MENLO PARK, CA. – On Monday Jan. 25, the city of Menlo Park bought its first run-down home as part of it’s local Neighborhood Stabilization Program, and is planning to purchase up to 11 more.
Menlo Park, home of Silicon Valley’s venture capitalists and million-dollar abodes, was not eligible for the federal Neighborhood Stabilization Program – so the city decided in May to fund one of it’s own.
The city’s Program, following the same principles, demographic metrics, and even sporting the same name, allocated $2 million from the city’s Below Market Rate fund for the purchase and renovation of vacant, foreclosed homes to sell at a subsidy.
A primary component of the BMR fund is an in-lieu payment made by developers to help the city secure the housing needs that a new development may create.
“It’s the same program,” said Housing Manager Douglas Frederick, “our only difference is we address a higher income household than the federal funds are allowing.” A BMR fund applicant must be earning between 60 and 110 percent of the Area Median Income.
The Federal funding criteria is based on the percentage of foreclosures within an area, and the Peninsula was not considered to have a big enough problem.
But surrounding cities like Palo Alto and Mountain View, though demographically similar, did receive Federal Neighborhood Stabilization Program funds through the Housing Trust of Santa Clara County. The Trust received a total of $25,000,000 of the $2 billion total federal assistance.
“There are hundreds of cities that are getting money from the federal government to do the same thing,” he said. “We are, as far as we know, the only city on the Peninsula that is doing it with local funds.”
The home was purchased by Menlo Park at $250,000 and needs $160,000 worth of repairs – including raising it from the flood level, full rewiring of the electrical system, a new heating system, insulation and new sheetrock, among other repairs.
“Everything was wrong with the house,” said Frederick, “but that’s exactly what we wanted.”
Frederick says the home will be higher quality than most of the housing stock in that neighborhood. It will be sold at approximately $350,000 to an eligible applicant of the city’s BMR fund.
“When we finish, it’ll be basically a new home, with granite countertops and possibly solar panels,” he said.
The city foresees it will lose $150,000 for each of the homes purchased and refurbished.
Though $350,000 is considerably cheaper than the median home value in Menlo Park – approximately $1,000,000 – it is en par with Belle Haven homes, the neighborhood where it is located. The median price of a home in Belle Haven is $380,000, according the real estate brokerage RedFin.
Belle Haven, located east of highway 101 has 80 foreclosed homes according to realty tracker Zillow.com, whereas the part of the city that is west of the highway has only seen two or three foreclosures.
The powder blue house, labeled “the classic ugly duckling” by Menlo Park Council Member John Boyle, is definitely an eye-catcher. The wood on the roof is moldy and decaying and weeds have grown around the foundation.
A sign reading “Wood for Sale” written in neon orange spray paint is propped against the wooden fence, probably hinting at the fence itself.
María Sánchez, who has been resident of the home adjacent for 15 years, said the previous owners had bought the home three years ago with hopes to refurbish it but never managed to do so. The 60-year-old house has been vacant for over a year now.
She is glad the house is being refurbished because it “was falling apart already.”
Josué Tovar, 30, another neighbor, says he believes the whole neighborhood will benefit from this purchase as well as “the economy in general.”
Holly Tuifua, a few houses down, wasn’t aware the house is being purchased by the city but is very pleased to hear the news.
“I think it’s good because it’s trash over there, nobody fix it, nobody buy it,” she said.
“The problem we’re trying to address with this program,” says Boyle, “is that once the house is vacated it may become the target of vandalism and may attract crime. That’s bad enough that it could bring the value of the property down, but what’s worse is it drags the whole neighborhood down.”
Menlo Park is one of the most proactive cities in the Peninsula, securing a partnership with Habitat for Humanity and a Foreclosure Prevention Program to help homeowners who have defaulted on their mortgages or are nearing default.
The city is awarding Habitat for Humanity $10,000 for each of the five homes it plans to purchase and refurbish, Frederick said. The first Habitat home was sold Oct. of last year.
The organization’s finished homes will be sold at a subsidy to applicants of the city’s BMR fund.
The home on Hollyburne Avenue was not foreclosed, but its purchase was approved anyway because the owner owes the bank much more than the property is worth.
The number of foreclosed properties on the market in California – one of the largest housing markets in the country – has decreased 18 percent from January to November of last year, according to Zillow.com.
Frederick said banks are reluctant to let houses reach the stage of foreclosure because of the negative impact this would have on the housing market.
“The banks are taking less in payment so the owner can get out from under it and in some of these cases, they’re not even considering foreclosing on the properties.”
The Belle Haven home does not yet have a prospective buyer and the completion date is to be determined, but Council Member John Boyle has a clear idea of what he does not want to happen.
“In the BMR program there are restrictions written in the deed to insure that the house stays at a below market rate price,” he said. “We wouldn’t want to let someone buy the house at a subsidy, turn around and flip the house a year later and make a ton of money.”