A pilot program of any kind always seems interesting. Sometimes it’s something no one ever thought could be a solution, and sometimes it makes you wonder why no one thought of it sooner. The Vacant Housing Receivership Program in Greensboro, N.C., has successfully tackled the issue of vacant and/or deteriorating houses with a program that is so successful, that it’s going to move from pilot to program soon.

Director Troy Powell, neighborhood impact manager in Greensboro, explained this issue clearly. “The city now has a tool to move forward. Twenty houses were selected to be rehabilitated. A code official determines when a house is unfit for habitation, and that decision is honored by the Greensboro Minimum Housing Standards Commission (MHSC) This could have led to court hearings, but every one of those houses was repaired and rehabilitated. And when you have a housing shortage, that’s a real asset to the community. That was our goal, make them safe, make them affordable.”

Most communities have seen homes in need of repairs. Powell said, “Well, that affects the neighborhood. It’ll hurt a community just like a bacteria will. So if an ordinance to repair is issued to the property owner, and then city staff can use receivership if that property remains in disrepair 90 days after the ordinance was given. That’s when a judge appoints a receiver to either repair or demolish unsafe houses. We have five qualified receivers, each ready to appear in court as needed. They are certified MBE (Minority Business Enterprise) or WBE (Women Business Enterprise).”

This was one important issue that had some community members worried and created a delay. “Some people had approached their council person, and they thought this pilot initiative might create an unfair advantage to minorities, might cause Caucasian companies to raise prices and costs to where the minority couldn’t pay the lien and would not be able to reclaim the property. Would this create gentrification? We knew the answer was no, but we had to pause and get more discussion,” Powell explained.

So a receiver prepares a plan of action, detailing everything that must be done to bring the house into compliant condition, as well as a timeline for completion. That plan is presented to a judge during a hearing. But, Powell said, “That has not happened once. Owners will bring their properties up to code when they understand that they’ll lose their properties otherwise. And that’s what we had in mind when we began working on this project.”

If, however, a hearing would be required, the receiver takes control of the property, and they are authorized to bring it up to standard. After that rehab period, the receiver can rent the house, “and all the rent and income are his or hers. That money pays for current expenses and repayment of rehabilitation or demolition expenses. The receiver can do this for two years after the rehabilitation. They can place costs — supplies, labor and fees — as a lien against the property. If what is collected isn’t enough to reimburse the receiver, and the owner doesn’t pay those liens, the receiver can foreclose or accept a deed,” Powell said. “Then the court can order the property sold to compensate the receiver. If there’s anything left over, that’s returned to the property owner.

“Our city is the first that has utilized this deal. Nine other cities are watching us, seeing how this works and how we do. We are having success with landlords. There’s one popular guy here who has eight to 10 properties, ten on ordinance, and some on the repair side. These are condemned but not risen to the level that would require demolishment. It’s just a matter of motivating the person to fix the structure. The process is the motivation,” Powell explained.

“We are a pilot, and I guess we could end it, but it said 20 structures and we have not yet repaired a structure, but we have corrected the violations of 41 structures. City council would be happy with the 41 results as compared to issuing paperwork for 20 structures. We gained compliance without having to use the courts. They see, and it’s ‘Oops, I have to take care of that.’ We are getting compliance because no one wants to lose control of their property for more than two years. It’s a seller’s market right now, and someone might come along to buy for $20,000 more, but you can’t sell it because it’s under court order. Can’t file bankruptcy, can’t be foreclosed — it sets there until the receiver has paid back the lien. For the owner, this is a plus. Now it’s repaired, and it has a tenant in it. The process has put a house back on the market.”

As for getting such a program going, Powell said, “How you finesse this is key. At first we were trying to wrap our heads around ‘Why would anyone fix a house that wasn’t in their ownership, who is in that market?’ What we came up with (was) house flippers who have liquidated assets and have maybe $10,000 or $15,000 that they can put into it. But it’s not the receiver who will just be repairing. He can do everything allowed, but it’s still controlled by the judge, and he will not allow them to put a value on it that is above market value. The judge has the final say on what the lien value will be. What if the receiver would really inflate the costs? Well, they wouldn’t want to do that, because the judge will remember that!”

Powell added, “What we heard most was from the landlord association that they may not take money and be a receiver. If they wait, and that property comes up for sale, and it’s repaired, then that’s when they’d get involved. They’d think this might be worth it to get involved, maybe start bidding at, say, $20,000 on a place valued at $50,000 or $60,000. They can bump it up another $ 20,000 as a business plan. But they can drop out anytime.” Homeowners really don’t want their house to go into receivership, Powell said. “You never have to worry if it’s maintained properly. Get it into compliance. If a neighbor wants to sell their house and get it appraised, and then the house appraises for less, they want to know: Why is that? Well, it’s because nothing on the street is selling. If a house here is falling down beside yours, it can’t be rated higher. If nothing sells, it depreciates your property. You need to preserve the value. You’ll lose money, lose your investment. So you can’t move without doing so in the negative.”

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