Subprime mortgages, foreclosures and the housing bubble have been discussed a great deal on this blog and elsewhere so I thought I would take the opportunity to focus on how this crisis has affected one community and what the community is doing to fight back.

North Minneapolis is a neighborhood with working class roots that has had its share of struggles – high crime rates, a high concentration of poverty and now, a huge upswing in foreclosures.

While the state of Minnesota has a fairly low rate of foreclosures, the communities in North Minneapolis have been disproportionately affected by the problem.

When you take a look at this amazing map created by the Minneapolis-St. Paul Star Tribune, it shows that, since January 2006, 60% of the 2,500 foreclosures in the Twin Cities have occurred in North Minneapolis. That’s roughly 10% of all the houses in North Minneapolis.

The numbers are startling and they are a direct result of subprime mortgages, mostly with adjustable-rates. They were given to new homeowners, landlords, and long time residents wanting to re-finance. There has been a lot of discussion about how the mortgage brokers and loan companies targeted poor minority communities like North Minneapolis.

The Star Trib quotes Amber Hawkins, a community activist in North Minneapolis:

People who have been historically denied access to credit are likely to be susceptible to those offers, she said. "They’ve been targeted and marketed to, and the average consumer is no match for companies that have trained their people to sell the loan no matter what and maximize the profit."

As people lose their homes, the result is block after block of boarded up and vacant buildings (click here and here for photos/images). Many of them have been abandoned by owners who couldn’t afford to pay their mortgages when the rates doubled and tripled. One MPR article talks about how this has caused increased crime rates:

A ride along with Halvorson shows many of the homes on Hawthorne’s tree-lined streets are sturdy and well maintained. However, there are dozens where bright orange and pink city water shutoff and condemnation notices have been stapled to front doors. Foreclosure or other problems have caused owners to walk away. They locked the door as they left, but that it isn’t much of an obstacle to squatters, drug dealers and thieves…. Blight is the problem the burgeoning foreclosure crisis is creating.

But the community is fighting back. Local leaders reached out to Mayor R.T. Rybak and the city for help, and together they formed the Northside Home Fund in 2005. The NHF is a partnership between elected officials, city agencies, neighborhood organizations and community development organizations. It focuses on the redevelopment of boarded up, vacant buildings.

Through the NHF, local community leaders sat down with the city and created a plan of action.  They decided to take back “clusters,” or small groups of properties, and redevelop them.  The idea is to start small and go big. The city, state, development companies and foundations provide the funding, but the community picks which areas become “clusters.” The community works with the city to pick the developer they want to partner with on the project. They all work together to develop the overall project plan. 

The NHF describes the cluster project:

Specific components of the cluster projects include community and outreach and organizing, the administration of a health impact assessment survey, a housing inspections component, foreclosure prevention, and the establishment of a development partnership to identify and implement residential development opportunities within the cluster.

So far the community has identified 6 clusters to redevelop. The partnership has removed the blighted effects of 37 boarded and vacant buildings, begun construction on new homes, and helped homeowners in and around the clusters do repairs to bring their buildings up to code. Different communities have different visions for their clusters.  For example, one community chose to develop with sustainable green building techniques.

In addition to the redevelopment project, the NHF partners with other city agencies and non-profit organizations to work on foreclosure prevention. They educate and counsel homeowners and perspective homeowners, and work with those who are in danger of losing their homes.

The NHF is taking a dynamic, multi-pronged approach.  They are addressing the problem of the abandoned buildings, but they are also working to prevent more from becoming vacant and boarded up in the first place.

Minnesota has already passed legislation to crack down on some of the smaller fraudulent lending companies.  While federal legislation is certainly needed as well, the city and communities of North Minneapolis should be commended for their efforts. In order to effectively address problems within a community, local leaders must have a place at the decision making table.

This post was written by Natasha Winegar. While Jonathan is away on vacation, she will be posting in his place.