Having presented the social ecosystem and discussed key findings, I now propose a series of recommendations linked to a set of strategic outcomes and objectives. These recommendations address the social ecosystem of two- to four-unit buildings in Woodlawn, barriers to their acquisition and renovation, and the need to improve property management and expand access to capital. The strategy also builds upon the strengths and opportunities that I have identified and speaks to the interests of local stakeholders.
Acquisition
Despite the substantial number of vacant two- to four-unit buildings in Woodlawn, many languish and continue to physically deteriorate because of direct barriers to acquisition and indirect factors that discourage investment. Currently, properties whose owners have fallen behind on property taxes, municipal services and building code violations cannot be purchased and renovated without paying these debts. As a result, additional strategies for easier acquisition are needed.
Renovation
Renovation strategies must be flexible in order to accommodate the unknown and varied building conditions. Controlling labor costs and providing reliable technical assistance are necessary to enable middle-income homeowners and smaller, entrepreneurial developers to take an active role in renovating two- to four-unit buildings. To ensure that properties are renovated sufficiently, a holistic approach must be taken to prevent landlords from milking properties and weakening the strength of the housing stock. Lastly, the economic activity generated by this labor-intensive process is a potential source of wealth for neighborhood residents.
Leasing, Sale and Property Management
Many of the “soft” issues in real estate development remain important to consider in the development of the strategy. Homeownership is down nationally, and increased rental demand presents an opportunity that should only be ignored at the peril of housing planners. Property management, a task that concerns homeowners and investors alike with two- to four-unit properties, has specific challenges given the nature of smaller buildings in weak market neighborhoods with a concentration of voucher recipients. Care must be taken to avoid blaming the most vulnerable participants in the real estate process, i.e. low-income tenants, for environmental conditions over which they have no control. More support for the landlords pursuing “high-road” property management would upgrade the residential options for all residents and reduce the viability of short-term cash flow driven investors. Attracting homeowners as well as tenants requires being more resolute and strategic about improving quality of life and public safety challenges in the neighborhood. A second approach for increasing homeownership is to rely more on tenants with an existing connection to the neighborhood.
Capital Availability
Several general and more specific challenges in capital availability have significant ramifications for two- to four-unit properties in Woodlawn. Beyond the macroeconomic challenges that have reduced many families’ earning capacity to purchase a home, homeownership is difficult because households cannot obtain financing in the same way they did prior to the recession. Because of the obstacles that would discourage many investors from renovating these properties, an important step is bolstering the ability of homeowners to obtain acquisition and rehabilitation financing. Much of the shortage in financing can be attributed to low property appraisals in the neighborhood, appraisals that are artificially low as a result of continued foreclosure, short sales and cash purchases. The community development institution in Woodlawn that historically filled this niche (ShoreBank) doesn’t exist anymore, while the institutions that do target Woodlawn fill a different niche in their lending. Developers can follow a series of best practices for obtaining financing: they need track records and carefully cultivated relationships with lenders, they need scale in putting together portfolios, and they need either personal funds for down payment or investment capital. Ideally, this last condition would ensure that asset appreciation takes precedence over cash flow. As a consequence of the difficulty of obtaining traditional sources of capital, other business strategies that are less community-minded become less viable.