Will free city money have buyers flocking to buy houses? While two Northeast neighborhoods, Holland and Beltrami, contain eligible blocks, the biggest action the program is seeing is in North Minneapolis where as of late May, 13 had reserved city funds or actually closed on their loans; representing 26 percent of the money made available starting May 5.
The City of Minneapolis’ citywide Minneapolis Advantage program is a $10,000 per eligible transaction pilot with $500,000 to spend, limited to assisting buyers who purchase single family or duplex homes on blocks on which there are foreclosed homes or vacant/boarded homes that are on the city’s “249” list, in neighborhoods with an extraordinary percentage of such homes.
A late-May analysis of available properties identified a handful in Northeast’s eligible neighborhoods using the easily available public information on where the foreclosures and 249-listed properties are. More might be identified by calling the program’s administrators, Greater Metropolitan Housing Corporation, Jenny Camacho, at 612-588-3033. The program is housed at the Housing Resource Center Northwest, at 2148 44th Ave. N.
Funds are no-interest loans that can be used for closing costs, down payment assistance or renovations (not cash back) and are forgiven at 20 percent of the $10,000 loan for each of the first five years that the buyer lives in the property. (If the buyer moves after three years, for example, she or he would owe $4,000 on the loan.) Minneapolis Advantage loan-backed renovations that increase a house’s market value are forgiven in a different calculation.
“We’re ecstatic,” said Mark Anderson, a senior contract management specialist in the city’s Development Finance Division. His office is part of the Community Planning and Economic Development Department, which designed the program. “We knew it would be popular from the number of calls received through council offices in advance of the release. It seems that people are looking at the market, seeing low prices, and realizing that with this opportunity, they will be able to buy.” Five buyers in other areas of town had also been identified (none from Northeast yet), and six more applications were in, but awaiting some documents.
Tom Streitz, Director of Housing Policy and Development for the City of Minneapolis, said that as the “credit crunch” has lenders pulling back and requiring larger down payments, “we knew there were qualified buyers that just didn’t have the up front” money for down payment, closing costs, or renovations.
Note: “249” got its name from the group of laws that regulate condemning vacant and substandard properties, and the steps that can be taken to save them from being torn down. A block, for purposes of the Minneapolis Advantage Program, is alley to alley (houses that face each other, not across the common back alley). The list is available here. A potential buyer can see by notices posted on boarded homes, whether new 249-list additions have been or will be made on a block where they are searching.
“Foreclosed” means “a sheriff sale has occurred,” said Anderson. “It doesn’t matter to us if a home on that list has since been purchased or redeemed (although few people redeem properties these days). It’s still an indication of the market. We’re doing this to stir the market and get things moving again. We’ll see if we can get enough activity flowing in this test phase, and if we fail we can make modifications.” (the program will be evaluated in six months). A list of foreclosed properties is available here with the most current information at www4.co.hennepin.mn.us/webforeclosure/.
There are other conditions of receiving Minneapolis Advantage funds. Buyers have to be using “A” or “prime” lending products (not subprime loans). And while they do not have to be first-time homebuyers, they do have to complete homeownership counseling (such as Homestretch, through Homeownership Center of Minnesota) prior to their loan closing. And they must live in the property; the program is not for absentee rentals.
The $500,000 for the program came from the city’s Legacy Fund, money that was paid back to the City by the Hilton hotel developers (the city had made an up-front investment many years ago) and is available for discretionary development purposes.
For more information on Minneapolis Advantage, go to www.ci.minneapolis.mn.us/cped/minneapolisadvantage_home.asp includes the application, a summary of the program, and a list of frequently asked questions.