West Allis - Officials will soon grapple with whether the city can get more bang for the buck in its blight fight by offering something such as forgivable loans for home repairs instead of buying up ailing homes.
The city has used federal economic stimulus dollars to buy and raze foreclosed homes. To get the most out of those anti-blight dollars, the city bought the most run-down of the foreclosed homes.
But the stimulus money has now run out and buying and razing deteriorated homes is more expensive than granting loans to fix up homes. The tab is more than $280,000 to buy, raze and build new. Rising construction costs, getting rid of asbestos in the old homes and often having to replace water and sewer service lines have boosted the cost over the years.
While the stimulus money has run out, West Allis still gets $200,000 federal dollars a year for its H.O.M.E. program that the city also uses to buy homes but also to give loans for home rehabilitation.
"But some people can't afford the loan," said Alderman Michael Czaplewski who sits on the community development authority, which hands out the loans.
Rather than give up on such owners of run-down properties, to the detriment of the neighborhood, officials said, the CDA will look into what can be done.
"It probably will be a forgivable loan," said Alderman Kevin Haass, CDA member and chairman of the common council administration and finance committee that will be a major player in evaluating a plan. "Forgivable if you own for a period of time like five years and have no inspection problems and continue to maintain what was done."
Officials know that homeowners will line up around the city hall to get a forgivable loan, so the requirements will have to be tight, they said.
"They would have to meet a lot of conditions," Czaplewski said.
The CDA and city staff are working on initiatives that could be ready as early as the Tuesday, Dec. 13, CDA meeting.
The city of Milwaukee already has two forgivable loan programs, both for income-qualifying homeowners. One matches the homeowner dollar for dollar up to $15,000 for improvements inside or outside in targeted neighborhoods. After five years, the loan is forgiven, if the borrower still lives in the home.
The other program offers loans of up to $20,000, forgiving 25 percent of the loan after 10 years.
The stimulus federal grant of $850,000 came to West Allis in 2009. The city used the money to buy, raze and sell seven homes, five of them in the last two years.
"We buy the worst of the worst, generally, so they do not have a negative impact on the rest of the neighborhood," said Patrick Schloss, community development manager.
"Blight tends to spread. If you get rid of it, that helps the neighborhood," Schloss said.
A home in disrepair brings down the value of its neighbors, he said. Abandoned homes invite loitering and crime, he said.
Market can't do it
The city looks for homes that are in such disrepair that the private sector would never rehab them, Schloss said. It would cost too much for them to ever be sold or rented. "Nobody was doing anything with them."
Because federal dollars are used for the program, the homes usually have to be razed because federal requirements call for such extensive improvements it makes economic sense to start from scratch, Schloss said.
Construction contracts are bid out, he said, but costs are still starting to climb toward $300,000, including demolition. Construction costs have risen nearly 60 percent in the six years since the first home was built.
That first home cost $178,000 to build in 2010, far less than the $282,000 for the last one that was constructed in May this year, said planner Kristi Johnson. The city uses three home designs that are basically 1,300 to 1,400 square feet with three bedrooms, she said. That comes out to $201 per square foot of living space.
Even though two or three bids come in for every project, that cost struck Jan Francki, executive vice president of Kaerek Homes as a bit high.
Kaerek can build a basic 1,380-square-foot ranch home for $160,000 and a basic two-story at 1,800 square feet for $164,000, she said. Kaerek only builds on new lots, but she said demolition can run $20,000 to $25,000. But that can escalate if asbestos has to be removed and water and sewer laterals installed, she said. Francki said.
Even under the best circumstances, the city doesn't get its investment back because federal rules require the homes to be sold to families meeting income guidelines. Some homes built with stimulus money had to go to families making up to only half the median income for Milwaukee County. The median means that half the families make more and half make less. Others went to families making as much as 120 percent more than the median income for Milwaukee County. It depended on the home, Johnson said.
If H.O.M.E. dollars are used to buy, raze and build, the homes can be sold to families making up to 80 percent of the county's median income.