Foreclosures Mean More than Empty Houses
As Wall Street continues to take blows from the downturn of the housing market, neighborhoods across the United States are being hit by ripple effects of the foreclosure crisis that could be early rumblings of an economic recession.
According to USA Today, a survey of 211 elected city officials conducted by the National League of Cities sought to determine the scope of the foreclosure epidemic around the country. The results are not encouraging, but not altogether surprising.
Two-thirds of those interviewed reported increased foreclosure rates in their cities, and 33% noted that those foreclosures have led to lost income for the city (largely in the form of property taxes), property abandonment and general urban blight. And more than 20% allegedly noted that the need for emergency and temporary shelter has increased over the past twelve months.
In many areas, respondents apparently said that abandoned, foreclosed-on properties attract vandalism, which leads to more calls to police. A story from Bloomberg indicates that one subdivision of Atlanta with a high foreclosure rate has seen prostitution and drug use among those inhabiting abandoned homes.
Unfortunately, these problems compound each other: the decreased city revenue, combined with an increased need for law enforcement officials, means that many problems can't be addressed.
But the echoes of mass foreclosures go beyond deteriorating neighborhoods - economically, the housing crisis could be the factor that jump-starts a recession. Sources note that Riverside, California, which ranks fourth nationwide for foreclosure rates, has suffered because of costs related to foreclosure.
Evidently, difficulty making house payments leaves residents with less disposable income for other goods, like cars. In California, where much of the cities' budgets come from sales taxes, thanks to a 1978 cap on property taxes, decreased consumer spending could have serious effects. Riverside, for example, has a reported $12 million budget deficit this year.
And, it seems, officials are dealing with budget problems by not hiring new employees - again, this could mean fewer police officers, which could lead to higher crime rates, etc.
But crime rates aren't the only things soaring as the country looms on the edge of recession. Tampa Bay Online reports that many residents of neighborhoods with high foreclosure rates have actually seen their cable television bills rise as a result of home vacancies.
How are the two related? Apparently, the Homeowners Association signed an agreement with a cable company for a reduced-rate bulk package to attract buyers to the development. When the houses were full - and residents were paying their association dues - there was no problem.
But now that many homes have been foreclosed on and vacated, the remaining residents are left to foot the bill for everyone. As of early March, some residents had already seen 44% increases in their bills, and that number is likely to rise, according to sources.
It seems no one was ready for the enormous ripple effect the foreclosure crisis has had on the American economy.