Government By Remote Control

Joe Doakes from Como Park writes:

The City intends to change the zoning of properties along Front Avenue between Dale Street and Rice Street. That means you can’t sell your land for as much money. Naturally, landowners are upset.

Here’s why: if your land is zoned for Industrial Uses and the building on it is a warehouse, you have a Conforming Use and any future owner can continue to use the land for a warehouse. But if the city changes the zoning of your land to Residential, then your warehouse becomes an Existing Non-Conforming Use. You – and future owners – are severely limited in what you can do with it. You can’t expand. If it burns down, you can’t rebuild. You can’t even guarantee the future owner will be allowed to keep using it as you did. So naturally, the future owner won’t pay as much for it as he would have before the zoning change.

Yes, the City has the power by law to do it. But destroying people’s land values through regulation is not a trifle. It shouldn’t be done lightly.

Key line in the article:

“Because no one who lives or does business in that area was involved in the current planning effort, community members and city officials agreed that the plan needs a second phase of study.”

Nobody who knows anything about the neighborhood was involved in the plan. It was dreamed up by urban planners in government and academia.

The crux of the piece – and it ties into so much about living in Saint Paul and Minneapolis, and any one-party autocracy:

This is how liberals think. We’re so smart we don’t even need to VISIT the neighborhood to know what to do in it. We have a plan for an ideal neighborhood so tough luck to you.

This is classic Saint Paul government in action; make a grand sweeping change “for the good of the peasants” – and then sit back and look amazed as the unintended consequences mount.

Another great – and bigger – example; almost four years ago, the city passed an ordinance requiring most vacant properties to be brought up to the latest building codes before they could get back their certificates of occupancy.  This means a foreclosed house with a bubbled-up paper value of $200.000 in Frogtown, the North End or the lower East Side, which might net $40-50K today, mostly on the value of the land it sits on – would need an additional $100-150K to make it actually salable – meaning the banks would be into properties for $300-350K apiece, guaranteeing a loss of a quarter million dollars on each property they sold.

I asked a few sitting members of the City Council about this.  They didn’t respond “the banks will make up for it with volume!”, but close; one councilperson said – I’m paraphrasing here – the  mortgages are owned by companies with lots and lots of money, so it’d all be OK.

In other words, money came from unicorns.

The results?  The Saint Paul housing market is worse than most.  There is a glut of property on the market; as mortgage companies opt to let properties go into tax default rather than  take quarter-million-dollar baths on them, they revert to state ownership; the state then generally hands them back to the city, which then either sells them to non-profits for a pittance, hands them over to public housing, or sells them on occasion to remodelers who meet the city’s absurdly high qualifications for a nominal amount, sometimes a dollar.

So do you want to pay $188,000 for a property on the private market, or do you want to pay a buck?

Saint Paul is a beautiful city with an incredibly ugly government.

The Great Saint Paul Land Grab, Part VI

I’m going to interrupt my narrative (although rest assured, it’s going to continue) to announce a fascinating experiment.

Bob Johnson, of the A Democracy blog – which focuses on housing and city council issues in Saint Paul – is hosting a round table discussion featuring, as this is written, Saint Paul City Council member Kathy Lantry.

They’re talking about a number of housing-related issues, including the vacant home ordinance we talked about in the rest of this series (Part I, Part II, Part III, Part IV, Part V), as well as some I haven’t talked about much; a RICO suit against the city by a number of landlords, questions about code enforcement abuses, and the future of housing in the city.

I’m honored to have been asked to help moderate the discussion, along with Bill Cullen, a Saint Paul landlord and activist. (Bill will let me know if that’s not a fair description!).
So go over to the thread on A Democracy and leave a (polite, reasonable) question; Bill and I will be picking the ones we forward to Councilperson Lantry and any other city officials that agree to participate.

This should be an interesting exercise.

UPDATE: Bumped up to today, so everyone hopefully sees it.

The Great Saint Paul Land Grab, Part V

Over the past few weeks, we’ve been looking at  Saint Paul ordinance07-1194 4 (”Green Sheet” number 3046791), which the City Council adopted unanimously at its June 25 meeting. The law would require owners of vacant homes listed in Category II (needs a bunch of work) and Category III (almost tear-down material) to get a city-determined laundry-list of improvements, to get buildings of whatever age up to current building codes before they could get a Certificate of Occupancy.  These repairs would add between $20,000 and $100,000 and more to the cost of houses before they could be occupied. These buildings are largely owned by mortgage holders – banks, investment firms, debt traders, Fannie Mae and Freddie Mac. 

