Council considers using eminent domain, land bank to bail out underwater mortgages

Compared to other major cities, Seattle’s housing market is rebounding wonderfully since the 2007 crash and Capitol Hill properties fare much better than in the rest of the city. But there are still thousands of residents facing foreclosure or struggling to pay mortgages higher than the value of their home. And the next bump in the economy — whenever it may come — could drag thousands more down with it.

The Seattle City Council’s Housing, Human Service, Health, and Culture Committee passed a resolution Wednesday that would enable City Hall to study how to use public resources, including eminent domain, to save underwater mortgages. The resolution now moves on to the full council.

Several homeowners who faced foreclosure or underwater mortgages spoke in favor of the city getting directly involved with reducing mortgage principals. “If my husband lost his job we’d be on the streets, the banks won’t give us a chance,” said Joelle Craft, a mother of three and volunteer with Washington Community Action Network.

Seattle Bubble’s most recent analysis of area foreclosure trends (based on trustee sales notices)

 

Picture 22In addition to exploring options for eminent domain, a study the city commissioned last year suggested the Seattle think about creating a “municipal land bank” that could take tax-foreclosed property and convert them into a “beneficial community use.”

“There’s not going to be any silver bullet … but it will be another tool that we can use,” said Council member Nick Licata. “We’re not alone at looking at these strategies.”

“More than one third of Seattle’s home mortgage total – about 42,000 homes – is underwater with an average negative equity of approximately $92,000,” a statement from Licata’s office this fall detailed. “Nationally, 19.4% of home mortgages are underwater, with average negative equity of approximately $73,000.”

In 2011 the City Council passed a resolution to track and study foreclosures in the city. But getting reliable data on foreclosures is difficult, to say the least. The Office of Housing is currently working with housing nonprofits to empty of distressed properties and small band-aid loans.

CHS City Hall Notes:

  • City Attorney Pete Holmes addressed proposed changes to the Seattle code that would encourage SPD to cite people for smoking outdoors who have already been warned. SPD wants to change the ordinance language to read that officers should issue warnings “whenever practical” from ”whenever possible.” CHS reported last week on the City Attorney’s call for an increase in the number of pot store licenses allocated for Seattle and a looser interpretation of buffer rules to keep the stores away from schools and playgrounds.
  • Council members have been working for months to update the city’s Multi-Family Tax Exemption program in an attempt to get the program to more directly help lower income residents. After nine meetings on the MFTE, the committee decided to put the changes on hold again pending the results of a sweeping independent study on affordable housing due in March.
  • The HHSHC committee approved Pamela Banks, president of the Urban League of Metropolitan Seattle, to join the Capitol Hill Housing Board. She said she supports CHH’s plans for affordable housing at 23rd and Union because it will “slow down the gentrification of our community”

5 thoughts on “Council considers using eminent domain, land bank to bail out underwater mortgages

  1. “Seattle’s housing market is rebounding wonderfully since the 2007 crash …”

    Rebounding wonderfully for whom? If you’re looking to buy or if you’re renting it isn’t. Why is it that rising housing prices are always spun as a “good” thing, and housing stories almost exclusively report from the perspective of owners, sellers, and the industry, and never the perspective of people either trying to buy a home, or just keep a roof over their heads with a rental?

    Regardless, I hope the council takes a serious look at this, because it seems to me that not only could the city rescue the housing situation for some of our most vulnerable citizens, they could (if they wanted to) take a cue from the Swedes and keep housing affordable by putting the land into a community land trust. Hopefully that’s what they mean by “beneficial community use.”

    • Rebound is wonderful for local and state government. It means we pay more taxes, more revenue to pay for programs, pay raises for the city council so they can bicker more about what to do with the extra tax money. It’s the wonderful gift that keeps trickling down.

  2. They signed on the dotted line, it’s their problem, not ours. I live within my means, why should I as a taxpayer be punished for others’ fiscal incontinence?

    • Trulia published a study earlier this year that found that buying a home is somewhere around 44% cheaper on average than renting in major metropolitan areas like Seattle. Who’s being fiscally “incontinent?”

    • Yes they did. I think the banks were partly responsible for what happened, by handing out questionable mortgages like they were candy, but I think the homebuyers were also to blame. Many took out mortgages they knew they couldn’t afford and were living beyond their means in other ways too, such as credit card debt. Now they are paying the price.

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