The Effect of Foreclosures on Neighborhoods
Foreclosures are bad news not only for the homeowner who has lost the home, but for nearby neighbors as well. That's because foreclosures, especially if there are a lot of them in a neighborhood, can hurt property values, cause blight and worse.
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Lower House Values
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Foreclosures can cause significant declines in neighborhood property values, especially if a few foreclosures spiral into blocks of abandoned and vacant houses. Banks typically do not invest in the upkeep of foreclosed homes,but instead sell them as quickly as possible on an "as is" basis, which tends to mean lower prices. Those foreclosure sales then bring down the value of other homes in the area.
Displaced Residents
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A foreclose typically involves an eviction, which means the homeowner must find another place to live. These displaced homeowners may be able to rent or move in with family or friends. But many become homeless and live on the streets or in emergency shelters. In some distressed cities, foreclosure is a top cause of homelessness.
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Crime Problems
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Houses that are abandoned and vacant after a foreclosure can cause a rise in property crime rates in the neighborhood. That's because a vacant house can be a magnet for thieves even if the house appears to be empty. Thieves will take bathroom fixtures, air-conditioning and heating equipment, appliances and copper wiring that can be sold as scrap. Vacant houses also can attract squatters, vandalism and drug dealers--all of which are harmful to the neighborhood.
Financial Scams
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Foreclosures can attract financial predators into a neighborhood because many struggling homeowners can be desperate to try to keep their home. These predators introduce a variety of financial crimes into the community from predatory lending to foreclosure rescue scams. These financial crimes contribute to a deterioration of the neighborhood as homeowners become victims. Elderly and isolated residents of the neighborhood may be especially vulnerable.
Lower Tax Base
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Foreclosures can cost neighborhoods a lot of money as a result of lower house prices, which lead to lower property tax revenues. As the prices of houses decline as a result of foreclosures in the area, property tax receipts drop and less money is available for public services from trash collection to libraries and schools. Lack of money hurts the neighborhood and the community as well as the homeowners.
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References
- Photo Credit Neighborhood image by Joelyn Pullano from Fotolia.com
