Foreclosure activity in Illinois surged in August, putting the state at the top of RealtyTrac’s list for the first time since the company began issuing monthly reports roughly seven years ago. Chicago ranked eighth in foreclosure notices among major metro areas nationwide, and Rockford, IL was ninth.
But the same site lists Chicago on its homepage as the “top foreclosure city” in the country, without explanation. Nonetheless Chicago needs leadership from Mayor Rahm Emanuel in tackling its foreclosure crisis. RealtyTrac’s monthly report found the area ranked eighth: one in every 235 housing units in Chicago-Naperville-Joliet had foreclosure filings in August, up 44 percent from the same time last year.
The city has not been dormant. Its micro-market recovery program is necessary triage, targeting nine lagging neighborhoods to prime the pump for private investment. The city won $170 million in Neighborhood Stabilization Program funding from the federal government, but has only sold some 32 homes through the program so far. Beyond those federally funded initiatives, Cook County started down the road toward establishing a land bank, and the city’s sustainable development division has sized up potential for flipping large vacant lots in South Side food deserts into urban farms.
But with some 40,000 vacant units restraining neighborhood development and well over a third of Cook County's mortgages underwater, the foreclosure problem threatens to darken Mayor Emanuel’s picture of a reinvigorated Chicago.
August’s reported rise is in part due to Illinois’ status as one of 26 states with a judicial foreclosure system, in which lenders must go to court to seize property. This creates a lag that may help explain why the state’s foreclosure activity rate has been consistently higher this year when compared with the same months in 2011, and why the problem seems to be getting worse locally while foreclosure filings fell nationwide.
Of course the local problem is not spread evenly across the city. In May the city posted its first gain in median home prices since before the crash. But that figure masks the persistent blight seen predominantly on the city’s South and West sides. Grassroots movements like “Liberate the South Side” draw attention to areas where the neighborhood-wide effects of high foreclosure rates are amplified by neglect on the part of overburdened or otherwise absentee banks.
Emanuel could further leverage tax increment financing (TIF) to help rehab foreclosed properties before they drag down blocks and whole neighborhoods. The city approved TIF funds for a foreclosure mitigation initiative in Humboldt Park, already one of the nine micro-markets targeted to help buoy hard-hit sections of the city. But the city will need to reintroduce private investment to such neighborhoods, perhaps through infrastructure trust programs—that is, if they can live up to the mayor’s promises of transparency and evenhandedness.
The factors contributing to a neighborhood’s desirability are complex—the teacher’s strike underscored how persistent poverty and a flagging education system are inextricably linked—but clusters of foreclosed homes undeniably scar local real estate markets. City hall should tackle Chicago’s growing stock of vacant properties as fervently as it takes on school reform.