W13-11: In the fall of 2011 the What Works Collaborative convened a meeting of researchers, policy makers, and practitioners to help frame a research agenda to inform policy making on issues related to housing finance over the next several years. Among the issues discussed at the convening was the challenge of obtaining mortgage financing in lower‐income neighborhoods heavily impacted by the foreclosure crisis. At the time, the foreclosure crisis had yet to show signs of abating even as the main federal initiative to address the impact of concentrated foreclosures on communities across the country, the Neighborhood Stabilization Program (NSP), was beginning to wind down. Participants noted that while the NSP had been plagued by problems that had stymied efforts to expend program funding, private investors had emerged in markets around the country as a significant source of demand for foreclosed properties in heavily impacted neighborhoods, with the volume of financial investment made through private channels easily dwarfing those made with NSP backing. Yet, while it was clear that private investors were playing a substantial role in absorbing foreclosed properties and directing substantial capital into these areas, there was little systematic information available about the scale of investor activity, who the investors were, what strategies they were pursuing with the properties they acquired, or what the consequences would be for these neighborhoods of this substantial increase in investor activity.
To address this void, the What Works Collaborative funded a series of case studies in four market areas across the country representing a range of market conditions, including Atlanta (Immergluck, 2013), Boston (Herbert et al., 2013), Cleveland (Ford et al., 2013), and Las Vegas (Mallach, 2013). In each market, the researchers focused on the activities of investors in acquiring foreclosed properties in low‐ and moderate‐income neighborhoods in the metropolitan area core county. The purpose of the research was to identify in each area the extent to which foreclosed properties were being acquired by investors, what scale investors were operating at, the strategies that investors were pursuing with these properties, whether they were engaging in rehabilitation of these properties, and ultimately what impact their activities were likely to have on the surrounding community. To address these issues the case studies combined quantitative analysis of available data on transactions involving foreclosed properties with qualitative information gathered through interviews with government officials, nonprofit organizations, investors, real estate agents, lenders, and other informed observers.
The purpose of this report is to synthesize the findings from the four case studies to identify common themes that emerged about the nature of investor activity in acquiring foreclosed properties and implications of these findings for public policy and ongoing research. While the research team coordinated the focus of the case studies in an attempt to yield consistent information across the markets, in the end the studies did vary to some degree in the nature of the information gathered. The case studies were of relatively modest scale and were designed to take advantage of available data and ongoing research being conducted by members of the research team. As a result, the extent of quantitative information available in each market differed substantially. Further, while in each case interviews were conducted with a dozen or more market participants, in each market the interview subjects were identified by means of available connections and can best be described as providing anecdotal information on investor activities. But despite the differences in information gathered, there are a number of insights that can be gleaned by comparing the findings across these studies.