Foreclosure Rental Housing May2008 Smith[1]

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Woodstock Institute May 2008

Introduction

The foreclosure crisis in the City of Chicago impacts not only the market for single family homes, but also themarket for affordable rental housing. In Cook County, declining access to affordable rental housing has a beena critical concern for a number of years. In 2005, 42 percent of the rental housing stock in Cook County wasconsidered to be affordable. This was a sharp reduction from previous years. Between 1990 and 2005, CookCountys supply of affordable rental housing decreased by an average of 9,000 units each year. This declinewas due to factors such as condominium conversions, demolition, or previously affordable units increasingrents to market rate. Although the demand for affordable rental housing in Cook County has also declined inrecent years, this decline has not been as sharp as the decrease in supply. In 2000 it was estimated that thedemand for affordable rental housing in Cook County exceeded the supply by roughly 34,000 units. By 2005,this imbalance had increased to 114,000 units.1 In addition to these trends, rising levels of foreclosures are

adding stress to the already strained affordable rental housing market.

A report by Harvards Joint Center for Housing Studies showed that nationally the recent rise in mortgageforeclosures has altered the supply and demand dynamics in the rental market. Foreclosures have forced manyfamilies to leave owner-occupied housing for rental housing to fill a temporary or a long term need for shelter.This increased demand for affordable rental housing has not been met by an increase in supply, and, in fact, asignificant portion of the rental housing stock is also threatened by foreclosure. Data from the MortgageBankers Association shows that 20 percent of national foreclosure actions in 2007 were associated with small,multi-unit properties. These properties make up a substantial share of the rental market in many urban areas.Foreclosures on these types of properties impact the rental market not only by reducing the number of rentalunits, but also by forcing tenants of those buildings back into the market for rental housing. In most markets,the foreclosure process is lengthy and can prevent these properties from returning to the rental housing

inventory for years.2

The Small Multifamily Housing Stock in Chicago

The housing stock in the City of Chicago is made up of a diverse set of buildings. In mortgage lending terms,a single family building is considered a site built structure with one-to-four housing units or a condominium.For the Cook County Assessor, the category of residential, or single family, properties is made up of anumber of different types of structures. The majority of these structures are single unit buildings such asstand-alone, one- or two-story houses; town homes; and row houses. However, the same property class alsoincludes condominiums and 2- to 6-unit buildings.

Small multifamily buildings make up a large share of the overall rental housing stock in the City of Chicagoand Cook County. A recent study of rental housing in Cook County found that 34 percent of renters in thecounty resided in 2- to 4-unit buildings and 19 percent in 5- to 9-unit buildings. By contrast, single familydetached homes were 8 percent of the countys rental stock, and buildings with 50 or more units provided 17

1The Real Estate Center at DePaul University. The State of Rental Housing in Cook County: Current Conditions and Forecasts. Chicago, IL: The RealEstate Center at DePaul University. In this report, affordable housing was defined as housing costing less than 30 percent of the monthly income for afamily of four earning 150 percent of the poverty level of income. In 2005, this translates to income of $29,957 and rent of $749 per month.

2Joint Center for Housing Studies of Harvard University. 2008.America's Rental Housing - The Key to a Balanced National Policy. Cambridge, MA:

Joint Center for Housing Studies.

Foreclosure Crisis Impacts Chicagos Rental Housing Market


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percent of the stock of renter occupied units.3

As opposed to larger multi-unit buildings which can have

hundreds of units and are often owned by investor groups and run by management companies, these smaller

multi-unit buildings are often owner occupied or owned by individual investors who manage and maintain theproperties themselves.

Foreclosures on Small Multifamily Buildings

In 2007, a substantial share of the residential properties with foreclosure filings in the City of Chicago were on

small multifamily buildings. Overall in 2007, there were 13,872 properties with foreclosure filings in

Chicago. Figure 1 breaks out the distribution of these foreclosures by property type. It shows that over 35

percent, or 4,822 foreclosure filings, were on 2- to 6-unit multifamily properties. Depending on the number of

units in each property, these foreclosures could impact between 9,644 and 28,923 housing units. Looking at

other property types, nearly 53 percent of foreclosure filings were on one unit buildings and 12 percent were

on condominiums.

