Richmond gets radical, seizing foreclosed homes from banks

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The banks have neglected their foreclosed homes in Richmond far more than the city and its residents would.
Creative Commons/CoCoACCE

As a rule of thumb, we at the Guardian tend to believe that if the banking and real estate industries are against something, then we’re probably in support of it. But that’s not the only reason that I’m so intrigued about the possibilities of Richmond taking ownership of hundreds of foreclosed homes, using eminent domain laws as needed, to keep people from being evicted and rejuvenate the community.

Richmond officials want to take over 624 homes that are underwater in that foreclosure-plagued city, becoming the first city in the country to do so. San Bernardino had considered and rejected the idea earlier, largely because of opposition from banks and threats that they might stop lending in the city. But Richmond officials appear to be holding tough against such extortionary threats and moving forward.

KQED’s Forum did an interesting segment on the situation this morning, following up a report from Democracy Now! on Tuesday (KALW also did something on this last month), with the bankers and Realtors offering up all kinds of unfounded concerns and fear mongering to confuse the issue. Because this is a truly radical action that Richmond is considering, in the best sense of that term: banks and those who control property have too much power over our lives, and it’s about time a city takes some of that power back on behalf of its people.

This is like nationalizing the assets of corrupt capitalists who have gone too far in subverting the broad public interest, a populist shot over the bow of the people who consider themselves our economic masters, from Wall Street right down San Francisco’s Chamber of Commerce and Association of Realtors.  

As Richmond Mayor Gayle McLaughlin told Democracy Now: “The banks sold our community predatory loans, and now they have no solution that they’re presenting for this crisis. So we are stepping in to fix the situation. We’re stepping in by taking these troubled loans off the hands of the banks. And we’re paying them fair market value for these loans, and then we’re working with the homeowners to refinance and modify loans in line with current home values. So we call on the banks to voluntarily sell us these loans. And if they don’t cooperate, we will be considering eminent domain.”

Just think about the possibilities of this: cities could seize all their most distressed properties, then pay fair market value (which would be at fire sale prices for rundown homes in communities with high foreclosure rates), have the residents work with city officials to turn the area around and thus substantially increase the value of those homes, and eventually sell those homes at a profit, either to their current occupants or some other city residents (choosing buyers based on social considerations, not strictly financial ones). If it works on a small-scale, it could be ramped up to larger and larger scales, with cities selling bonds to buy real assets that would only go up in value as properties get more attention than these absentee bankers have been giving them.

If predatory entrepreneurs can buy these short-sale properties and flip them for a profit, why can cities do the same thing and do some good for their people in the process?