It’s a great time to buy a home in Indianapolis. At least that’s what the numbers indicate. Historically low interest rates combined with less strict lending standards have resulted in an upswing of home sales, 18% to be exact, in the country’s fourteenth biggest city. New destination neighborhoods like Holy Cross and Bates-Hendricks continue to pop up, as people flock for the amenities and convenience of an urban setting.
Indianapolis has gone through a slow but steady recovery from the housing crisis, as the Metropolitan Indianapolis Board of REALTORS has shown in their latest report. That’s not to say they don’t face their fair share of challenges going forward. Attracting millennials and convincing potential residents to buy, rather than rent, property are just a few of the issues confronting the Indy market. Though there’s one issue in particular that continues to infect Indiana’s capital; a plague of “zombie homes.”
What’s a zombie home?
A home fits the zombie billing when it’s on the heels of foreclosure, and the owner has vacated the property, but the mortgage holder decides not to take over the title. When the bank does not repossess the home, often because the value is so low, it lays dormant for several years. Naturally, these homes deteriorate when they are not maintained, opening themselves up to squatters and looters. These abandoned, decrepit homes infect whole neighborhoods and sink property values.
What’s being done in Indy?
Now, after battling this problem for years, legislation to address the issue is popping up in state governments around the country. Much of the demand from people is to create a registry of vacant properties and to expedite the process of ownership. In the past, it has taken an individual who buys a home at a tax sale four months to a year to actually take possession of the property, largely due to a required redemption period to acquire the deed. That ownership process is now being accelerated in the cities and counties throughout the United States thanks to state and local governments. That is the case in Indiana, where Gov. Mike Pence signed Senate Bill 415 into law in May.
The law allows officials to label homes as abandoned by following criteria such as boarded-up windows and disconnected utilities. A home that qualifies as vacant will then be sold at the next tax sale and the buyer acquires the deed immediately. Therefore, the process is sped up both on the front and back end, meanwhile encouraging the new owner to take immediate action on fixing up the property. In the case of a minimum bid not being placed, a city or county can take control and either demolish the property or pass it on for someone to rehab.
So what’s the issue?
While the general consensus is that this is a step in the right direction, opponents feel the law did not go far enough or even address zombie homes at all. While there is a strong push for a zombie home registry and enforced maintenance of homes, those items were not written into the language of Senate Bill 415. These homes, said to represent about 25 percent of foreclosures in Indiana, could still be stuck in limbo for years.
According to District 19 Council Member, Jeff Miller, Senate Bill 415 put in place an important process called receivership that may help address some of the housing issues in the city, but did not do Indianapolis any favors when it included the following:
Critics say the big winner in all of this is the banks. While the former home owner is long gone with zero incentive to come back and make repairs, the lenders can claim they technically are not yet the owner. The tax payer is then held responsible by way of the city coming in to make general repairs or cut the grass. A double standard is created when other homeowners are required to maintain their property in a certain fashion, but the abandoned home down the street is not held to the same standards.
“The bottom line is we cannot do anything locally to impact the mortgage process or to the mortgager (i.e. banks). This would prevent a foreclosure registry to know what properties are caught in the foreclosure process and, most importantly, would prevent requiring the banks to maintain the property while it is in the foreclosure process and when the owner leaves the premises due to the impending foreclosure.”
-District 19 Council Member, Jeff Miller (City of Indianapolis)
Miller says there are fair and equitable solutions that don’t make it burdensome on the banks, but do require them to keep properties up to the same city laws that the rest of the city follows.
“Rather than tell us what we cannot do, the state should put in place the parameters around what it is that we can do. For instance, they could define a standardized foreclosure registry process, detailing out the rules around it, fees associated with it, and processes for registration. As another example, they could define the rules around enforcing bank maintenance of the property, such as banks are required to maintain it only if it is vacant, and in that case the banks do not have to maintain it beyond the standards of any other property owner in the city.”
Where do we go from here?
One thing all parties can agree on is that the fewer zombie homes there are, the better. Some suggest that can be done under the current law, others say a new bill needs to be introduced as soon as possible. Similar problems exist from New York to Oregon, as the remains of the housing crash can be seen in almost every major market. As for Indianapolis, it has officials in place, like Miller, who will continue to fight for reform. Only time will tell if these homes will be brought back to life.