The Minneapolis Advantage is an effort to stabilize neighborhoods hardest hit by the foreclosure crisis. It would pay homebuyers $10,000 to buy properties in certain inner city neighborhoods.
It's not a new concept. Some neighborhood groups have been offering similar incentives for years, and they say the city plan can boost their efforts to encourage homeownership.
The Minneapolis Advantage is still in the planning stages, but if adopted by the City Council later this month, there will be 50 loans available for qualified buyers to purchase a home in any of 18 neighborhoods.
Minneapolis City Housing Director Tom Streitz recently presented details of the plan to members of the City Council. He says the neighborhoods chosen for the program are areas that have high concentrations of boarded and vacant homes.
"We know that investors have come into some of these neighborhoods, and essentially flipped these properties over and over again. They've inflated the value," Streitz said. "They've stripped the equity, and in many cases they've stripped whatever quality materials were left in the house, and left devastation in its wake."
Streitz says the program may not be able to completely prevent a repeat of that scenario, but there are some safeguards.
For example, the loans will only be available to individual homebuyers, not corporations. The homebuyer has to live in the house and commit to staying there for five years. After that point, the loan will be forgiven.
Some councilmembers worry the focus of the program is too broad and might not achieve the desired impact. Some are concerned the plan could widen the homeownership gap, because buyers would have to have good enough credit to qualify for a prime interest rate loan.
Streitz, who used to work for the city's public housing agency, says he's concerned about keeping homeownership available to low-income residents and people of color.
"As we move forward and learn from this program, what we're going to find out with these first 50 loans is, who are the people? What are their incomes? Where are they coming from? So I see this as an innovative learning process for engaging the Council in something unique," Streitz said.
But this approach to encouraging homeownership is not new outside of City Hall.
"Our programs were designed through our neighborhood revitalization program," said Larry Hiscock, executive director of the Harrison Neighborhood Association in north Minneapolis.
Harrison is one of the 18 neighborhoods included in the Minneapolis Advantage target area. It already offers incentives to homebuyers, using money from the Neighborhood Revitalization Program or NRP.
Hiscock says he hopes the city's program will bring attention to what Harrison has to offer.
"The city launching the program is going to get publicity, people are going to learn about it," Hiscock said. "The $10,000 ... is going to be an important step. Combined with our $4,000 grant program, someone could get up to $14,000 in downpayment assistance."
But there's more.
Hiscock says Harrison also offers rehab loans of up to $15,000. So it's possible that a first-time buyer of a fixer-upper could receive nearly $30,000.
A handful of cities across the country, including St. Paul, have developed similar programs as part of a larger strategy to mitigate the effects of the foreclosure crisis and prevent further damage.
The state's Family Housing Fund has loaned more than $10 million to the Greater Metropolitan Housing Corporation to buy vacant properties in north Minneapolis. Those homes will either be rehabbed, or torn down, rebuilt and sold.
The foreclosure crisis is also having an impact beyond city limits. Right now the state Legislature is considering a bill that would place a year-long freeze on foreclosures.
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