Figure 1. City of Chicago Residential Foreclosure Filings by Building Type, 2007

52.8%35.1%

12.1%

1-Unit Building 2- to 6-Unit Building Condominium

Source: Woodstock Institute analysis of data from Foreclosure Report of Chicago

Foreclosures on small multifamily buildings were largely concentrated in certain communities. Figure 2 maps

the geographic distribution of 2007 residential foreclosure filings by property type in the City of Chicago. It

shows that the areas with the highest concentrations of foreclosures on 2- to 6-unit properties were located in

neighborhoods on the West and South Sides of Chicago. Community areas with the highest concentrations

include West Garfield Park, East Garfield Park, Austin, Humboldt Park on the West Side and New City,

Englewood, and West Englewood on the South Side. Areas along the lake had the highest concentrations of

foreclosure filings on condominiums. These include areas such as Near North Side, Edgewater, Uptown, and

Lincoln Park.

Figure 3 breaks out the foreclosure filings in each Chicago community area by type of property and ranks the

community areas by the share of 2007 foreclosure filings that were on 2- to 6-unit buildings. In West Garfield

Park, over 86 percent of the 2007 foreclosure filings were on 2- to 6-unit buildings, and in North Lawndale

nearly 80 percent of the 2007 foreclosure filings were on 2- to 6-unit buildings. The Loop and Near North

Side had the highest percent of foreclosures that were on condominiums. In the Loop, over 98 percent of

3The Real Estate Center at DePaul University. The State of Rental Housing in Cook County: Current Conditions and Forecasts. Chicago, IL: The Real

Estate Center at DePaul University.

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Figure 2. Chicago Residential Foreclosure Filingsby Property Type, 2007

