Nearly 160 homes in Buffalo and Erie County are either owned by banks following a foreclosure or have been abandoned by their former owners before foreclosure was completed, lowering the value of those and neighboring properties by over $3.5 million, according to a new report being issued Friday by a state Democratic legislative group and a senator from Buffalo.
The report by Sen. Timothy Kennedy, D-Buffalo, and the Independent Democratic Conference is the latest effort to tally up the impact from so-called “zombie” properties, and put pressure on lenders, servicers and government agencies to address the problem.
Zombie properties refer to homes that have been vacated and abandoned by their owners after a lender initiates a foreclosure, but before the bank takes possession of the property. Such houses are effectively in limbo, since the lender doesn’t yet legally have control or responsibility for them.
“This is a statewide issue. The sad part is that not only does this impact on the person that lost their home, but also surrounding homeowners,” said Sen. Jeffrey D. Klein, D-Bronx, leader of the five-member Independent Democratic Conference.
According to the new report, part of the Independent Democratic Conference’s “The Next Great American Bank Robbery” series, researchers found 81 “zombie” properties in Erie County, plus another 78 bank-owned properties in the city of Buffalo.
The zombie properties account for $1.5 million in falling property values across the county, with the biggest impacts in four Buffalo ZIP codes and one in Cheektowaga. Each of the 2,794 homeowners who live within 300 feet of a zombie property are losing $736 in value on their homes each year, the study said. And local municipalities spend $186,273 to maintain such properties each year, led by Buffalo with $51,617 and Cheektowaga with $23,329.
The bank-owned properties similarly reduce the value of 2,303 privately owned homes by $2 million, the report said. Each of the 4,606 neighboring homeowners faces a drop of $446 in property value each year.
The report said 44 percent of the bank-owned properties are in minority neighborhoods, while 85 percent are in areas of already high poverty.
“The No. 1 issue in every community has been the fact that property values surrounding zombie homes are decreasing, because the laws that exist lack the teeth to hold these banks accountable,” Kennedy said. “That is real money, and in a working-class community like Buffalo and Western New York, that has a real financial impact, and a real detrimental impact. It has to change.”
Last year, the state Department of Financial Services reached agreements with 11 major banks and servicers to identify zombie properties, report them to a state register that municipalities could access, and maintain them. But the report says that’s not working.
“Clearly the banks aren’t maintaining the properties that they’ve foreclosed on, and a lot of the zombie property problem is caused because the banks know that if they foreclose, they have to maintain them, so they don’t follow through,” Klein said. “Here we are, a year later, and they’re not maintaining zombie properties or properties they already own. So I think that agreement was absolutely useless. We need to have legislation passed quickly.”
He’s sponsoring new legislation, on behalf of State Attorney General Eric Schneiderman, to create a registry of foreclosed homes and allow municipalities to use it to track complaints and violations. Another bill would expand the maintenance requirements and registry to include zombie homes as well. The legislation includes fines of $1,000 per day, per violation. Finally, he proposes creating a Community Reinvestment Program fund to refinance mortgages and buy properties that could be repaired, converted to affordable housing, or demolished.