There goes the neighborhood
In Elk Grove, keeping up appearances during the housing collapse is more than a full-time job
Code-enforcement officer Shane Diller pulls the white minivan slowly between the two brick columns that mark the entrance to the Monterey Village development in southern Elk Grove.
That is, he pulls into what should have been Monterey Village.
Instead of rows of compact two-story homes lined up along the curving streets, the development is mostly wide, empty dirt fields.
“The developer just ran out of money,” Diller explained. “The bank took over the titles to the lots when they went into default.”
It’s a sobering sight—scores of wooden stakes bearing white foreclosure notices hammered into the ground on each lot, repossessed before construction even began on the homes.
“Believe it or not, this is one of our success stories,” Diller laughed as he parked the van next to a handful of partially completed homes in one corner of the development.
Diller works as the community enhancement manager for the city of Elk Grove. Normally, his office notifies homeowners that they can’t park their RVs on the street or block public easements with excess trash.
But the housing crash has hit home in Elk Grove, where foreclosures of homes purchased with so-called subprime loans are rapidly increasing. Now Diller and his team of inspectors have their hands full dealing with the numerous hazards posed by abandoned, foreclosed properties.
In Monterey Village, for example, the weeds took over after the developer abandoned the project, creating a major fire hazard during the summer’s scorching heat. The city had to work with a third-party contractor to get the weeds cleared out.
Code enforcement isn’t just about overgrown lawns and rusted cars. Abandoned homes can pose a significant risk to public safety. “Every year we get houses that burn down because we have squatters that go into these houses,” explained Karen Maxwell, Sacramento County assistant district attorney. “All the utilities are off, and they’ll go in and they’ll start fires to keep warm.”
With no running water, sewer or trash services, a foreclosed home can quickly become a health problem. Pools of stagnant water become breeding grounds for mosquitoes carrying West Nile virus. Vacant lots become magnets for the illegal dumping of trash and other hazardous materials.
It’s up to code-enforcement officers like Diller to keep an eye out for homes that may be abandoned. As the housing downturn continues to pummel the economy, Diller has seen his workload steadily increase.
“I arrived in September 2007; that’s when the foreclosure crisis arrived as well,” Diller said. He feels his staff of five inspectors, one supervisor and two administrators are adjusting to the increased workload. As of October, the city had 69 open code-enforcement cases on bank-owned properties. The most common violations include overgrown weeds, defunct swimming pools and broken fences.
Most of the recent foreclosures are in new developments that cropped up after the city incorporated in 2000. While Diller admits that there’s no way to know the particular financial situation of any one homeowner, he speculates that most of the newly foreclosed homes in Elk Grove fell victim to subprime adjustable-rate mortgages resetting at higher, less-affordable rates. According to the county district attorney’s Web site, one in 67 homes fell into foreclosure in 2007, a sixfold increase from the previous year.
With equity evaporating as home values decrease, some owners wind up owing more to the bank than the home is worth. Rather than continue making payments, they just pack up and leave the keys in the mailbox—the “jingle mail” that’s been ringing across the country as the market implodes.
That makes Diller’s job even more complicated. Normally, all he has to do is send a friendly worded letter to a homeowner to fix what are usually minor code infractions. But when a home is abandoned, it can be difficult determining ownership. Because mortgages are often bundled together, then sold to different banks and investment houses, tracking down the person legally responsible for fixing code violations can be complex.
In February, a regional task force made up of representatives from the Sacramento Housing and Redevelopment Agency, city and county code-enforcement officials, the district attorney’s office and the board of supervisors convened in part to deal with the rising number of code violations. In September, the task force also met with more than 60 representatives from banks and property-management issues to help wade through the various code requirements for different cities in the area.
“The problem is actually going both ways,” Maxwell said. “Code enforcement tries to notify the banks of problems on the property, and it’s kind of hard to locate the actual person responsible for the property. On the other end, the banks are having a hard time because then they get notices of the violations on their property, and there are so many jurisdictions and different regulations. It’s hard to know what each city within our county requires, and just keeping on top of it is kind of difficult for them.”
But Jose Mendez, a senior code-enforcement officer for Sacramento County who attended the meeting, was frustrated that the banks have done little to keep foreclosed homes from deteriorating. At that meeting, the banks seemed interested in keeping their properties up to code, but “in the field, it’s completely different,” Mendez said. “There’s very little bank interest until they want to sell or go into escrow.”
Mendez deals only with the unincorporated areas in Sacramento County. North Highlands, Rio Linda, Oak Park and the Vineyard area have been particularly hard hit. On Norcade Circle in the Rosemont area, 16 of 52 properties have been boarded up and secured by his office.
Last quarter, the county spent $150,000 to board up foreclosed properties. In many cases, the county will place a lien on the property, making it impossible for the bank to make a sale until the county has been paid back.
However, in the city of Elk Grove, which does not fall under county-code jurisdiction, Diller seemed generally pleased with the job banks have been doing. Part of that may be due to another factor: proactive community associations.
Susan McDonald, president of the Franklin Reserve Neighborhood Association, said her organization has had success getting banks and brokers to clean up their properties.
“We’re trying to target the banks and basically put pressure [on them],” McDonald said. Her organization contacts banks directly and reminds them of their potential liability. “The banks can be held responsible financially for allowing a property to sit like that and affect the quality of life of everybody else on that street.”
McDonald noted that keeping homes up to code is not only a quality-of-life issue, but a financial one as well. With many owners already underwater, deteriorating homes drag drown the property values of their neighbors.
McDonald has credited the cooperation between community associations and city officials as well as the police and fire departments for keeping abandoned homes from becoming neighborhood blights.
Diller knows the city isn’t out of the woods yet—not by a long shot.
“I expect the number of foreclosures to climb for the next 18 months to two years,” he said. He figures that as the last of the three-year adjustable subprime loans were made in 2007, “it won’t be until 2010 that the number of foreclosures backs down again.”
Unfortunately, he said, there’s not a whole lot the city can do to stem the tide of foreclosures. In the meantime, Diller expects Monterey Village to be sold to another developer. Some day, maybe a few years from now, those empty dirt fields will be another bustling suburb.