2- to 6-Unit Building

1-Unit Building

Condominium

Foreclosure Filings

Community Areas

1. Rogers Park

2. West Ridge

3. Uptown

4. Lincoln Square5. North Center

6. Lakeview

7. Lincoln Park

8. Near North Side

9. Edison Park

10. Norwood Park

11. Jefferson Park

12. Forest Glen

13. North Park

14. Albany Park

15. Portage Park

16. Irving Park

17. Dunning

18. Montclare

19. Belmont Cragin

20. Hermosa

21. Avondale

22. Logan Square

23. Humboldt Park

24. West Town

25. Austin

26. West Garfield Park

27. East Garfield Park

28. Near West Side

29. North Lawndale30. South Lawndale

31. Lower West Side

32. Loop

33. Near South Side

34. Armour Square

35. Douglas

36. Oakland

37. Fuller Park

38. Grand Boulevard

39. Kenwood

40. Washington Park

41. Hyde Park

42. Woodlawn

43. South Shore

44. Chatham

45. Avalon Park

46. South Chicago

47. Burnside

48. Calumet Heights

49. Roseland

50. Pullman51. South Deering

52. East Side

53. West Pullman

54. Riverdale

55. Hegewisch

56. Garfield Ridge

57. Archer Heights

58. Brighton Park

59. McKinley Park

60. Bridgeport

61. New City

62. West Elsdon

63. Gage Park

64. Clearing

65. West Lawn

66. Chicago Lawn

67. West Englewood

68. Englewood

69. Greater Grand Cross

70. Ashburn

71. Auburn Gresham

72. Beverly73. Washington Heights

74. Mount Greenwood

75. Morgan Park

76. O'Hare

77. Edgewater

2 Miles

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3.7%

3.9%

4.2%

4.8%

5.1%

6.0%

6.0%

7.2%

7.5%

7.9%

9.7%

11.1%

13.0%

13.8%

14.3%

14.7%

16.7%

16.7%

16.8%

17.2%

18.2%

18.5%

19.0%

20.0%

22.9%

23.9%

24.2%

25.2%

25.6%

27.4%

27.4%

28.4%

28.6%

29.4%

33.3%

33.3%

34.4%

34.5%34.6%

37.3%

37.9%

38.7%

40.9%

41.9%

42.8%

43.9%

46.7%

49.2%

49.4%

50.0%

51.5%

52.0%

53.4%

57.3%

57.6%

58.4%

59.4%

59.9%

64.6%

65.7%

66.7%

70.3%

78.0%

79.3%

79.5%

86.6%

98.3%

100.0%

94.6%

14.8%

95.6%

4.4%

96.6%

82.7%

84.4%

94.4%

92.9%

92.3%

90.5%

26.0%

92.8%

86.3%

92.1%

89.3%

83.3%

26.0%

86.2%

3.6%

6.4%

24.4%

82.7%

83.2%

8.6%

77.3%

81.5%

28.9%

70.8%

77.1%

75.8%

26.3%

18.0%

11.0%

72.6%

66.3%

67.9%

39.7%

46.8%

66.7%

66.7%

65.4%

48.6%62.7%

38.1%

62.1%

56.6%

50.0%

39.5%

19.7%

34.1%

53.3%

47.1%

48.9%

14.3%

25.0%

18.0%

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43.1%

41.0%

28.8%

19.1%

40.6%

38.2%

35.4%

22.5%

33.3%

29.7%

13.1%

20.7%

19.5%

12.9%

49.5%

35.1%

86.7%

2.7%

52.8%

8.9%

11.8%

1.9%

22.6%

13.5%

3.4%

30.5%

25.0%

36.3%

3.7%

22.0%

37.5%

18.6%

9.1%

4.7%

24.6%

12.1%

2.7%16.9%

23.8%

31.7%

3.7%

6.3%

63.4%

56.8%

49.5%

9.2%

52.1%

4.5%

74.1%

59.0%

78.9%

82.1%

61.0%

5.6%

68.0%

6.3%

3.6%

2.6%

2.4%

11.7%

13.6%

92.3%

83.6%

3.9%

96.8%

13.3%

98.5%

1.7%

2.0%

1.4%

0.0%

1.0%

0.6%

0.0%

0.2%

0.2%

1.7%

2.0%

1.7%

1.0%

0.5%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Loop

Edison Park

Mo unt Greenwood

Riverdale

Near North Side

Ashburn

Near South Side

M organ Park

Uptown

Hegewisch

Norwood Park

Clearing

Garfield Ridge

Beverly

Forest Glen

West Lawn

Hyde Park

Washington Heights

Dunning

South Deering

Avalon Park

Montclare

Kenwood

Pullman

O'Hare

Lakeview

Douglas

Calumet Heights

RoselandEdgewater

West Elsdon

West Pullman

Near West Side

Jefferson Park

Burnside

Auburn Gresham

West Ridge

Rogers Park

Lincoln Park

Gage Park

Po rtage Park

Chatham

Lincoln Square

South Shore

East Side

Archer H eights

Chicago Lawn

Irving ParkBelmont C ragin

City of Chicago

Albany Park

West Englewood

Hermosa

Oakland

North Park

Grand Boulevard

North Center

M cKinley Park

Greater Grand Crossing

South Chicago

Washingon Park

Armour Square

West Town

Austin

Bridgeport

Englewood

Logan Square

Woodlawn

Brighton Park

Humboldt Park

South Lawndale

Avondale

Fuller Park

New City

East Garfield Park

Lower West Side

Nort h Lawndale

West Garfield Park

Figure

3.

ChicagoCom

munityAreaForeclosureFilingsbyPropertyType,

2007

Condominum

1-Unit

2to6Unit

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foreclosure filings were on condominiums, and in the Near North Side, nearly 97 percent of foreclosure filings

were on condominiums. Community areas Riverdale, Mount Greenwood, and Hegewisch all had a high

percent of foreclosures that were on one unit, single family structures.1

A number of the community areas that experienced the highest levels of foreclosures on small multifamily

buildings are lower-income areas with high minority populations that recently experienced a decline in the

number of rental housing units. Table 1 shows the top ten community areas by number of foreclosures on 2-

to 6-unit buildings and the range of possible housing units impacted by these foreclosures. All the communityareas in the top ten are lower-income community areas with high minority populations, and most experienced

declines in renter occupied housing units between 1990 and 2000. Foreclosures on 2- to 6-unit buildings are

likely to exacerbate these declines. For example, between 1990 and 2000 North Lawndale experienced a 14.4

percent decline in the number of renter occupied housing units. In 2007, North Lawndale had 240 foreclosures

on 2- to 6-unit buildings representing nearly 80 percent of the foreclosures in that community area. These

foreclosures have the potential to impact between 480 and 1,440 housing units, depending on the size of the

buildings in foreclosure.

