Richmond moved one step closer to implementing its eminent domain plan Tuesday night by tightening guidelines for the program, which aims to save struggling homeowners from foreclosure.
The approval of last night’s resolution for the program, called Richmond CARES, gives priority to neighborhoods hardest hit by the housing crisis and qualifies only those homeowners who have balances below the conforming loan limit. The council also instructed city staff to reach out to banks in search of alternative principal reduction strategies and to seek partner cities to form a Joint Powers Authority. While the agenda item was approved 4-2, the city’s eminent domain plan needs the council’s supermajority for final approval.
“It is the community that is driving this program and the homeowners that have so much to lose,” said Mayor Gayle McLaughlin, the item’s sponsor. “Today is an opportunity for us to move to the next step and show our strength not to bow to Wall Street.”
McLaughlin said the city would only use eminent domain “when a clear public purpose is served.”
It was standing room only in the Council chambers, and dozens of residents and community leaders toted signs in support of the plan.
Although Richmond remains the first city in the country to consider using eminent domain to stem foreclosures, McLaughlin said cities across the country – including San Francisco, El Monte, Seattle, WA, Yonkers, NY, Irvington, NJ – are mulling the idea and have expressed support for Richmond.
With nearly half of the mortgages in Richmond underwater, the city is proposing to buy properties at current market value in hopes of preventing another wave of foreclosures.
Richmond officials are planning to use the city’s eminent domain power to seize the mortgages that banks refuse to or reduce, slash the value to current market value, and resell them to other lenders. The program could reduce the principal owed by homeowners, ultimately making monthly payments more manageable.
“We’re here today saying that it’s time for a local solution,” community organizer Melvin Willis said. “The financial industry doesn’t rule us. We are standing up to Wall Street.”
While most residents spoke in favor of the plan, some still worry eminent domain isn’t the solution.
“I have no problem with sticking it to the banks, but for the most part the banks no longer own these loans,” said Richmond resident Don Gosney. “While we all want to see distressed homeowners find a solution to this problem, this is the wrong approach.”
Vice Mayor Corky Booze and Councilman Jim Rogers, who voted against the resolution, both expressed concern about the potential financial and legal risks to the city. Bates, who was absent from Tuesday’s meeting, sent an email to the council proposing a ballot initiative that would allow citizens to vote on the eminent domain plan in 2014.
“I understand it’s fun to be risky… but my job is not to listen to my anger, my job is to try to make the best decision for the city of Richmond,” Rogers said. “Until we resolve the liability issue, it’s a deal breaker for me.”
With banging drums and soaring chants, more than 100 people rallied outside of City Hall ahead of Tuesday’s meeting in support of the housing plan.
“You’re not alone,” Doris Ducre said. “Hang in there. Fight. We will win.”
Despite the fanfare, Constance Delany said she’s still leery.
“Have you tried anything else?” Delany asked the council members. “I don’t like to see the housing crisis destroying city after city, but when I hear eminent domain, red flags go up. I’m seriously concerned about the motives behind the slogan.”