SECTION FOUR

Use Rehabilitation and Housing Assistance Resources to Prevent and Stabilize

Substandard and Vacant Properties within the Region’s Core Communities

Immediate steps should be taken to prevent the region’s vacant property problems from getting
worse. The Miami Valley’s core communities should deploy staff and resources across political
jurisdictions to help stem the rising tide of mortgage foreclosures, stabilize substandard
occupied properties, and abate abandoned buildings. Developing such inter-governmental
partnerships would be especially important for the inner-ring communities (e.g., Kettering,
Trotwood, Fairborn, Riverside, Harrison Township, and West Carrollton) that still have
manageable levels of abandonment. Such a multi-jurisdictional approach requires a blend of
compliance and code enforcement strategies, along with housing rehabilitation resources.

The assessment report discusses prevention and stabilization into two sections: (1) ways to better
coordinate and expand existing rehabilitation resources and housing-assistance programs for
landlords and single-family home owners (Section FOUR) and (2) the three types of code
enforcement strategies to prevent and stabilize vacant properties (Section FIVE). The region
should adopt and then coordinate the implementation of the recommendations contained in both
of these sections as part of a comprehensive approach.

Like other regions throughout the Northeast and Midwest, Dayton and the Miami Valley must
simultaneously address two primary fronts in their battle against vacant properties: (1)
transitional neighborhoods with substandard properties and habitable vacant homes and (2)
distressed neighborhoods with increasing numbers of vacant and abandoned properties. Each
type of neighborhood demands different strategies. Distressed neighborhoods require more
aggressive actions, such as the revitalization and reclamation of abandoned properties by land
banks, consistent with neighborhood-driven reuse plans (see Section THREE of this report).
Transitional neighborhoods often need a balance of code compliance and enforcement strategies,
along with rehabilitation resources and repair programs. From the assessment team’s perspective,
a top priority is to ensure that abandonment does not spread to more neighborhoods; this can be
done by preserving existing housing and preventing vacant properties in the region’s core
communities.
Coordinate and Target Community Development Resources to Preserve and
Rehabilitate Vacant Properties

Dayton and its core communities have a myriad of public and nonprofit programs that facilitate
the preservation and rehabilitation of homes and multi-family dwellings. Led by COUNTY
CORP and CityWide, these and other community development organizations counsel new home
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owners and landlords, give repair- and rehabilitation-assistance grants, and develop affordable
housing. Montgomery County and the cities of Dayton and Kettering also have housing-
assistance programs, along with public-housing agencies that manage federally and state-
subsidized housing efforts.

With the exception of the Montgomery County Housing Trust,1 most of these geographically
based programs rely heavily on federal housing funds (e.g., HOME, CDBG, and Weed ‘n’ Seed)
and foundation grants, which they allocate to particular projects within their respective
jurisdictions. Many concentrate on one particular aspect of housing, such as first-time home
buyers, home repairs, or affordable-housing construction. Long-term effectiveness of these
independent efforts could be improved by more regional and local coordination of all resources
targeted to certain neighborhoods and communities. The goal is to get the right mix of resources
to address the relevant vacant property problems in those neighborhoods with the greatest
revitalization potential.

POLICY RECOMMENDATION: Inventory and map the region’s community and

economic development resources and programs as a way to leverage and coordinate
resources.

• ACTION ITEM: Compile all programs listed in HUD’s consolidated plans for
Montgomery County and Dayton, and then work with the region’s community and
economic development organizations to ensure a complete inventory of the region’s
public, nonprofit, and private sector resources and programs.
• ACTION ITEM: Create a GIS map to determine the existing and the ideal locations for
these public, non-profit, and private resources.
• ACTION ITEM: Share the GIS map with economic and community development
policymakers throughout the region.

