Chicago's communities of color face slower recovery from foreclosure crisis
Vacant, lender-owned properties are concentrated in African American communities, go unsold longer, and incur greater losses to the lender, says a new report from Woodstock Institute entitled Roadblock to Recovery: Examining the Disparate Impacts of Vacant Lender-Owned Properties in Chicago.
As preliminary signs of stabilization in the housing market begin to appear, there are clear indicators that African American communities will have to address the negative effects of foreclosure, such as property value declines and increases in violent crime, far longer than predominantly white communities.
The report, which looks at foreclosure auction results and subsequent real estate transactions, found that 64 percent of vacant lender-owned properties from 2007 and the first half of 2008 were located in African American communities. These properties also sat unsold much longer, taking 25 percent longer to be absorbed into the market than vacant, lender-owned properties located in predominantly white communities.
As these properties sit unsold, they also lose significant value. When comparing the amount owed to the lender to the price at which a vacant, lender-owned property ultimately sold, lenders experienced greater losses on properties located in African American communities than losses in predominantly white communities. In African-American communities, the average loss per property was 35 percent, compared to an average loss of 17 percent in predominantly white communities.
The longer a property remains vacant, the longer the community is exposed to the negative effects of vacant properties. Previous Woodstock Institute research has demonstrated that high concentrations of foreclosures lead to declining property values of surrounding homes and increases in violent crime.