The foreclosure crisis continues to evolve and pose new challenges for communities working towards recovery. Chicago area municipalities, community and policy groups, and financial institutions have been working together for years to develop tools and strategies to handle the problems associated with foreclosures on single-family homes, many of which have been highlighted by Regional HOPI. A new threat is commanding these groups’ attention: foreclosures on condominiums.
New data show that condominiums are a significant driving force behind foreclosure growth in many parts of the Chicago region. For example, in the suburbs of Northwest Cook County, foreclosures grew by 24.5 percent from 2009 to 2010—one of the highest rates of growth in the region. However foreclosures on condominiums grew by 32.3 percent and made up nearly half of the foreclosures in Northwest Cook County in 2010 (42.5 percent).
Clearly, condo foreclosures are becoming a problem that the region can’t afford to ignore. However, condo foreclosures are a different beast than foreclosures on single-family homes and require new tools and innovative approaches. Regional HOPI recently highlighted some of the problems unique to condo foreclosures, including restrictions on credit that make it difficult for prospective buyers to purchase foreclosed condos. Two new resources give insight into the issues towns in the Chicago region are seeing with condo foreclosures.
The Metropolitan Mayors Caucus surveyed 85 municipalities in the region to see what challenges they faced with condo foreclosures. Municipal leaders responded that:
- Condo associations are not equipped to handle the issues that arise with foreclosures. They are having a difficult time with property maintenance as foreclosures rise and dues are not paid.
- Damage in foreclosed units can cause damage to other units, such as frozen water pipes bursting when the heat is turned off.
- It is difficult for our municipality to find information regarding the vacancy of condo units.
Additionally, a new report from Urban Land Institute (ULI) Chicago detailed more challenges municipalities face with condo foreclosures, based on a workshop on the issues facing Arlington Heights, a village in Northwest Cook County. Condo foreclosures made up 47.4 percent of Arlington Heights’ foreclosure filings in 2010. These challenges include:
- Identifying distressed condo units. Unlike single-family homes, signs of distress on a vacant, foreclosed condo unit may not be visible from the outside. This makes it difficult to identify potentially destabilizing factors.
- Obtaining data on whether or not a condo unit is occupied by an owner or renter and understanding which parties have interests in the property.
- Managing the diverse set of situations facing different condo owners. Each unit has a separate owner, independent financing, and different levels of default risk that all affect the building’s well-being. Some units may be occupied by renters or owned by non-occupant investors. This makes it difficult to assess the state of the property, as well as complicates communication about what approach to take with the building.
In response to these challenges, participants in ULI Chicago’s workshop set out to develop a set of recommendations to help Arlington Heights evaluate distressed condo buildings and take action to stabilize them.