Preserve the Region’s Traditional Housing Stock and Reclaim Obsolete

Housing

The region’s traditional housing stock is an important asset worth preserving. Many of the
neighborhoods that are adjacent to downtown Dayton include a mix of historic homes and
Midwestern designs dating back to the 1920s. The inner-ring suburban communities generally
have the 1940s ramblers and the typical single-story subdivision homes from the 1950s and
1960s. With few exceptions, the majority of the region’s housing stock appears to be in good
shape. A concerted rehabilitation initiative could direct resources to the homes and
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neighborhoods with the greatest reinvestment potential. Beyond providing home owners with
rehabilitation resources, successful housing-preservation programs often need special zoning and
building rules as well as design guidelines and technical assistance.
Bungalows that were built during and right after World War II also present a host of policy
challenges for the region’s core communities. Scattered throughout the Miami Valley, these
small homes (less than 1,000 sq. ft. in area) seem obsolete for most of today’s housing market;
they are often more difficult to market and rent, and thus are more likely to become vacant.
Moreover, they were not built to last for fifty years, and many are in desperate need of repair or
even demolition. Yet many of them provide moderate- to low-income residents with a good
source of affordable housing. The region’s housing and real estate leaders should determine
whether a market exists for these small-lot homes and, if so, work with neighborhood residents
on innovative ways to repair and redesign them. In regions of the country that have stronger
housing markets, such bungalows have become attractive housing for certain residents.

Chicago’s Bungalow Initiative

In 2000, the city of Chicago launched the Historic Chicago Bungalow Initiative, a
comprehensive program designed to support the preservation and upgrading of one-and-a-
half-story detached brick structures concentrated in an inner-ring area known as the
“bungalow belt,” adjacent to the city’s downtown area. To promote these bungalow
neighborhoods, Chicago’s initiative includes a certification process and design guidelines for
rehabilitation, as well as access to technical assistance and financing for bungalow-renovation
projects. More information about the initiative can be found at
http://www.chicagobungalow.org/index.html.

While the Miami Valley’s housing markets and economic prospects are much different than
those in Chicago, many detached structures in Chicago resemble those in the Miami Valley.
Thus, it seems certain that further study of the Historic Chicago Bungalow Initiative could
provide relevant insights for those dealing with the Miami Valley region’s traditional and
obsolete housing stock.
Dayton’s Rehab-a-ram2 program is a good local example of a housing preservation-rehabilitation
program that could be expanded to other neighborhoods and other housing types within the
region. This approach could be applied to obsolete, small-lot housing that is worthy of
rehabilitation.

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 Build the Capacity of Landlords and Single-Family Property Owners to
Become More Effective Property Managers and Owners

For the past five years, the federal government, major lending institutions, and nonprofit
organizations have oversold the benefits of home ownership. In fact, not everyone is capable of
owning a home or of managing a rental property.3 Beyond facilitating access to the resources
needed to make property repairs, effective revitalization programs must also help landlords,
property managers, and owners acquire the basic skills of home ownership and property
management. COUNTY CORP, Montgomery County, and the city of Kettering have an array of
special programs for responsible owners of multifamily buildings to maintain their properties in
sound and financially viable conditions; these programs include (1) low-interest loans on
reasonable terms to enable owners to refinance existing debt and finance improvements and (2)
training programs, technical assistance, and mentoring for owners and managers of rental
housing.4

City of Kettering Home Enhancement Loan Program (HELP)

In partnership with the Day Air Credit Union, the city of Kettering helps home owners obtain home-
improvement financing to make substantial updates, additions, and improvements to their single-
family, owner-occupied homes. The combined total gross income of all adults residing in the home is
not to exceed $142,250. The city of Kettering participates by providing approved borrowers with a 2
percent interest buy-down; the credit union provides an additional 0.5 percent discount. All loans are
subject to the credit union’s standard underwriting guidelines.

The minimum loan amount is $15,000; the maximum is $50,000. The maximum term of the loan is ten
years. The money is issued as a one-time, closed-end home-equity loan with no add-ons or refinances
unless approved by the city. Since the inception of HELP, Kettering has financially supported the
program with a $50,000-per-year budget allocation; to date, it has allocated $150,000.