They are largely “upside down” – they were largely foreclosed with loan balances much higher than the houses’ current values.  In some cases, the discrepancy is immense. 

Dan Bostrom represents the Sixth Ward – the upper-half of Saint Paul’s East Side.  We spoke on the phone last week. 

“It’s not unusual to see houses with $200,000 balances that aren’t worth $30,000”, said Bostrom. 

And the problem – at least in Saint Paul’s worst-affected neighborhoods, Frogtown and the North End and the lower East Side – is serious.  “There’s one block”, Bostrom notes, citing a block just off Payne Avenue, on the lower East Side, “with 23 houses on it.  12 are vacant”. 

The ordinance is intended to compel banks and other lenders owning foreclosed property in Saint Paul to bring foreclosed property up to current building codes before they can be re-sold.  “The outcome we’re looking for”, said Kathy Lantry, who represents Ward Seven, which includes the hard-hit Payne-Phalen and Dayton’s Bluff neighborhoods as well as the placid proto-suburban expanse of Battle Creek, “is a city with liveable houses, that people can afford to live in”. 

Which is, of course, what everyone wants; it’s the means to the end that are the question.  I wondered if this strategy – putting intensely difficult conditions on selling foreclosed and vacant properties – had been thought through; how likely were institutional mortgage-holders to comply with this ordinance?  Had there been any “market research” done on the percentage of compliance expected?

“No”, said Lantry.  “We did this just for the fun of it”, she quipped sarcastically.  She quickly added that the ordinance was not a hasty decision; “We went over this ordinance with any number of bankers, the St. Paul Association of Realtors”, and other local financing bodies to sanity-check the proposal.

“…there was a fair amount of give and take with local community banks in helping to improve upon earlier drafts of the ordinance, and a local representative of an association of community banks in the area has said that they are relatively comfortable with the final ordinance”, added Ward 4’s Russ Stark in an emailed response.

OK – so there was some buy-in (and I plan on following up with some of the industry sources named in the interviews) from the local financial-services community.  We’ll come back to that (I plan on interviewing some of the industry sources named in my interviews, later this or early next weeks). 

But what if, at the end of the day, the lender doesn’t comply?  If the price to get the house – especially a detriorating, vacant one – saleable in the near future is just too high?  Will they have to sell at a huge loss?

“The goal”, added Lantry, “is to get these companies to negotiate workouts with homeowners, rather than foreclosing”. 

“We have provided a cattle prod to try to get them to negotiate”. 

OK, good – but what if they don’t?  What if the prospect of a huge loss is just not acceptable, for whatever reason?  More to the point – what about the houses in which there’s nobody to negotiate, the city’s huge stockpile of vacant homes (which topped a total of 2003 buildings earlier this week – 80% of which would be affected by the terms of this ordinance)?  

“Unfortunately, many of the properties in question, prior to the ordinance, were already ‘falling through the cracks” and deteriorating to the point of needing to demolished”, said Ward 4’s Stark, referring (I presume) to the 300-odd Category III properties on the vacancy list.

“If the mortgage holders walk away, the house is probably beyond saving”, said Lantry.  “Look – you need to remember that these lenders are not unsophisticated, mom-and-pop lenders.  These are big companies…they have a fiduciary responsibility to their trustees…their responsibility is to maintain [these assets] for their trustees”. 

But what if the lenders did abandon these properties?  And remember, there’s a time limit for properties on the vacancy list.  Hypothetically, let’s assume the worst: that most of the banks involved decline to comply with the ordinance.  They also stop paying property taxes, allowing the properties to go tax-forfeit.  The land forfeits to the State, obviously – but the State then assigns it to the city/county to dispose of.  Assuming the hypothetical “worst case” scenario, what does the city intend to do with all of this new property?

Bostrom denied any interest in this; “We don’t want to own a bunch of houses”.  But how about the land the houses are on?  Bostrom vigorously denied any city plant to gobble up property. 

Russ Stark:  “We’re trying to use this and several other tools at our disposal to avoid the problems that all of us are concerned about — and yes, there is some risk that these tools will not be effective.”

