. And for municipalities, the decreased tax bases can mean increased borrowing costs if bond markets begin to question a municipality’s ability to repay.

Certainly the greater the percentage of mortgaged homes foreclosed, the greater the damage to that community. The foreclosure crisis in the state’s urban communities is different than the smaller municipalities. In Central Falls and Providence for example, there are entire neighborhoods that have been blighted by foreclosures and boarded up buildings. In smaller communities, the foreclosures may be more scattered and less visible.

In a state as compact as Rhode Island, foreclosures represent an important challenge that requires statewide attention and response.

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