How Richmond rebuilds abandoned homes

When LaTanya Hawkins and her construction team walked into the small buttercup-yellow house in Central Richmond over a year ago, the windows were boarded up and the front yard was overgrown. Syringes, needles and rat droppings littered the rooms.

“It was really an eye sore to the community,” said Hawkins, the construction director for the Richmond Housing Renovation Program, an initiative to rebuild homes.

The owner of the house had died almost 20 years ago, and it, “had become the primary shooting gallery for people using heroin around the city. So, it was a real problem house,” said Jim Becker, executive director of the Richmond Community Foundation, a nonprofit that started the housing renovation program.

“We had to scrape the ground to get all of the needles out,” Becker said.

This house on South 37th Street is the ninth one rebuilt under the housing renovation program that turns abandoned, uninhabitable homes into livable ones and sells them to local, lower to medium income, first-time homebuyers. The house took over a year to rebuild and will be ready to sell next month.

The Richmond community foundation started the housing renovation program in 2015. It has sold seven homes to Richmond residents so far and has acquired 17 vacant properties.

It’s hard to know the accurate number of vacant properties in Richmond but the city works to identify and clean up as many as possible. The city was aware of 139 vacant structures last year, according to Tim Higares, Richmond’s infrastructure maintenance and operations director. The reasons why houses are abandoned in Richmond vary. Some properties are unoccupied for years because an owner dies while others can remain vacant after foreclosure.

The renovation program works closely with the city to identify vacant properties that can be successfully renovated or rebuilt and sold to first-time homebuyers. Program staff prioritize houses that are close to parks and schools because abandoned homes can be dangerous for children if left unmanaged, Becker explained.

The renovation program is funded through a $3 million social impact bond sponsored by Mechanics Bank.

Social impact bonds are a relatively new funding mechanism in the U.S. and don’t have much of a track record yet. New York was the first state to create a social impact bond in 2012 to start a prisoner rehabilitation program at Rikers Island Jail, according to a 2014 report by Princeton University.

Becker and his team at the Richmond community foundation were met with skepticism and caution when they reached out to investors about the renovation program.

“I was surprised that anyone would actually entertain a social impact bond,” said Rauly Butler, the director of retail banking at Mechanics Bank. “I had not seen them work anywhere in the country.”

After a few lunches with Becker, Butler was convinced that Richmond’s social bond was different from previous ones and could have a large impact on the community. His bank not only agreed to help sponsor the program but bought the entire bond.

When the community foundation, “is able to buy a house, renovate it and put a local person in it who really needs a house and is going to live in it and improve that neighborhood, that’s a home run, that’s just a homerun,” Butler said.

“It couldn’t get better than that.”

The prices of the houses are generally below Richmond’s median property price of about $525,000 but are not affordable by government standards. The housing renovation program partners with Sparkpoint and Neighborhood Housing Services of the East Bay, nonprofits that offer free counseling and classes to help low and medium-income first-time homebuyers buy houses in the East Bay housing market.

It’s not a requirement to be from Richmond to buy a house through the renovation program. But because the program chooses buyers through local nonprofits, all seven buyers have been from Richmond.

The last house was sold for $510,000 to Anthony Caro, 21, and Mitzi Perez, 24. Caro runs a nonprofit and Perez is a local high school teacher. Perez grew up in Richmond, and their new house is just blocks away from her childhood home and schools.

“This was Mitzi’s way of taking back the city,” Caro said “To me, it was about economic stability.”

The young couple couldn’t have bought the home alone. Neighborhood housing services led them through the buying process from start to finish, helping them to organize their finances, find a real estate agent and navigate the inspection process. Because the couple makes a combined income of about $72,000 a year, Perez needed both of her parents to cosign to close the deal.

Happy as they are about buying the house, they are struggling to keep up with their expenses.

“The one part of homeownership that no one really told us was that we had to use our credit card as soon as we got the house to get furniture and buy food,” Caro said. “Right now, Mitzi and I are recovering from actually buying the home.”

To afford a $510,000 house in the U.S., a household needs to make at least $100,000 a year and have a down-payment of at least $46,000, according to CNN’s money calculator. The median household income in Richmond is $57,000.

High rents are driving people out of Richmond. About half of Richmond’s residents are renters, and rent has risen by more than a third in Richmond over the last eight years, according to a 2018 study done by the HAAS Institute, a nonprofit research organization at the University of California, Berkeley. Rent throughout the entire Bay Area has skyrocketed in the last three years, increasing 40 percent since 2015.

This spike in rent is why Nikki Beasley, the executive director of the neighborhood housing services group, is dedicated to making the renovation program accessible to Richmond residents. Her group has educated 600 people and helped 20 people buy homes this year. Several of their clients, including Caro and Perez, have bought homes from the renovation program.

“For the population we serve, the only way that we are going to close this wealth gap is through homeownership,” Beasley said.

But Beasley is also aware that the prices of the rebuilt homes are out of the budgets of the many low and medium-income residents of Richmond.

The prices of the vacant properties are driven up by the cost of settling legal issues, Butler said. The community foundation often needs to pay unpaid taxes, liens and fines to buy the property. The community foundation tries to break even when it sells the houses, covering these costs of acquiring the property as well as construction costs, Becker said.

Homes on the market in Richmond typically receive several offers before being sold, according to RedFin. But because the renovation program selects buyers that have been through the first-time homebuyer assistance programs, there is no bidding process. If there are several people who want the same house, the community foundation picks a name out of a hat.

The community foundation, “is a patient seller,” Butler said, compared to conventional sellers who typically, “just wants their money, wants to close and wants to get out.”

Rebuilding houses like the one on South 37th street doesn’t just help one person, it helps entire neighborhoods, Becker and others argue.

“One house gets bad and then another house gets bad and the neighborhood can kind of get taken over that way,” he said.

Hawkins, who has worked in Richmond for the past eight years, said she is proud to rebuild abandoned houses for Richmond residents.

She and her crew are finishing the landscaping, electrical work and touching up the paint on the house on South 37th street. She chose to paint the outside the same yellow as the original house because it brightens up the street, she said.

As soon as she finishes this house, she will move onto the next of the 17 properties that are on the housing renovation program’s list.

“To have the homes available for first time homebuyers that are typically in the area, to be a part of that process is really an honor,” Hawkins said.