The three phases of the program consistently show that, for each dollar that the city contributes, more
than $9.50 is spent on the overall project. Over the course of thirty-seven projects, the cost has ranged
from $15,000 to over $50,000. With each phase, Kettering has seen more extensive projects
undertaken, further highlighting the residents’ confidence in the city and their desire to remain in their
neighborhoods.

Home-repair loan programs are part of another housing preservation strategy that addresses the
special needs of owners of single-family homes, especially senior citizens on fixed incomes or in
difficult financial circumstances. During its visits, the assessment team heard about the growing
inability of such home owners to maintain their properties consistent with applicable housing

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codes. Unfortunately, the demand for such local assistance programs far exceeds available
resources. With huge budget cuts in CDBG funds looming in Congress, it would be prudent for
policy makers to explore alternative sources of funding. For example, the Cleveland Fix-Up
Fund is a home-repair loan program administered by a community development intermediary,
Neighborhood Progress, Inc., in partnership with two banks, the Cleveland Housing Network,
and several CDCs.5

POLICY RECOMMENDATION: Develop a series of preservation and rehabilitation

strategies for different housing types.

POLICY RECOMMENDATION: Identify obsolete housing stock that may be good

candidates for rehabilitation or, alternatively, for reclamation.

• ACTION ITEMS: Conduct a countywide inventory and assessment of the housing types
and determine whether potential markets exist for both traditional and obsolete housing.
• ACTION ITEM: Develop a promotional/marketing strategy in cooperation with local real
estate associations for those housing types that are worthy of rehabilitation.
• ACTION ITEM: Hold a design competition through the local and regional universities to
develop a series of remodeling templates to help home owners expand and remain in their
homes.
• ACTION ITEM: Study potential zoning changes or special permits that could facilitate
the rehabilitation of different housing types.
• ACTION ITEM: Reallocate revenue from the sales tax for the Housing Trust Fund for
programs that address the special needs of owners of single-family, owner-occupied
dwellings and of landlords with fewer than five rental units.

Address Predatory Lending and the Region’s Foreclosure Crisis

Mortgage foreclosures have reached epidemic levels throughout Montgomery County. The
region’s foreclosure crisis is the result of several factors, such as predatory lending, job loss,
poor financial decisions, and household instability. COUNTY CORP, CityWide, and several
local governments (e.g., Kettering) have instituted programs to counsel home owners and
educate the public about sound financial decision making.6 Although only the Home Ownership
Center and the Miami Valley Fair Housing Center (MVFHC) currently investigate predatory-
lending practices and help home owners who are facing foreclosure, all of these programs are
essential to address the multiple factors that underlie the current foreclosure crisis.7 Given the
region’s high rate of foreclosures, state and local policy makers should expand these assistance
and guidance programs to meet the increasing demand. Beyond counseling and education, state
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policy makers need to take aggressive steps to protect Ohioans against unscrupulous real estate
and financial transactions.
Several policy-advocacy groups have recently issued studies on the close relationship between
exorbitant, subprime housing loans and the growing number of foreclosures in selected states.8
Conditions in Ohio seem to be much worse than those in the states that were the subjects of these
studies (i.e., North Carolina and Tennessee). While the assessment team could not document the
precise impact that predatory practices have had on the Miami Valley region’s foreclosure crisis,
it heard many stories of fraudulent real estate transactions that precipitated foreclosure and the
eventual property abandonment.
There are two basic types of fraudulent or predatory lending practices. The first is known as
“property flipping.” The general modus operandi often starts with real estate speculators getting
unscrupulous appraisers to value vacant or abandoned buildings at three to five times their actual
worth. Using these inflated values, the speculators obtain financing from absentee and
unsuspecting lending institutions—mainly the secondary mortgage companies. With the instant
paper equity in these properties, the speculators then cash in to acquire more property, which
they often sell to close friends or partners, who turn around and follow the same model.
The basic scam is to milk the secondary mortgage market for funds and cash flow, and not to
rehabilitate or reinvest in the property. By the time such a scam comes to a halt, a legitimate
investor or redeveloper, such as a nonprofit CDC, may be the ultimate victim. The unsuspecting
investor finds it financially impossible to reclaim the property because of outstanding liens and
mortgage debts. Even an investor that manages to reacquire the property has little financial
incentive to expedite the foreclosure and gain legal title because the property is worth less than
the outstanding mortgage debt. The bank’s failure to act often means that the property will
remain in foreclosure limbo for months or, in some cases, years. Meanwhile, the vacant property
leads to further decay in the neighborhood in which it sits.
While this type of property flipping results in high levels of vacancy, another type of real estate
scam, known as “loan flipping,” has more of a negative impact on individual home owners. In
this practice, the same home owner receives repeated financing. The lender mines the equity
from the home, largely through fees, which can total $3,500 to $8,000 per transaction.