“Remember”, added Lantry, “you have two years to sell a house that’s Category II…if they can build a bridge across the Mississippi in 24 months, they can sell a house in two years.”

Of course, bridges that carry 140,000 cars a day are a bull market.  Houses, these days?  Not so much.

More Friday.

UPDATE:  Of course, it’s Russ Stark.  Matt was an ACLU lawyer.  In 1986.  Blah.

(Read the whole series: Part I, Part II, Part III, Part IV, Part V)

The Great Saint Paul Land Grab, Part IV

Last week, I sent this email (with a few subtle variations, depending on the recipient) to every Saint Paul City Councilperson (and each of their Legislative Assistants, just for good measure).

I’m Mitch Berg.  I’m a twenty-year Saint Paul resident.  I live in the Fourth Ward. 

I also write a blog (Shot In The Dark) and host a radio talk show (“The Northern Alliance Radio Network”). 

I have a few questions about a recent City Council decision.

At the June 25 meeting, the City Council passed Ordinance 07-1194 4 (”Green Sheet” number 3046791).  This ordinance amends Legislative Code 33.03, and states that vacant homes (in Category I and II – the most saleable homes) can only be sold if all vacant building fees are paid, and if the owner posts a performance bond or escrow equal to the estimated amount needed to bring the structure up to code.

I have several questions about this ordinance, and I’d appreciate your answers.

1) It seems, on its face, that this ordinance is intended to compel banks and other lenders owning foreclosed property in Saint Paul to bring foreclosed property up to current building codes before they can be re-sold.  Is this accurate?

2) Has the City Council gotten an estimate as to the likelihood of institutional mortgage-holders (banks) complying with this ordinance?  Has there been any “market research” done on the percentage of compliance expected?

3) If a mortgage holder does *not* comply – fails to post the performance bond or escrow, or bring the building up to code – then as I read it, this ordinance means the property remains in limbo, a deteriorating vacant structure.  Is this accurate?

4) Given that the reason most of these homes were foreclosed in the first place was that the amounts owing were greater than their market values, and that it can *easily* cost between $30,000 and $50,000 (or more) to bring an older home up to current code standards, on properties that are already “upside down” (worth less than the bank has lent for them), what percentage of institutional owners (banks) do you expect to comply with the terms of this ordinance? 

5) Did the City Council seriously discuss this scenario?  If so, why did they decide to take the action they did in approving the ordinance?

6) In the event that a large percentage of institutional mortgage holders that own foreclosed, vacant properties in Saint Paul *do not* comply with the ordinance, what is the city’s “fallback plan” for dealing with the large number of vacant, deteriorating properties that would result?  And for the additional drag on the values of *neighboring* properties that will result from having huge numbers of vacant, distressed buildings as neighbors?

Finally, a few questions that deal with the consequences of the ordinance:

7) Hypothetically, let’s assume the worst: that most of the banks involved decline to comply with the ordinance.  They also stop paying property taxes, allowing the properties to go tax-forfeit.  The land forfeits to the State, obviously – but the State then assigns it to the city/county to dispose of.  Assuming the hypothetical “worst case” scenario, what does the city intend to do with all of this new property?

8) Again assuming the “worst case” above – is it the city’s intention to use the epidemic of tax-forfeit property to…:
   a) drag down property values in these distressed neighborhoods
      to make eminent domain settlements against the remaining
      homeowners cheaper, to enable the city to…
   b) redevelop the land according to its own plans, on the relative

9) Finally – what do you, and the Council, *believe* the consequences of making properties much more expensive than they are worth to their owners will be?

Again, when you get a moment, I’d be very interested in your answers to the above.  If email is less convenient for you, feel free to call my cell phone: [redacted].


Mitch Berg
The Midway

Wednesday, the responses.

(Read the whole series: Part I, Part II, Part III, Part IV, Part V)

The Great Saint Paul Land Grab, Part III

So let’s recap what we have so far:

On June 25th, 2008, the Saint Paul City Council passed ordinance 07-1194 4 (“Green Sheet” number 3046791). You can read it for yourself – but in essence, it amends the city’s legislative code to say the following (I’m summarizing below):

To sell a vacant (or “dangerous” or “nuisance”) house, you need a Certificate of Occupancy.