Table 1. Share and Number of 2007 Foreclosures on 2- to 6-Unit Buildings and Change in Renter

Occupied Housing Units, 1990-2000

Number of Change inForeclosures Renter Occupied

on 2- to 6-Unit Housing Units

Buildings, 2007 If 2-Unit If 6-Unit 1990-2000

Austin 421 842 2,526 3.2%

New City 308 616 1,848 -0.2%

Englewood 295 590 1,770 -16.7%

West Englewood 253 506 1,518 -5.2%

Humboldt Park 248 496 1,488 -2.5%

North Lawndale 240 480 1,440 -14.4%

West Garfield Park 188 376 1,128 -7.1%

Greater Grand Crossi 185 370 1,110 -2.6%

South Chicago 176 352 1,056 -0.6%Chicago Lawn 176 352 1,056 8.1%

City of Chicago 4,822 9,644 28,932 0.5%

Possible Housing

Units Impacted

Range of

Source: Woodstock Institute analysis of data from Foreclosure Report of Chicago and Chicago Rehab Network 2003 Affordable HousingFact Book

Conclusion

Going forward, it is critical that policy makers consider the impact of the foreclosure crisis on the rental

housing market. Foreclosures on 2- to 6-unit buildings made up over 35 percent of the foreclosures on

residential properties in the City of Chicago in 2007. These types of buildings make up a substantial share of

the overall rental housing market in the city. Additionally, many of the community areas with the highestconcentrations of foreclosures on small multifamily buildings are also those that have seen the largest recent

declines in rental housing units. As the number of foreclosures on small multifamily properties grows,

mechanisms need to be in place to facilitate the process of municipal governments, non-profit agencies, and

the private market acquiring these properties and keeping them active in the rental market. Without suchvehicles, large inventories of potentially usable buildings will remain vacant, and the affect of foreclosures

will continue to threaten community stability.

1 Appendix I includes data on foreclosures by property type for each Chicago community area. Appendix II includes data and a map detailingforeclosures by property type in Cook County.

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Appendix I -

City of Chicago Residential Foreclosure Filings by Property Type, 2007

ShareNumber Community Area 1-Unit 2- to 6-Units Condominium NA Total Small Multifamily*

