Later this month, the District will begin disposing of some 27 dilapidated row houses it acquired from the federal government under the urban homesteading program.
The housing will be offered at acquisition prices ranging rom $1 to $10,000 to eligible families selected by lottery who have incomes under $18,000. (The houses became the property of the Department of Housing and Urban Development after they were abandoned following foreclosures on FHA loans.)
In return, the buyers will agree to live in the houses for three years and rehabilitate them with low-interest loans from the D.C. Development Corp. Since the first 19 houses were allocated in the District about two years ago, there have been no foreclosures on rehabilitation loans for them, according to Abraham Greestein, acting deputy administrator of the Neighborhood Improvement Administration, part of the D.C. Housing Department.
This success story has been repeated so many times in cities across the country that HUD last week decided to make its demonstration urban homesteading program permanent. Next year's allocation for acquiring foreclosed properties was raised to $19.8 million, a 40 per cent increase that will enable purchase of 850 more houses. The allocation for rehabilitation loans is up 26 per cent to $22.9 million.
Thirty-nine cities are participating in the demonstration program, which soon will be opened to all those eligible. Urban homesteading is aimed at cities with clumps of houses abandoned after FHA foreclosures.
The object of urban homesteading is to upgrade entire neighborhoods - and attract private investors - through the rehabilitation of individual houses. HUD loans are also available for rehabilitation of privately purchased houses near the homestead units.
Because Washington's abandoned houses are scattered, it is not one of the 39 cities in the two-year-old HUD program. Its houses were acquired separately from HUD.
During the first phase of the program, HUD paid off $7.6 million to FHA for 1,503 houses, which then were sold to 23 cities for $1 each. Just over 1,000 of these have been transferred to homesteaders. In that time, HUD has made rehabilitation loans of $5.3 million to homesteaders and their nighbors.
The average cost of acquisition plus HUD-financed remodeling works out to about $17,000 per house. In Washington, the average rehabilitation cost is about $17,500.
No homesteaders have defaulted on their remodeling loans to date and the delinquency rate is very low, HUD says. The average family income nationwide of these than the average income of those who purchased government-subsidized homes under the Section 235 program.
Before it was revised, this program had a relatively high foreclosure rate when low-income, low-equity homeowners failed to keep up payments. Some of these same houses which reverted to HUD now are being offered as homesteads.
The Housing Department also plans to sell at appraised value next spring 30 houses on 10th Street NE that it acquired by eminent domain some years ago in anticipation of a highway in Brookland. However, the new owner will put down only a nominal sum, say $200, and pledge to bring the house up to building code standards within a year.
Loans will be made available at 3 per cent interest by the D.C. Development Corp.: permanent financing will be offered at market rates by thrift institutions. If the house is sold before five years are up, the appraised value is subtracted from the sale price and returned to the lender.If the house is sold after five years, one half of this appraisal "lien" will be forgiven.