To get a Certificate of Occupancy, you need to…:

  1. Pay all vacant building fees (Category I properties – the ones in the best shape. There are about 300 Cat I properties among the 2,000 vacant houses in Saint Paul).
  2. Get A Truth In Housing Report (again, for Cat I houses)
  3. Post a Performance Bond or Escrow amount to cover the estimated amount of repairs to bring the structure up to code (all categories).

Now, let’s posit a hypothetical; say you’re a bank. You’ve had to foreclose on a ton of properties, because your CEO’s dimbulb nutslap of a nephew went to a bunch of sleazy brokers and bought a ton of Adjustable Rate Mortgages (ARMs) that were going to adjust to eleventy-billion percent, and went and spent it all on jet-skis and tipping waitresses at Hooters. Naturally, when the ARMs adjusted the owners defaulted; as housing values sagged, the owners came up “upside down”; they owed you more than the house could sell for.

So you foreclosed on ’em. Business is business, right?

Ordinarily, you’d wait out the market and sell the place when you could get a good enough price to make it worth selling. In the meantime, you are the owner; you and your bank are responsible for the property taxes and – to keep it saleable and keep the city’s code enforcement people off your back – enough maintenance to keep it ready for some approach to the market.

You grab a file at random from the pile of “foreclosure” files on your desk. You open it up. It’s a house on the North End of Saint Paul.

Eventually – I don’t think this is irrationally exuberant – the market’ll rebound. Right?

You have to hope so – because until then, the house that your bank is into for, say, $200,000 (plus fees and whatever maintenance it takes), would fetch $175,000, as is, if you tried to sell it today (and could find a buyer). Maybe less, since there are more and more foreclosures popping up in the neighborhood.

But the City has just passed a law saying:

To sell the property to anyone, you need a Certificate of Occupancy.

To get a Certificate of Occupancy, you need to…:

  1. Pay all outstanding fees.
  2. Get A Truth In Housing Report
  3. Pony up whatever it takes to bring the structure up to code. And by “to code”, we mean “the current code, not the code when the building was built. For the sake of this hypothetical, let’s say the house was built when a lot of the houses in the St. Paul neighborhoods worst-affected by the foreclosure epidemic were built – say, 1920.

“Hm”, sez you, the banker and accidental owner of the property. “We have to pony up a bond, and get all the work done, to current codes, before we can even try to sell this house”.

“What would that mean?”

So you get an inspection. And you get the following letter back from the City (with marginal notes in blue:

(The letter below is an actual letter, to the owner of an actual vacant property, forwarded to me by a contact in Ramsey County’s government who wishes to remain anonymous. It is by no means atypical of a punch list for repairs to an older house – in this case, a 90-something-year-old home on the North End, not far off Rice Street, an area heavily beset by the foreclosure epidemic. I’ve redacted personal information and the address. I can scan and post the original, if needed)

STATE OF MN TRUST [Department Redacted]
SAINT PAUL, MN 55102-1657

Re: [Your property’s address]

File#: 04 215708 VB2

Dear Property Owner

Pursuant to your request the above-reference property was inspected and the following report is submitted:


  1. Replace or sister all damaged floorjoist on first and second floor per Code with proper supports and hangers.
  2. Remove all exterior wall covering and insulate and frame to Code.
  3. Replace first floor and basement stairs to Code. (Catch this? You need to remove all the siding and not only insulate, but make sure the framing complies with current standards – which means massive, expensive structural rework).
  4. Install rear, exterior stairs and landing to second floor to Code with frost footings or close up and stucco.
  5. Remove covering from first floor ceiling and add floor joist to support second floor. (Cha-chingggg!)
  6. Install ventilation for bathroom per Code.
  7. Insure sill plates are in good condition.
  8. Exterior to be weather proof. (Not cheap!)
  9. Insure basement cellar floor is even, is cleanable, and hall holes are filled. (Which, with an older place, can mean a ton of money!)
  10. Install Provide hand and guardrails on all stairways and steps as per attachment.
  11. Strap or support top of stair stringers.
  12. Install floor covering in the bathroom and kitchen that is impervious to water.
  13. Provide thumb type dead bolts for all entry doors. Remove any surface bolts.
  14. Repair or replace any deteriorated window sash, broken glass, sash holders, re-putty etc as necessary.
  15. Provide storms and screens complete and in good repair for all door and window openings.
  16. Provide fire block construction as necessary.
  17. Re-level structure as much as is practical.
  18. Where wall and ceiling covering is removed, attic, replace doors and windows, (insulation, glass, weather stripping, etc.) shall meet new energy code standards.
  19. Prepare and paint interior and exterior as necessary (take the necessary precautions if lead base paint is present).
  20. Any framing members that do not meet code (where wall and ceiling covering is removed, members that are over-spanned, over-spaced, not being carried properly, door and window openings that are not headered, etc.) are to be reconstructed as per code. (Jeezus H. Christ On A Harley! That means the framing – which could be spaced pretty haphazardly in structures more than 30-odd years old – has to be re-done to current standards. After you remove the siding!)
  21. Habitable rooms with new usage, replaced windows shall have glass area equal to 8% of floor area, or a minimum of 8 sq. fet., one-half of which shall operate and all bedroom windows shall meet emergency egress requirements (20″ wide minimum, 24″ high minimum but not less tan 5.7 sq. ft. overall). (In other words – egress rooms even on upper floors!)
  22. Provide general clean-up of premise.
  23. Provide smoke detectors as per the Minnesota State Bullding Code.
  24. Repair soffit, fascia trim, etc. as necessary.
  25. Provide proper draininge around house to direct water away from foundation. (Cha-chingggg!)
  26. Install downspouts and a complete gutter system.


  1. Rewire all exposed areas to Code.
  2. Install front entry light.
  3. Wire basement to Code.
  4. Rewire service grounding to Code.
  5. Insure proper fuses or breakers for all conductors.
  6. Repair or replace all broken, missing or loose ficxtures, devides, covers and plates.
  7. Check all 3-wire outlets for proper polarity and ground.
  8. Throughout building, install outlets and fixtures as per Bulletin 80-1. (In other words, you need to re-wire the place…)
  9. Install smoke detectors as per Bulletin 80-1 and I.R.C.
  10. Electrical work requires a Permit and inspections. (…and get a licensed electrician to do it!)


  1. All plumbing work requires permit(s) and must be done by a plumbing contractor licensed in Saint Paul. (Cha-chingggg!)
  2. Expose all plumbing that has been covered with concrete on [sic] sheetrock so it can be test [sic] and inspected. (Not cheap!)
  3. Finish all waste and vent, water and gas piping for a complete plumbing system to Code. (Major work!)


  1. Install heating system to Code. (You know what furnaces, and their support infrastructure done to code, cost these days?)
  2. Install gas piping to Code.
  3. Recommend installing approved lever handle manual gas shutoff valve on gas appliances.
  4. Install chimney liner.
  5. Replace furnace/boiler flue venting and provide proper switch for gas appliance venting.
  6. Tie furnace/boiler and water heater venting into chimney liner.
  7. Recommend adequate combustion air.
  8. Provide support for gas lines to Code. Plug, cap and/or remove all disconnected gas lines.
  9. Provide heat in every habitable room and bathrooms.


  1. This property was inspected as being a single-family dwelling.


  1. See attachment for permit requirements.
  3. Provide plans and specifications for any portion of the building that is to be rebuilt.
  4. Most of the roof covering could not be properly inspected from grade. Recommend this be done before rehabilitation is attempted.
  5. There was considerable storage/clutter within property at the time of the inspection. All to meet appropriate Codes when complete.
  6. All items noted as recommended do not have to be completed for code compliance but should be completed at a later date. Possible purchasers of property should be made aware of these items.


[Name redacted]
[Title redacted]

Remember – all of these have to be done (save for the two “recommended” items) before anyone can live in the place.

Any builders out there wanna take a whack at estimating this? I am going to take a very ill-informed whack at this, and say $20,000. I think I’m being conservative. Remember – you have a bank to run; no sweat equity here; you need to hire the work done.

And until your bank ponies up for all of this work, nobody can occupy it – hence, almost nobody will buy it (because they’ll just inherit the same problem!)

So, Mr. Banker – what do you do with the property? Remember – it’s already upside down. Its value is falling, since the rest of the block is slowly going vacant. You’re paying property taxes on it. So to sell this house, by the time you are ready you’ll have (counting the original loan liability, my conservative estimate of repairs, and property taxes, and vacancy fees) well over $225,000 on a house that, maybe, will be worth $165,000 for the foreseeable future.