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 Miami Valley Fair Housing Center

Through the Predatory Lending Solutions (PLS) program, MVFHC specializes on the
underlying complexities of fraudulent real estate transactions. Predatory lending has the most
direct impact on struggling home owners. By intervening in civil court on behalf of victims of
these predatory-lending schemes, MVFHC has been able to obtain results, sometimes
recovering as much as $80,000 for the victims. Importantly, the victims have also been able to
convert high-interest loans to fixed-rate, thirty-year loans.

MVFHC has a four-pronged approach: (1) education; (2) advocacy, (3) victim intervention
(through the courts), and (4) local data collection (done under contract with the University of
Dayton). The county has already invested $2.5 million in MVFHC. If such programs are to
continue, however, they will need a more stable source of funding.

www.mvfairhousing.com

Dayton and the region’s core communities must continue to take aggressive actions to address
predatory lending, or the vacant homes of today will become the abandoned homes of tomorrow.
Local prosecutors and the state attorney general’s office have pursued some criminal cases. A
number of Ohio cities, including Dayton, enacted local predatory-lending ordinances in attempts
to target the bad actors in these illegal real estate transactions. Under the legal doctrine of
preemption, however, the Ohio state courts invalidated such local ordinances by concluding that
state government must regulate all issues relating to lending institutions. Unfortunately, the state
has not yet enacted legislation or adopted new policies to protect its citizens from fraudulent
practices. 9

POLICY RECOMMDNATION: Expand home ownership and consumer-education

assistance programs to combat the current foreclosure crisis and its relationships with
predatory lending.

• ACTION ITEM: Support the existing countywide predatory lending assistance network
currently led by the Home Ownership Center and MVFHC.
• ACTION ITEM: Inventory the number of predatory-lending-related programs and
entities in the region (i.e., Montgomery County and beyond), and bring together
representatives of these entities to brainstorm possible collaborative activities.
• ACTION ITEM: Enhance existing coordination among the many independent public and
nonprofit programs designed to assist home owners who are in foreclosure.10

POLICY RECOMMENDATION: Petition the Montgomery County prosecuting attorney

and the Ohio attorney general to create a special housing-fraud prosecution unit to hunt
down and prosecute those who are engaged in fraudulent real estate transactions.

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 • ACTION ITEMS: Gather stories, document evidence, and collect information about
fraudulent practices to build the case for a special prosecution task force headed by the
prosecuting attorney and/or attorney general.
• ACTION ITEM: Encourage the county prosecutor’s office to coordinate prosecutions
with MVFHC’s intervention strategy on civil cases through a more aggressive pursuit of
loan flipping.

