A house in Selden is demolished on Feb. 23, 2015. (Photo credit: Ed Betz)
Local and state governments are developing new ways to fight Long Island’s abandoned home crisis. Municipalities are creating registries of vacant homes and new laws to tackle blight while the state is attempting to hold financial institutions more accountable for homes in foreclosure that become eyesores or hazards.
Newsday’s yearlong analysis of the problem found that towns and villages across the Island last year spent at least $3.2 million to clean, board up and demolish abandoned homes. Most of the properties are what have become known as zombie houses — those being foreclosed on by financial institutions and the owner has walked away.
Four Suffolk towns and three Nassau villages have established vacant-home registries. Depending on the location, banks have between 15 and 120 days to register empty houses with the municipality or face fines between $100 to $2,500.
Some towns have focused on trying to control blight before a house deteriorates to the point the town has to maintain the property.
Huntington, which in 2014 spent nearly $31,000 on cleanups and board-ups, last year assessed 61 properties more than $182,000 for violating its 2012 blight law.
The town assigns points based on the severity of the problem. For example, a house would receive five points for broken shutters and 50 points for having a fire hazard. When the house reaches 100 points, the owner has to agree to fix the problems. If the owner does not enter into an agreement with the town within 30 days, the town adds a $2,500 fee to the property’s tax bill.
Brookhaven officials in December approved a point system to determine whether a house should be repaired, boarded-up or demolished. A municipal court hearing is scheduled if the house isn’t brought into compliance. If the owner fails to appear, Brookhaven could repair or demolish the property.
“That is a desperate measure from a town that is overwhelmed by these problems,” Brookhaven Town Supervisor Edward P. Romaine said. Over the past year, the town has torn down eight houses from among 12 “Dirty Dozen” homes scheduled to be demolished because they are structurally unsound.
Babylon Town departments are working together to create a digital mapping system for abandoned homes and streamline the process of monitoring and maintaining blight. The work now involves five or six departments and is their most complicated task, said John Cifelli, Babylon’s director of operations.
Deputy Supervisor Tony Martinez said the proliferation of abandoned homes in the town — the number has reached nearly 200 — led officials to find new ways to address the problem. By mapping the homes and building a database that includes the property history, Babylon officials hope to identify blight at the neighborhood level while looking for patterns to prevent more abandoned homes.
“This came out of the frustration with all the clean-ups we do, all the calls that we get,” Martinez said.
Towns and villages also have been working to improve the aesthetics of boarded-up houses. Islip crews paint the plywood a neutral gray and Babylon Town workers match boards to the home’s exterior color. Islip workers also have started boarding up dilapidated homes from the inside and outside to try to prevent boards from being easily removed.
This week Nassau County Executive Edward Mangano and state Assemb. Todd Kaminsky (D-Long Beach) announced the launch of a new online database where residents in the county can submit information and photos of abandoned homes in their neighborhoods. The county assessor’s office will research the ownership of the homes and relay that information to towns and villages, who can then contact the owner or bank to bring the property up to code. The City of Long Beach is currently the only municipality that will be entering its log of abandoned homes into the database but Mangano said he is reaching out to other municipalities to take part.
In Suffolk County, the state Supreme Court last year created a fast-track procedure for abandoned homes in foreclosure. If a municipality identifies a home as abandoned, and the homeowner has not filed any legal papers or appeared in court, the court skips the usual process of appointing a referee to calculate the amount owed. Instead, if Suffolk County District Administrative Judge C. Randall Hinrichs determines that a foreclosure sale is warranted, the judge calculates the total debt.
That can save nine months or more, a court spokesman said.
In the year since the program began, the court has identified about 400 abandoned homes in foreclosure, the spokesman said. That’s 2.7 percent of Suffolk’s roughly 15,000 pending foreclosures.
Nassau County’s state court created a fast-track foreclosure process in mid-2013 for cases where homeowners have never shown up in court or filed any legal papers, a court spokesman said. Nassau has seen about 2,000 fast-tracked cases, out of a total of 9,700 pending foreclosures.
At the state level, attempts are being made to speed up the state’s foreclosure process, which averages 934 days, and hold banks responsible for maintenance on vacant homes.
State Assemb. John T. McDonald III (D-Cohoes) is drafting legislation that would create a fast-track foreclosure process for abandoned homes with delinquent tax bills.
New York Attorney General Eric T. Schneiderman last month proposed legislation to force banks and mortgage companies to start maintaining homes as soon as they become vacant and not wait until there is a foreclosure judgment. The proposed bill also establishes an inspection schedule for banks to determine if a property is being occupied by squatters.
The legislation has not been introduced. It is an expansion of a bill Schneiderman proposed last year that died in both the Assembly and Senate.
Schneiderman told Newsday the legislation “is very much targeted at helping the local governments on Long Island deal with this really, really damaging issue for many communities.”
As part of the proposed Abandoned Property Neighborhood Relief Act, banks would have to electronically register vacant homes in the foreclosure process with the state.
