News From Terre Haute, Indiana

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February 3, 2014

Small-town blight: $75M fund for removal

Abandoned homes sit for years, driving crime up, property values down

INDIANAPOLIS — Indiana plans to spend $75 million to tear down thousands of abandoned homes. For cash-strapped communities, the program aims to help wipe out blight from neighborhoods plagued by plummeting property values and rising crime.

The money targets he “worst of the worst” properties – vacant houses that have become eyesores and have no chance of being reclaimed – in communities of all sizes.

Indiana is only the third state to tap a blight-elimination program that uses money originally set aside by the U.S. Treasury Department for mortgage relief. Unlike Michigan and Ohio, which used funds for large-scale demolitions in big cities, Indiana officials will divide up the money across the state.

“We know abandoned homes are a poison in every community,” said state Sen. James Merritt, R-Indianapolis, who helped push for the program.

Lt. Gov. Sue Ellspermann announced the program Monday. During a “listening” tour that took her to every county last year, leaders throughout the state identified abandoned homes as one of their most difficult obstacles, she said.

“Unfortunately, Indiana has the dubious distinction of having the highest percentage of abandoned foreclosed homes in the country,” Ellspermann said.

State officials said about 30 percent of foreclosed homes have been left to deteriorate. That equates to about 5,000 abandoned properties. While many are in places like Indianapolis and Gary, two of the state’s biggest cities, they’re also in smaller cities and rural areas.

“You drive around smaller communities where there are 10 to 12 homes on a city street and half of them are abandoned,” said Rep. Alan Morrison, R-Terre Haute. “Even for people who are keeping up their homes, their property values are dropping, and there is nothing they can do about it.”

The blight-elimination money could make a difference for a community like Brazil, a city of 7,900 in west-central Indiana, said Mayor Brian Wyndham. His city has lost population and jobs over the last decade, and it doesn’t have the money to knock down abandoned houses.

“We’ve spent money on fixing up homes and helping people move into them,” Wyndham said. “But some houses just need to be knocked down.”

Demolition can cost $5,000 to $25,000, depending on factors such as the presence of asbestos or other hazardous materials. In the past, Brazil has used fees from building permits to demolish abandoned homes.

“But if you don’t have new building, you don’t have the money from those fees,” Wyndham said. “And if you have blighted neighborhoods, no one wants to build. It’s a vicious cycle.”

Local governments must apply for the blight-elimination money, and the process is competitive. Local officials can increase their changes by showing that a property will be used for redevelopment or for community green space, or that it will be put up for sale to neighbors. State officials said there’s enough money for about 4,000 demolitions.

The program is funded through the federal Hardest Hit Fund, an offshoot of the Troubled Asset Relief Program. The fund was established in 2010 to help homeowners avoid foreclosure in states hit hardest by the 2008 recession.

Indiana received $221 million, primarily to help low- and moderate-income families avoid foreclosure. The state spent about $30 million of that Hardest Hit money by late last year, helping families with mortgage assistance payments. Another $63 million in mortgage assistance payments has been set aside for families currently enrolled in the program.  

States with Hardest Hit funding have lobbied the federal government to use some of the money for demolition of abandoned homes. Houses left vacant through foreclosure, they’ve argued, rapidly deteriorate and pull down surrounding property values. The states made the case that eliminating blight helps reduce foreclosures by stabilizing an area’s property values.

Maureen Hayden covers the Statehouse for CNHI, the Tribune-Star’s parent company. She can be reached at maureen.hayden@indianamediagroup.com.

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