ENDNOTES

1
The Montgomery County Housing Trust was established by legislation in 1990 by the Montgomery County
Commission to provide a flexible source of financial resources to address the unmet housing needs of low- and
moderate-income households in the county. Since then, the housing trust has been funded each year by a special
appropriation from a one-half-cent sales tax collected for affordable housing, economic development, and arts and
cultural programs. In 1999, the county commission extended its commitment of funding for another ten years. In
addition, it assigned responsibility for the management and day-to-day administration of the housing trust to
COUNTY CORP. see generally www.countycorp.com
2
See generally www.citywidedev.com
3
“Homeownership—An Overblown Pitch?” by columnist Neal Peirce, January 23, 2005. For this and other
columns, see www.citistates.com
4
The city of Kettering’s Housing Rehabilitation program is a low-interest loan program for income-eligible
homeowners to finance needed repairs to their homes. Based on household income, 0 percent and 3 percent loans are
available. For the elderly, the city offers a deferred loan that is repaid only when the home is sold or otherwise
transferred. Income requirements are based on the total number of persons in the household and the household’s
gross income. For a household of one person, the maximum income limit is $33,700; for a three-person household it
is $43,350; and for a family of five it is $52,000. Repairs that can be financed include plumbing, heating, electrical,
and structural repairs and updates, as well as roof, window, door, and siding replacements. The city’s First Time
Homebuyer program provides down-payment and closing-cost assistance not to exceed $2,500. The home buyer is
required to have 3 percent of the down payment, and the city finances the additional 2 percent. The city will also pay
for reasonable closing costs, such as application fees, title searches, and appraisals. See
www.ketteringoh.org/cepts/housing
5
Cleveland’s Fix-Up Fund helps home owners repair or improve their homes. This neighborhood-based nonprofit
program offers low-interest loans, technical support, and free guidance. Loans can be from $500 to $15,000. The
program provides contractor supervision to assist with code compliance and inspection. The fund’s Web site offers a
Home Improvement Tracking System that allows a user to monitor a loan’s status and payments for the loan status
and payments, as well as home repairs completed. One limitation of such home repairs programs is many residents
(elderly and low income) need not only loans but also grant funds; currently, however, there are not sufficient
resources to provide either.
6
COUNTY CORP’s new credit repair program has been in effect for about a year. Staff closely evaluates a client’s
credit report through a step-by-step process to determine specific actions the client can take to improve his or her
credit score. Clients receive one-on-one counseling and follow-up calls to see whether they have made
improvements. This pilot program has three priority clients: First priority is given to lease-purchase clients
(generally people who lease from COUNTY CORP for one year as they get their finances in shape for outright
purchase). Second priority goes to home-rehabilitation-loan clients; Third priority goes to the general public (there is
a $35 fee, which covers the cost of a credit report from a credit bureau).
7
The Miami Valley Fair Housing Center’s contends that irresponsible debtors are only a minor part of the
foreclosure problem. They estimate that perhaps15 percent of the people they counsel are truly poor managers of
their credit and that the other 85 percent are victims of border line financial transaction. The more difficult cases
involve financial problems with seniors and persons with mental illness. Conversations between local government
officials and banks paint a different picture. Local banks claim that 50% of the homeowners that fall behind with
their payments never contact the bank to discuss their financial problems. They estimate that only 10% of the
foreclosures are related to predatory lending.

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8
Policy Matters Ohio has issued several reports about recent increases in the number and rate of foreclosures and
bankruptcies in Ohio. See Home Insecurity 2004: Foreclosure Growth in Ohio (Cleveland: Policy Matters Ohio)
available at www.policymakttersohio.org.
9
On June 18, 2004, the Ohio Court of Appeals ruled that Dayton’s anti-predatory lending ordinance conflicts with
the state loan law and thus is unenforceable. In September 2004, the Lucas County Court of Common Pleas
invalidated a similar ordinance passed by the city of Toledo. The Ohio attorney general defended the state’s position
that state-covered loan laws of 2002 supersede these local ordinances. Mortgage Banking, September 1, 2004.
10
Coordination on predatory lending does occur among the nonprofit organizations; for example, when COUNTY
CORP and other lenders receive unusual loan requests, they require the home owner to come in for a counseling
session and share appropriate information with MVFHC. Sometimes, home owners will use a no-interest rehab loan
to repay a high-interest predatory loan. By sharing information, the agencies can prevent home owners from
becoming victims of lenders who offer terms that are not in their best interests.

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