By Kelly Pearson and Jason Keller
The Community Development and Policy Studies (CDPS) division at the Federal Reserve Bank of Chicago has a longstanding interest in community banks, current regulatory developments, and the ways smaller banks adapt to environmental changes, such as the high rates of vacant properties in Chicago’s low- and moderate-income neighborhoods. As the landscape of community reinvestment and revitalization evolves, community banks and their partners must work together to respond to the needs of the neighborhoods they serve.
Neighborhood Housing Services of Chicago (NHS) held its annual Community Banks Partnership Meeting (the Partnership) earlier this year at the Federal Reserve Bank of Chicago. The meeting brought together over 70 community bankers, regulators, housing experts and industry partners to discuss current trends in housing, specifically how to convert vacant properties into neighborhood assets. NHS is a nonprofit organization driven by the belief that homeownership is essential to strengthening households and communities. Established in 2007, the Partnership is an innovative collaboration that supports NHS’ community reinvestment programs and services through financial support, lending capital, and consultation.
This year’s meeting coincided with the 40th anniversary of the Community Reinvestment Act (CRA) and the recent release of the July 2016 Interagency CRA Questions and Answers (Q&A’s). During his opening remarks, Jason Keller, economic development director for CDPS explained that the revised guidance reflects consideration of comments from bankers, community organizations, and others and offers technical corrections in light of an evolving financial regulatory landscape. The new guidance supersedes the 2010 and 2013 Q&A’s and provides for new and revised examples of economic development, community development loans, and activities that are considered to revitalize or stabilize underserved middle-income geographies.
With this context in mind, Kristin Faust, president of NHS, described the Partnership as a key group of NHS supporters who promote revitalization in neighborhoods that need it most. Faust described that sustained recovery in home values has yet to realize in some neighborhoods on the south and west sides of Chicago. Despite tough market conditions, however, NHS has seen some positive developments. Through the City of Chicago’s Micro-Market Recovery Program in the Chicago Lawn neighborhood, NHS turned 54 vacant buildings into owner-occupied housing from 2012 to 2015. In 2016, NHS started an effort to take 20 vacant properties and match them with 20 homebuyers in the Woodlawn neighborhood on the south side of Chicago. To date, NHS has surpassed its initial goal, transforming 25 vacant properties into owner-occupied homes thus far.
Turing to the morning’s panel discussion, Art Neville, vice president and chief lending officer from Community Savings Bank and past chair of the Partnership invited Allen Rodriguez, vice president of resource development, NHS Board of Directors, to the podium to moderate a panel discussion. Rodriguez introduced the panel, which included: Sarah Duda, associate director, Institute for Housing Studies at DePaul University; Rob Rose, executive director, Cook County Land Bank Authority; and John Groene, West Humboldt Park neighborhood director, NHS.
Sarah Duda shared current housing market conditions in Cook County in light of trends over the past 20 years. Using data from the IHS Clearinghouse (and other sources), she highlighted a variation in recovery across markets, with wide-ranging rates of vacancy, mortgage activity, and property values throughout Chicagoland. Residential vacancy remains a legacy of the housing crisis, with 64.3 percent of long-term vacant properties being in low- and moderate-income (LMI) census tracts. Furthermore, vacancies are roughly five times more concentrated in LMI neighborhoods than in upper-income neighborhoods. In many neighborhoods on Chicago’s south and west sides and south suburban Cook County, there are clusters of home sales of $50,000 and below. Figure 1 illustrates the geographic pattern of low-value sales in Cook County in 2016. It shows that these types of sales make up a substantial portion of total sales activity in neighborhoods on the west and south sides of the City of Chicago and in the south suburban Cook County. These are typically investor sales because there are limited mortgage products available to owner-occupants to rehab them.
Figure 1: Low-value sales in Cook County (2016) 
Duda went on to describe how there is weak demand in some areas for housing and an increased demand in communities like Humboldt Park, East Garfield, Logan Square, and Pilsen. According to Duda, these communities have seen rapidly increasing home values since 2013 likely due to nearby amenities and available transit.
In light of stagnant housing markets with low values, low turnover rates, and high rates of vacant properties in certain neighborhoods, Rob Rose described one role of the Cook County Land Bank Authority (CCLBA) as being to generate activity in these markets. Land banks are public or nonprofit entities that acquire, hold, develop, and dispose of vacant properties. The mission of the CCLBA is to reduce and return vacant land and abandoned buildings back into reliable and sustainable community assets. The CCLBA was founded in 2013 and operates in Chicago and south suburban Cook County. Illinois has a lengthy foreclosure process averaging 900 days, but due to a new, expedited process, the CCLBA can sometimes clear title in 8-12 months. CCLBA has the ability to eliminate back taxes, remove fines, and liens. The CCLBA also works with local developers and organizations like NHS to build a pipeline of prepared homebuyers. Through its Vacant Lot Program, the CCLBA sells lots to residents, developers, and community groups.  Uses for these lots include side yards, solar banks, and community gardens. Rose noted that community banks can support the work of the CCLBA by creating more consumer purchase/rehab loan products and more developer acquisition/rehab loan products; donating hard-to-move inventory; and by structuring deed-in-lieu transactions, discounted payoffs, short sales, and distressed note sales.
John Groene shared how NHS helps homeowners stay in their homes and prepares new homebuyers to reoccupy vacant properties in targeted neighborhood areas. For example, in the West Humboldt Park neighborhood on Chicago’s west side, NHS organizes a network of volunteer “Block Ambassadors”: residents who canvass their blocks to identify vacant properties and reach out to homeowners at risk of foreclosure to let them know about NHS foreclosure prevention services. NHS has multiple success stories of working with partners to curb vacancies. In 2015, a family of ten in West Humboldt Park faced eviction when their landlord fell into foreclosure. Community Investment Corporation (CIC) acquired the property, and after a period of time renting from CIC and preparing for homeownership with NHS, the family purchased their longtime home, and the property never became vacant.  In 2016, after a decade of a vacant property being a magnet for criminal activity, a second property was acquired by CIC then transferred to the CCLBA. A first-time homebuyer working with NHS purchased the property in March 2017, utilizing NHS purchase rehab financing and leveraging the City of Chicago’s Tax Increment Financing (TIF) program, which provides up to $25,000 to owner-occupants purchasing vacant buildings in targeted areas. Groene closed by stating that in order to support NHS’ strategies, community banks can be patient sellers to first-time homebuyers and partner with entities such as the CCLBA and CIC when disposing of vacant properties.
By providing this annual forum, the Partnership offers lenders, intermediaries, and other interested constituents an opportunity to discuss issues central to improving lives and strengthening neighborhoods in the Chicago region. As a result of this meeting, partners are better equipped with innovative solutions that can be leveraged to address issues of vacant buildings in their communities. By working together with nonprofits such as NHS and the Cook County Land Bank Authority, community banks can help generate renewed interest in communities that have yet to fully recover from the housing crisis.
Kelly Pearson is a senior associate, Foundation and Corporate Relations, of Neighborhood Housing Services of Chicago. She manages corporate and foundation funding partnerships for NHS, as well as the Community Banks Partnership.
Jason Keller is the economic development and Illinois state director in the Community Development and Policy Studies Division of the Federal Reserve Bank of Chicago.
 To review the full Questions and Answers, visit the Federal Financial Institutions Examination Council web-site.
 IHS Data Clearinghouse: Calculations of Data from Cook County Recorder of Deeds via Property Insight, Record Information Services, Cook County Assessor.