Many towns play 'This Old House' when others won't

Towns buy long-vacant houses to rehab and resell – diminishing blight and boosting property values.

When the lawn became calf-deep, the windows targets for rocks, and the walls grafittied with gang symbols, the vacant home on Woodland Drive became the subject of sharp resident complaints to the town hall.

Their message: This eyesore is marring the character of our tidy, modest-homed neighborhood. Do something.

The house was in foreclosure and owned by an out-of-state mortgage company. Private-sector resale didn't seem imminent.

So town officials came up with an innovative solution: Become their own Donald Trump (minus a few digits on the real-estate price tag). By buying the home, rehabbing it, and selling it at a break even price, the town would revitalize a beleaguered block and return the offending property to the tax rolls – a win for the town, a future homeowner, and the current residents of Woodland Drive.

A similar formula has caught in diverse suburban communities and some cities, including Milwaukee. It isn't always a financial success, but in some cases, town-financed rehabs seem to be working where traditional solutions – such as letting private builders or nonprofits handle run-down homes – haven't been enough.

"I won't make any dramatic changes, no purple or pink – I have some pretty strict guidelines," says Jeneen Smith-Underwood, the housing-rehabilitation manager who is overseeing the project here in Round Lake Beach. "I just want to give it some curb appeal."

Playing "This Old House" may be an unfamiliar role, but officials here are beaming at the opportunity to transform the garageless, mostly boarded up, three-bedroom split level. It lies half a block from the picturesque body of water that gives this outer Chicago suburb its name.

The village has established a line of credit at a local bank and has identified 100 vacant houses it would like to see reoccupied, though it is unlikely the town will purchase more than a handful at any one time.

"There's a lot of buzz," Ms. Smith-Underwood says. "The Boy Scouts called, they want to get involved. Other cities have called and want to know about it. A building-supply company wants to offer material at a discount."

Another Chicago suburb, Country Club Hills, has bought, rehabbed and sold seven houses, all of them without a real estate agent and all contracted for within a week of going on the market.

"We're very proud of our little program," says Henrietta Turner, the town's community-development director. "We would love to expand it and take a more comprehensive approach."

Developers there have also been buying up vacant homes, but sometimes make only cosmetic changes before reselling them. In some cases, low-income buyers have moved in, only to be forced to sell when hit with a major maintenance bill.

The town, using credits supplied by the federal government, has been doing substantive remodels and breaking even.

Cities large and small have struggled for years with the problem of abandoned homes, typically relying on nonprofit organizations, private developers, or partnerships between those groups and cities to find a redevelopment formula that works.

Washington, D.C., unveiled a plan earlier this year in which the city hopes to acquire and resell up to 250 long-empty properties by the fall of 2003. In this case, the city would resell – to developers or non-profits– before the homes are rehabbed. But the plan comes at a cost: about $23 million – or $92,000 per house.

That, experts say, points up the real problem: the gap between what it costs a developer to renovate a home and what the residents of the typically lower-income neighborhoods can afford to pay for a home. The Bush administration has proposed a homeownership tax credit aimed at bridging the gap. The program would allow investors to write off up to half the cost of rehabilitation or construction.

But until such programs cause developers to beat a path to the town hall here, Round Lake Beach officials are planning to fight the blight alone.

The key to success, they say, is bird-dogging costs. The nearby town of Carpenterville abandoned a similar effort to buy and rehab homes, having fallen prey to the "money-pit" phenomenon familiar to many homeowners. The village won't consider a vacant home unless it sees a good shot at breaking even.

"Among the primary responsibilities of government are keeping a city in good working order, keeping property values up and crime down," says Round Lake Beach Mayor Richard Hill. "By restoring a house that has failed the community, we're accomplishing all those goals."