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Vacant Homes Give Habitat a Leg Up

Famed for building homes for the poor from scratch, Habitat for Humanity sees a silver lining to thousands of foreclosed homes available for a pittance.
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Shanta Brown, a nursing assistant in Charlotte, N.C., walked through her soon-to-be home in August, pointing out favorite features — the living room's vaulted ceiling, two full baths and new black countertops she chose for durability.

In a few minutes, Brown would stand outside the front door and cut a ribbon, dedicating the first house in Habitat for Humanity Charlotte's ambitious new effort to rehab homes in neighborhoods decimated by foreclosures.

Across the country, Habitat chapters are doing the same — buying vacant, foreclosed-on homes at rock-bottom prices. For most, that's a big departure from their longstanding model of using volunteer labor to build affordable housing from the ground up.

But that model was pre-foreclosure crisis. Now, as thousands of homes sit vacant, Habitat officials say they can't pass up this opportunity.

With prices depressed, many are finding they can buy and rehab cheaper than they can build. (Most Habitat chapters also continue to build.) Rehab projects are often faster, so families can move in sooner. And Habitat officials say rehabbed, owner-occupied houses will ultimately boost home values in high-foreclosure neighborhoods.

Like most nonprofits, Habitat chapters have seen donations fall. But the federal government is handing out millions to help make these rehabs happen.

"It's an incredible opportunity to turn things around," says Mark Andrews, Habitat for Humanity International's senior director of U.S. operations.

Habitat International officials don't have totals of homes being rehabbed because their 1,500 chapters work independently. They do know that about $80 million has been earmarked to go to about 80 to 100 chapters — the first wave of grants from the U.S. Housing and Economic Recovery Act's Neighborhood Stabilization Program. That money will be used to rehab or build about 1,300 homes.

Some chapters are also kicking in their own money to buy foreclosures. And a second wave of federal funding could mean more than $200 million, awarded to Habitat International and state organizations in Alabama, Florida and Louisiana, for about 1,600 additional homes. That money will be awarded later this year.

Rehabbing means new and sometimes dirty jobs for volunteers: Removing mold and lead paint, tearing out nasty carpet, repainting dingy walls.

But in Charlotte, where many foreclosures are nearly new homes, the rehab jobs aren't bad. One sunny morning, the sounds of hammers rang out in the Windy Ridge neighborhood as volunteers added a storage shed to a home that had been foreclosed on twice in its seven-year life.

A couple of years ago, Charlotte's Windy Ridge neighborhood became a poster child for everything wrong with the home mortgage industry. It was a nearly new subdivision, yet as a result of predatory lending and easy credit, 61 percent of its 132 homes had seen foreclosures by the end of 2007. Crime was up. Property values had plummeted.

Habitat has purchased six foreclosed homes in the subdivision and plans to buy more. Brown's 1,000-square-foot home, the first to be rehabbed, sold new in 2003 for $106,000. Habitat bought it in April for $44,000. Aside from new carpet and paint, the property didn't need a lot of work. Even after repairs, the project cost less than the $60,000 needed to build a new home.

Different cities have different stories. Habitat of Collier County in Naples, Fla., has purchased nearly 50 homes in the troubled Naples Manor neighborhood. When those home values peaked at around $250,000 a few years ago, many homeowners took out equity loans, only to see prices collapse. Now, houses are selling for under $100,000.

In Minnesota, Habitat for Humanity Twin Cities is rehabbing pre-1940 homes mostly located in the urban core. Like many chapters, the Twin Cities affiliate is concentrating efforts in a few neighborhoods. By working alongside other groups doing similar work, "we'll have an impact not only on the housing stock, but property values, social connections and how people feel about their neighborhoods," says Kristen Beckmann, the affiliate's director for government relations.

Some chapters, including the Greater San Francisco affiliate, are rehabbing without federal funds. San Mateo County is generally affluent, so it didn't qualify for federal money. But that affluence masks pockets of poverty.

Habitat officials plan to continue working on foreclosures as long as it makes sense. But within three to four years, they're hoping the housing market bounces back and they can get out of the rehab business.

"In the short term, and we do truly hope it's the very short term, we're trying to make some lemonade out of lemons," says Phillip Kilbridge, executive director of Habitat for Humanity Greater San Francisco.

If trends hold, neighbors of these newly rehabbed Habitat homes won't have to worry about foreclosures. Thanks to extensive screening and homeowner education, the foreclosure rate for Habitat homes is just 2 percent.

At Brown's Habitat home dedication, Habitat of Charlotte Executive Director Bert Green spoke of a new life for the home and neighborhood, rising from the ashes of foreclosure and loss.

Brown grinned as she thanked Habitat workers and volunteers.

"My own land," she said. "My own home."

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