“Until we have a statewide registry we’re never going to have accurate numbers,” Schneiderman said.
Data from California-based RealtyTrac, which compiles real estate statistics, show 4,044 zombie houses on Long Island, a number Schneiderman said is “low.”
The Vacant and Abandoned Property Registry would be supplemented by a toll-free hotline that residents could use to report suspected abandoned homes. The hotline also could be used to gather information on registered properties, including their status and who is responsible for maintaining them.
“The problem with zombie properties right now is that the neighbors can’t figure out who’s in charge, most times local government can’t figure out who actually holds the mortgage,” Schneiderman said. “So this is going to force, in one bill, transparency about who owns what properties in the state of New York.”
If the bill is enacted, failure by banks to comply would result in fines of $1,000 per day for each violation of failing to register a property or failing to maintain it. The money would be directed to a fund for local governments to hire additional code enforcement officers.
It is unclear how much support Schneiderman’s bill will get. Senate majority leader Dean Skelos (R-Rockville Centre) did not return repeated calls seeking comment.
Garden City-based attorney Bruce Bergman, who represents banks, said the attorney general’s proposal would impose potentially enormous financial burdens on lenders — not just the cost of maintenance, but liability for hazardous conditions and fires. Bergman said it’s not always clear whether a house has been abandoned, nor is it clear how often lenders would need to inspect homes to make sure they are in good condition.
Schneiderman’s proposal would force lenders to maintain properties for years even though they do not own the homes and it would expose lenders to charges of trespassing, said Marianne Collins, executive director of the New York Mortgage Bankers Association.
“How much do we want to drain the assets of the lender?” Collins said. “Rates will be higher, closing costs will be higher, because lenders have to stay in business.”
If New York fast-tracked foreclosures of abandoned homes, “the process would be over in 60 days instead of three years,” she said.
State Sen. Tom Croci (R-Sayville), the former Islip Town supervisor, said he is not sure if he will support Schneiderman’s legislation, but added he will take “a really hard look at it.”
Croci said he plans to find other ways the state can help combat problems associated with vacant dilapidated homes.
“I’ve seen the complexity, I’ve seen the difficulties that towns have,” he said. “If there’s a way from the state government perspective … that we can give the towns the tools to more effectively deal with this situation, I’d love to be in a position to investigate how to do that.”
Officials in Nassau and Suffolk counties have expressed support for Schneiderman’s bill.
“Anything to make these banks not hide behind the excuse that they’re not the legal owner of the property,” Martinez said.
“We need as many tools in the arsenal as we possibly can get,” Hempstead Town Supervisor Kate Murray said. “I think it [Schneiderman’s proposal] could go a long way in at least keeping the facade of these foreclosed homes in decent shape.”
The legislation would bring much needed help to smaller municipalities, said Valley Stream Justice Robert Bogle, who handles village summonses that are given to banks and homeowners and also reviews foreclosure cases as a supervising court attorney in Nassau County Court.
A state registry would “be really helpful to the little villages and towns throughout New York State that don’t have the manpower to do research on these matters,” Bogle said.
But the number of abandoned homes across Long Island and their associated maintenance costs steadily climb each year, and municipal workers often have to make repeat visits to properties.
Douglas Bunge, 66, lives near an abandoned home in Bay Shore that was boarded-up by Islip Town last month. The house — across the street from an elementary school — had become a hangout for trespassers, he said, and the town oarded it up inside and out. But within weeks, someone ripped out the window frames and removed the boards, Bunge said.
“It’s a continuing problem,” Bogle said. “And it could very well be a problem that will be with us for many, many years ahead.”
High Cost of Zombie Houses
Examples provided by the Town of Babylon. Click the points on the photo for more information.
Structural damageStructural damage at abandoned homes can lead municipalities to board them up. The average cost of a board-up is about $3,700.
Tree trimmingOvergrown vegetation often leads to complaints that municipal crews have to address. The costs average between $500 and $1,000.
Grass overgrownComplaints about overgrown grass can result in municipal work crews mowing lawns at abandoned houses. These costs average between $500 and $800.
Debris removalPiles of trash and debris are removed by work crews. These costs average between $500 and $2,000.
Accessible entranceOpen doors are boarded up to prevent entry. The average cost of a board-up is about $3,700.
BOARD-UPSBroken windows and open doorways lead to properties being boarded up. The average cost of a board-up is $3,700.
DEMOLITIONIf the property is deemed unsafe, municipalities will seek to tear it down. The average cost of a demolition is $25,000.
Joining the fight
State Attorney General Eric T. Schneiderman in February proposed legislation to require banks and mortgage companies to start maintaining vacant homes soon after the foreclosure process starts and not wait until they win a judgment.
The law would require banks to register with the state all vacant homes in the foreclosure process.
Four Suffolk towns and three Nassau villages have established vacant-home registries that include fines for homeowners who fail to register.
Towns including Huntington and Brookhaven have established point systems to track blight, assigning values based on the severity of problems.