That’s a $60,000 bath.

For one house.

And the one in the next file? And the next one? And the next one?

Repeat this process for most of the 2,000 currently vacant properties in Saint Paul. And for the dozens coming up vacant every month (my estimate; the five Twin Cities law firms that specialize in foreclosures say there are 500 foreclosures a month in the Twin Cities, today, and they are disproportionally focused in Minneapolis and Saint Paul.

So what does this mean for Saint Paul?

Good question.

We’ll look at it from a couple of sides – from the mortgage lender side, and the City of Saint Paul’s as well – on Monday.

UPDATE:  I floated this scenario past Dan Bostrom, City Councilman for Ward Six, the north-east part of Saint Paul. 

He got a chuckle out of it.  It doesn’t go far enough.  I am, indeed, too conservative in many cases.  “There are houses out there with $200,000 mortgages that aren’t worth $30,000”, he said, “And it’ll take $100,000 to bring them up to code”.   More from Bostrom – and a couple of other City Council reps – next week.

At any rate – put yourself back in the banker’s shoes, and plug those numbers in; you’ve foreclosed on $200,000 in loan, you’ll have over $300,000 in by the time it can be occupied, and by then you might – might – get back half of that when the market starts to tilt toward some kind of equilibrium.

More next week.

(Read the whole series: Part I, Part II, Part III, Part IV, Part V)

The Great Saint Paul Land Grab, Part II

As we noted yesterday, there’s a bit of a foreclosure and vacant home crisis in Saint Paul. And while having 1993 registered vacant homes in a stock of about 115,000 residential buildings is a crisis by any measure, the fact that they are (so far) so heavily concentrated in some of the city’s lower-income neighborhoods – Frogtown and the North End, as well as the East Side’s Dayton’s Bluff, Swede Hollow and Payne-Phalen neighborhoods – is its most visible consequence so far. And that’s just the registered ones. It’s likely there are hundreds more that aren’t in the system yet.
A bus ride down Thomas Avenue in Frogtown, or a bike ride down Front Street between Western and Rice, takes you past rows of blue “Vacant Building” placards taped to front doors. It’s depressing.

So how does the city plan to respond?

It went past pretty much without notice. The Saint Paul City Council adopted ordinance 07-1194 4 (“Green Sheet” number 3046791) at its June 25 meeting. It passed unanimously. It went pretty nearly un-covered in the media, and escaped notice elsewhere.

Including by me. While I live in Saint Paul, and am among the thin film of Republicans who tries to keep the hard-left City Council  honest, it’s one never-ending job among many.

But I got an email last week about this. I cited the writer yesterday – he’ll remain anonymous for now, as the information comes from his wife, and she’d like to remain under the radar.

Ordinance 07-1194 4 is the city’s response to the vacant building crisis. My emailer writes:

There are three categories of buildings: cat 1 is pretty good shape (350 of them); cat 2 needs work (1400 of them); cat 3 is pretty tough (200 of them).

None of these houses can be occupied without City permission. Cat 1 is simple – pay a fee and you’re in business. Cat 2 and 3 is tougher – pay a fee, develop a rehab plan, make a deposit to cover inspections, develop a timetable to get the work done. Oh, and you can’t live there while you work on it, the place has no Certificate of Occupancy.

What does this mean?

So it’s not clear that you, as owner, can do the work since you’re not the owner-occupant. You certainly have to pay to live somewhere else while you work on the place, you may have to hire contractors who have the special City-issued licenses to work in St. Paul and yes, that means they charge more.

You might be thinking “no biggie”. You’d be thinking wrong. We’re not talking a coat of paint and and some Murphy Soap here:

Here’s where the new ordinance comes in. When the City says it wants you to bring your vacant building up to code, they mean ALL codes. Building code for wall stud spacing (rip off the siding to add studs, then replace siding). Energy code (rip open the walls to insulate, replace windows and appliances). Wiring code (replace old wires with new plastic-coated wires pulled through the walls to the outlets). Plumbing code: replace lead or galvanized plumbing with copper or PVC. Building code: tear off shingles and lay new plywood to cover gaps in roof boards before reshingling. Jackup the floors to level them. Re-landscape for drainage.


I’ve seen the work order – it’s more expensive than building a new house because you have all the demo work first.

You might be thinking “So what? We make sure we have decent housing stock”.

