Federal ruling on Chicago vacant buildings ordinance weakens key tool for preserving communities

CHICAGO—Fannie Mae and Freddie Mac will not be required to maintain vacant homes up to the standards in the City of Chicago’s vacant buildings ordinance, ruled U.S. District Court Judge Thomas Durkin on Friday. 

The Federal Housing Finance Agency (FHFA), which regulates Fannie Mae and Freddie Mac, filed suit against the City of Chicago’s vacant buildings ordinance in December 2011. The ordinance requires mortgagees of a vacant building to register the property with the City, pay a registration fee, and maintain the property or face penalties of $500-1,000.

“The City of Chicago expanded its vacant buildings ordinance to hold mortgage servicers accountable for securing and maintaining vacant buildings stuck in the foreclosure process,” said Katie Buitrago, Senior Policy and Communications Associate at Woodstock Institute. “Prior to this change, mortgage servicers could  abandon homes in the foreclosure process and leave properties in limbo without a responsible party to maintain them.”

“The City of Chicago’s ordinance is a key tool for limiting the devastating effects of vacant homes on communities, including increased blight and crime and  decreased property values and revenue for public services,” said Buitrago. “We are deeply disappointed in the Court’s decision and hope that a higher court will reverse the decision.   Chicago and communities across the country must be empowered to ensure that the actions of a federal agency, the FHFA, do not wreak havoc on neighborhoods.”

In a 2011 report, Woodstock Institute found that nearly 1,900 vacant homes in the City of Chicago were stuck in foreclosure and had not reached a clear outcome, raising concerns that the servicer had decided to abandon the process. These “red flag” properties, sometimes called “zombie properties,” pose substantial risks to the surrounding community. Woodstock estimated that “red flag” properties cost the City of Chicago $36 million in maintenance, security, and administrative costs.

For more information, please contact Katie Buitrago at kbuitrago@woodstockinst.org or 312-368-0310.