Babylon Town is creating a computer mapping system to track abandoned homes and blight.
Flipping zombie homes a ‘very complicated’ process
On television, home “flippers” purchase rundown houses cheap, fix them up and quickly resell them for a profit.
On Long Island, it’s not that easy. Thousands of abandoned houses across Nassau and Suffolk counties can spend years decaying, even as families struggle to find homes they can afford and flippers look for bargains.
Real estate investors and home buyers say the obstacles include New York’s protracted foreclosure process, the steep costs of buying and repairing dilapidated homes and the difficulty in getting lenders to approve sales.
“The cost to acquire these properties and rehabilitate them and sell them is more than the value of the house, and so you’re not going to make money doing it,” said Marianne Garvin, chief executive of the Centereach-based Community Development Corp. of Long Island, which has received federal funding to repair and sell such houses.
The share of Long Island homes flipped — purchased and resold within several months — is lower than in the rest of the United States. In Nassau, 2.9 percent of homes were flipped within six months, according to a RealtyTrac report for the fourth quarter of 2014. In Suffolk, 3.8 percent were flipped in that period. Nationwide, 5.3 percent of homes were flipped.
New York’s average 934-day foreclosure process — the fourth-longest in the nation — allows properties to deteriorate so badly that repairs can be prohibitively expensive, said Daren Blomquist, vice president of RealtyTrac, a California-based real estate data company.
“If you have an abandoned home that’s in poor condition, that’s going to sell at a discounted price,” Blomquist said. “I don’t think the banks are always taking that into account.”
And in some cases the decision to sell the house — and at what price — is made not by the lender, but by the company paid to manage the loan, known as a servicer.
“The servicer may not always be motivated to sell quickly,” Blomquist said.
Servicers are guided by their contracts, federal requirements and independent price appraisals, said Allison Schoenthal, a partner at Manhattan-based Hogan Lovells law firm who represents lenders.
Additionally, renovating an abandoned home takes too much time for many investors, said Susan Vincennie, president of LI Profiles, a Nesconset-based real estate data provider.
“They don’t want their cash tied up, they’re not going to be doing lengthy renovations,” she said.
Flipping can make a difference in a neighborhood.
Chris DiJorio, co-owner of a Port Jefferson-based real estate investment company, paid $235,000 for a burned-out house on an otherwise pretty block in Levittown in August. The company spent $95,000 restoring it and adding a second floor. DiJorio said a family member bought it for $415,000 in February.
Neighbor Maureen McCarthy said it’s a relief to have a young family living in the home, instead of the rats that had plagued the vacant, boarded-up property. “It’s a happy ending, and the house really looks nice,” she said.
But happy endings are rare.
DiJorio said he has given up flipping homes because the costs have risen too much in the past year.
“It’s harder than it looks on TV,” he said. “You have to spend your money wisely, first of all, so you don’t end up aimlessly spending and burning through your budget.”
David De Rosa, a real estate investor based in Farmingdale, said he has purchased more than 3,000 homes, mostly Long Island properties in foreclosure or other forms of distress.
Such transactions are “very complicated,” he said.
“It would be very difficult for a first-time home buyer to buy a distressed property, and the majority of times when they do, they lose their shirts,” because of the complications, he said.
Nevertheless, some do try. And it can help a buyer move into a community they could not otherwise afford, said Steven Pagano, a real estate broker in Huntington.
However, if a home is not in livable condition, buyers cannot get a traditional mortgage loan. Instead, they must get special loans under programs like the Federal Housing Administration’s 203(k) program, which funds home purchases and repairs. These loans require detailed documentation such as repair cost estimates, inspection reports and requests to draw down funding from an escrow account. They also have slightly higher interest rates. The amount loaned under the 203(k) program on Long Island has fallen to $55.3 million last year from $91.1 million in 2010, federal data show.
Officials with nonprofit housing groups say they, too, face hurdles in restoring blighted homes.
After the recession of 2007-2009, Long Island received $30.5 million to rehabilitate foreclosed and abandoned homes, under the federal Neighborhood Stabilization Program. The funds were used to repair 71 homes and rental units in Suffolk County and 167 in Nassau County, according to county records.
The Community Development Corp. used the funds to restore 48 Long Island homes. But now, Garvin said, “that money is gone.”
In a bid to fund more rehabilitations, State Attorney General Eric T. Schneiderman set aside $2.6 million for Suffolk County Landbank Corp. over the past two years. The money comes from the $25 billion mortgage settlement reached between the nation’s five largest mortgage companies and federal and state agencies in 2012. The county is considering applications from nonprofits, including Garvin’s group.
Nassau County Executive Edward Mangano said he plans to ask the county legislature to create its own land bank to help fix up abandoned homes.
Suffolk’s land bank will not be enough to solve Long Island’s huge problem with abandoned homes, Garvin said.
“We’re doing the best we can with the resources we have, which don’t match up to the problem that’s out there,” she said.
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