Portland might foreclose on “zombie houses” as home prices skyrocket

June 06, 2016 / Posted in Real Estate

PORTLAND, Ore. — City officials in booming Portland have developed a plan to foreclose on so-called “zombie homes” for the first time in 50 years as the city grapples with skyrocketing home prices that threaten to lock new homeowners out of the market.

The City Council was scheduled to vote Wednesday on whether to foreclose on five of the city’s worst abandoned properties. It’s the first part of a long-term plan to free up housing in an overheated market while clearing out squatters who have plagued developing neighborhoods outside the city’s hip core for years.

Council members also will vote on whether to alter city code so Portland can sell a foreclosed property for its market value and not just for what’s owed in liens.

The idea of cities buying up blighted properties isn’t new, and Portland looked to metropolises like Baltimore or Detroit while devising its plan. But unlike those cities, which were hit hard by the recession, Portland is bursting with newcomers and housing demand has far outstripped supply.

Portland home prices are going up 11 percent year over year, and 1,000 new people move to the city every month, said Mayor Charlie Hales.

A fire-damaged, abandoned and boarded-up house stands in Portland, Ore., Tuesday, June 14, 2016. City officials in this booming Pacific Northwest metropolis have developed a plan to foreclose on so-called "zombie homes" for first time in 50 years as Portland grapples with a swelling population and skyrocketing home costs that threaten to lock new homeowners out of the market. (AP Photo/Don Ryan)
A fire-damaged, abandoned and boarded-up house stands in Portland, Ore., Tuesday, June 14, 2016. City officials in this booming Pacific Northwest metropolis have developed a plan to foreclose on so-called “zombie homes” for first time in 50 years as Portland grapples with a swelling population and skyrocketing home costs that threaten to lock new homeowners out of the market.

“It’s fundamentally crazy that we have houses sitting empty in a market where a ‘For Sale’ or a ‘For Rent’ sign would cure that by tomorrow morning,” Hales said. “We’ve got to light up every single one of these homes with people living in them.”

Portland hasn’t foreclosed on anyone since 1965, when a single mother sued after officials took her home over a $28 sidewalk nuisance fee. That episode chastened the city, which reversed course so dramatically that Hales wasn’t even aware it had a foreclosure manager on its staff.

In the five decades since, Portland has essentially operated as a collections agency, putting delinquent owners on payment plans for unpaid liens and boarding up vacant homes.

The sharp policy shift, while a boon for frustrated neighbors, has some residents nervous about potential abuses of power. The city will only take on documented vacant and abandoned homes, but some wonder what would prevent the city from foreclosing on any property that generates too many complaints.

In the Lents neighborhood, where some “zombie homes” are on the city’s list, 1,000 homes were razed through eminent domain for the construction of Interstate 205 in the 1980s and that suspicion lingers.

“In a neighborhood like ours, it’s going to be a sort of divisive issue,” said Cora Lee Potter, land use chair for the Lents Neighborhood Association on the city’s far eastern edge. “Everywhere you see I-205, there used to be four or five city blocks of housing there.”

Chad Stover, a livability project manager on the mayor’s staff, emphasized that the city wasn’t taking action to make profit, but to restore neighborhoods and bolster housing supply. There are probably hundreds of vacant and abandoned homes citywide that could eventually qualify, he said.

The city is starting out small with five homes on its foreclosure wish list, but the mayor’s office has passed a list of 25 or 30 more to the foreclosure manager for review after working with police and residents.