Chandler is preparing to spend millions of dollars trying to shore up one of its most sickly economic indicators, the home foreclosure rate, which surged by 95 percent over the last year.
In the coming weeks, the City Council is expected to consider expanding an eight-month-old program to buy up bank-owned properties and renovate them for sale as affordable housing. The council this month also passed a resolution declaring the entire city an "economic recovery zone," making it eligible to issue $8 million in bonds to pay for infrastructure projects like roads and drainage, meant to create jobs and stimulate the local economy.
Dennis Strachota, the city's management services director, said Chandler's home foreclosure rate rose 95 percent from the third quarter of 2008 to the fourth quarter of 2009. Similarly, unemployment increased from 4.3 percent in October 2008 to 6.6 percent last October, and Chandler's poverty rate now stands at 7.3 percent, he said.
"The foreclosure rate is by far the most significant impact we've had," Strachota said.
In May, the City Council ratified an agreement with the nonprofit group NewTown to form a land trust in which the city would buy foreclosed homes in the 85225 ZIP code using $1.4 million in funding from the U.S. Department of Housing and Urban Development for "neighborhood stabilization." The homes sit in an area bounded by Elliot and Ray roads, and Arizona Avenue and Alma School Road, where the foreclosure rate has approached 40 percent.
The trust retains title to the land, while potential homeowners purchase only the home itself, meaning a more affordable price. Each home must be owner-occupied. The program is aimed at preventing the neighborhood's decay because of the high vacancy rate, officials have said.
Earlier this month, Chandler's Housing & Human Services Commission voted to recommend expanding the geographic target area to adjacent high-risk neighborhoods to include up to 35 available foreclosed homes. The commission also recommended pouring an additional $700,000 in federal grants into the program.
Allen Carlson, NewTown's executive director, said the group so far has spent about 25 percent of the program's funds to complete three sales. Nearly 2,700 properties in Chandler are at some point in the process of foreclosure, and the number is expected to rise in the coming weeks after a holiday lull, he said.
"The banks didn't foreclose property like they would if it wasn't the holiday season," Carlson said. "I don't want to minimize how serious the foreclosure problem is. We haven't seen the end of foreclosures."
John Stih, CEO of the Southeast Valley Regional Association of Realtors, said there are signs that the housing market is beginning to recover, but the elevated foreclosure rate is expected to continue in the near future.
"We assume there will be more coming," Stih said.
However, banks are regulating the number of foreclosed homes on the market in an attempt to keep prices up, he said.
"They've been resistant to flood the marketplace," Stih said.
Strachota said Chandler's recent designation as an economic recovery zone under federal stimulus laws, making the city eligible to authorize up to $8 million in bonds, is based upon its high foreclosure rate. A local government must have significant poverty, unemployment, foreclosure rates or be under general distress to qualify for the bonds, which must be issued by the end of 2011.
The move allows Chandler officials to issue up to $3.2 million in economic development bonds to pay for public facilities, infrastructure, job training and educational opportunities. The city would receive a favorable interest rate because of federal subsidies.
Strachota said city officials don't have any specific projects yet in mind for financing, but the money could fund capital improvement projects that had been delayed because of Chandler's shrinking budget.
The recovery zone designation also allows the city to authorize up to $4.8 million in facility bonds, which could finance retail business projects that otherwise are not eligible for public bond financing, he said.