Well, perhaps not so much.

If the city seriously makes all the Cat 2 and 3 houses go through this, who’s going to pay for it? The foreclosing lenders? They’re not stupid. They already know they’re upside down on those houses, that’s why they took them back in foreclosure. Throw in another $50,000 of repairs before the lenders can sell the foreclosed houses, and the lenders would be complete fools to bother.

So what is the motivation behind the new ordinance?  I mean, everyone can agree on sticking it to the lenders that got us into this mess in the first place – right?
More on Monday.

(Read the whole series: Part I, Part II, Part III, Part IV, Part V)

The Great Saint Paul Land Grab

Last week, I wrote about the mood change I see in Saint Paul since the Coleman (Chris) Administration took over, and since the ultraliberal Gang of Four consolidated their power and expanded to Five. 

To sum it up – things seem gloomy in Saint Paul lately. 

Now, I’ve lived in some gloomy places.  I grew up in North Dakota, during the farm depression of the seventies and eighties.  The family farm, in those pre-ethanol days, was in deep trouble.  A decade of profligate farm lending (and borrowing) ran smack-dab into huge surpluses and lower prices.  This, combined with government interference in the market both chronic (the various farm subsidy programs) and acute (the 1980 grain embargo of the USSR), made independent farms dry up and blow away faster than Al Franken’s political future.  Some farmers (and the rural businesses that supported and depended on them) adjusted; they sold the land and left the business; others diversified crops and, in many cases, careers.  Others reacted less rationally.  And quite a few just hunkered down and rode it out.

Which, if you’re not on the federal reserve board or Warren Buffet, is about all you can do.

Unless, of course, government seems hell-bent on making things much, much worse.


I got an email last week from a Saint Paul resident, from the Como Park neighborhood.  He’ll remain nameless for now, since his wife is closely-enough connected to this issue that it’d be poor form for her name to be floating around.

She got a copy of this new St. Paul city ordinance from her trade association.  If they’re correct that this ordinance was adopted, it could be historic.  We could see huge swaths of Frogtown and the East Side disappear in the next three years.

That got my attention.

Saint Paul has a foreclosure problem – and that leads to a vacant building problem.  As of yesterday, the city listed 1993 vacant properties in Saint Paul.  The number is big enough when you put it up against the total number of houses (115,713 as of the 2000 census); it’s worse when you see how those vacant properties are concentrated.   While real estate values throughout the city have suffered, a big part of the problem is concentrated in some of the city’s most “challenged” neighborhoods.  You can walk some blocks in the North End, the East Side and Frogtown and see more houses with blue “Vacant Building” signs on them than without; I walked a block near one of my kids’ schools, in the North End, last spring and counted five vacant, foreclosed homes out of six on a block just west of Rice Street.

Now, you can attribute this to any cause you want.  Some will point to greedy, unethical lenders – and they are certainly a part of the problem. 

Of course, free markets are usually pretty good at preventing bad behavior on their own – and when you see unethical behavior on a wholesale basis, it’s often useful to look for openings for that behavior, created by government interference in the market. 

The Community Reinvestment Act, and its various amendments, is a good place to start looking; the CRA impelled lenders to get into the subprime business on a wholesale level in the first place.  This wasn’t a bad thing in and of itself; home ownership can, in and of itself, be a very good thing for communities.  Twenty years ago, “absentee landlords” were the crisis du jour in exactly the same neighborhoods that are awash in foreclosures and vacancies today. 

Of course, combining a regulatory compulsion to do assume riskier loans and the “get rich quick” impulse on the part of many lenders to fill that compulsion during the housing bubble meant that, in a lot of cases, money was moving faster than information; a lot of new home-buyers didn’t know the questions to ask.  The lenders (or, to be fair, the brokers that originated the loans that the big lenders then bought to collect on the debt) didn’t, by law, need to care; they were doing their job, as mandated under the CRA.

But this posting isn’t about why we have a foreclosure crisis in Saint Paul.  It’s about how we – as a city – react to it.

And that’s where the really bad news kicks in.  Not only are many of the city’s oldest – and, as it happens, most historic – neighborhoods in immediate jeopardy, but so is the notion of actually being able to buy a home, if the plan goes through.

More on Thursday.

(Read the whole series: Part I, Part II, Part III, Part IV, Part V)