1 Rogers Park 20 28 63 1 112 25.2%

2 West Ridge 52 48 98 12 210 24.2%

3 Uptown 4 3 84 4 95 3.2%

4 Lincoln Square 25 18 20 2 65 27.7%

5 North Center 14 18 9 3 44 40.9%

6 Lakeview 7 16 86 1 110 14.5%

7 Lincoln Park 9 21 52 0 82 25.6%

8 Near North Side 6 1 212 9 228 0.4%

9 Edison Park 13 0 2 0 15 0.0%

10 Norwood Park 67 3 11 4 85 3.5%

11 Jefferson Park 46 13 6 0 65 20.0%

12 Forest Glen 36 2 1 1 40 5.0%

13 North Park 17 18 8 0 43 41.9%

14 Albany Park 45 44 29 1 119 37.0%

15 Portage Park 138 57 13 2 210 27.1%

16 Irving Park 72 51 25 1 149 34.2%

17 Dunning 138 12 10 0 160 7.5%

18 Montclare 45 6 3 0 54 11.1%

19 Belmont Cragin 208 115 9 2 334 34.4%

20 Hermosa 60 41 5 0 106 38.7%

21 Avondale 23 67 12 0 102 65.7%

22 Logan Square 49 98 23 4 174 56.3%23 Humboldt Park 158 248 8 2 416 59.6%

24 West Town 36 103 61 6 206 50.0%

25 Austin 373 421 16 0 810 52.0%

26 West Garfield Park 28 188 1 1 218 86.2%

27 East Garfield Park 25 149 17 6 197 75.6%

28 Near West Side 41 27 74 10 152 17.8%

29 North Lawndale 59 240 3 0 302 79.5%

30 South Lawndale 64 117 0 0 181 64.6%

31 Lower West Side 12 46 0 1 59 78.0%

32 Loop 1 0 64 6 71 0.0%

33 Near South Side 9 1 51 4 65 1.5%

34 Armour Square 1 2 1 0 4 50.0%

35 Douglas 19 13 46 1 79 16.5%

36 Oakland 11 9 2 1 23 39.1%

37 Fuller Park 14 28 0 0 42 66.7%38 Grand Boulevard 41 89 78 2 210 42.4%

39 Kenwood 20 10 47 4 81 12.3%

40 Washingon Park 13 45 33 2 93 48.4%

41 Hyde Park 13 3 34 0 50 6.0%

42 Woodlawn 49 150 58 4 261 57.5%

43 South Shore 199 125 101 6 431 29.0%

44 Chatham 184 77 10 1 272 28.3%

45 Avalon Park 92 10 1 0 103 9.7%

46 South Chicago 174 176 6 1 357 49.3%

47 Burnside 37 11 0 0 48 22.9%

48 Calumet Heights 129 26 1 0 156 16.7%

49 Roseland 482 97 0 1 580 16.7%

50 Pullman 56 9 0 0 65 13.8%

51 South Deering 128 11 0 1 140 7.9%

52 East Side 56 28 0 0 84 33.3%

53 West Pullman 406 92 0 0 498 18.5%

54 Riverdale 19 0 0 1 20 0.0%

55 Hegewisch 28 1 0 0 29 3.4%

56 Garfield Ridge 134 6 2 0 142 4.2%

57 Archer Heights 22 11 0 0 33 33.3%

58 Brighton Park 52 76 0 0 128 59.4%

59 McKinley Park 16 14 0 0 30 46.7%

60 Bridgeport 25 31 2 0 58 53.4%

61 New City 130 308 0 0 438 70.3%

62 West Elsdon 51 12 3 0 66 18.2%

2007 Properties with Filings

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Appendix I -

City of Chicago Residential Foreclosure Filings by Property Type, 2007

ShareNumber Community Area 1-Unit 2- to 6-Units Condominium NA Total Small Multifamily*


63 Gage Park 114 43 0 0 157 27.4%

64 Clearing 65 3 9 0 77 3.9%

65 West Lawn 152 10 6 0 168 6.0%

66 Chicago Lawn 335 176 1 1 513 34.3%

67 West Englewood 415 253 0 1 669 37.8%

68 Englewood 211 295 9 1 516 57.2%

69 Greater Grand Crossing 177 185 14 2 378 48.9%

70 Ashburn 318 5 13 0 336 1.5%

71 Auburn Gresham 336 106 1 1 444 23.9%

72 Beverly 78 4 2 0 84 4.8%

73 Washington Heights 296 23 0 1 320 7.2%

74 Mount Greenwood 59 0 1 0 60 0.0%

75 Morgan Park 194 5 4 2 205 2.4%

76 O'Hare 1 4 23 0 28 14.3%

77 Edgewater 10 20 86 1 117 17.1%

City of Chicago 7,262 4,822 1,670 118 13,872 34.8%

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Appendix II

Cook County Residential Foreclosure Filings by Property Type, 2007

Table 2 breaks out residential foreclosure filings by property type for the sub-regions of

Cook County. It shows that the City of Chicago had the largest share of foreclosure

filings on small, multi-unit buildings with over 35 percent of all filings on this type ofproperty. In West Cook County, 15 percent of the foreclosures were on small multi-unit

buildings. In the other regions of Cook County a very small share or foreclosures wereon 2- to 6-unit buildings. The lowest was in Northwest Cook were only 0.5 percent offilings were on small multi-unit properties. Figure 4 maps the distribution of 2007

residential foreclosure filings by property type in Cook County.

Table 2. Residential Properties with Foreclosure Filings by Property Type for CookCounty Regions, 2007

Share

Cook County Region 1-Unit 2- to 6-Units Condominium NA Total 2- to 6- Unit*

Chicago 7,262 4,822 1,670 118 13,872 35.1%

North Cook 716 63 174 9 962 6.6%

Northwest Cook 1,278 9 665 19 1,971 0.5%West Cook 1,936 382 214 13 2,545 15.1%

Southwest Cook 1,322 51 238 4 1,615 3.2%

South Cook 4,376 213 169 15 4,773 4.5%

Cook County Total 16,890 5,540 3,130 178 25,738 21.7%


*Calculation of the share foreclosures that are on 2- to 6-unit buildings does not include foreclosures on single family properties where

the building type was not available.

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Figure 4. Cook County ResidentialForeclosure Filings by Property Type, 2007

2- to 6-Unit Building

1-Unit Building

Condominium

Foreclosure Filings

Northwest CookNorthwest CookNorthwest CookNorthwest CookNorthwest CookNorthwest CookNorthwest CookNorthwest CookNorthwest Cook

North CookNorth CookNorth CookNorth CookNorth CookNorth CookNorth CookNorth CookNorth Cook

ChicagoChicagoChicagoChicagoChicagoChicagoChicagoChicagoChicago

West CookWest CookWest CookWest CookWest CookWest CookWest CookWest CookWest Cook

Southwest CookSouthwest CookSouthwest CookSouthwest CookSouthwest CookSouthwest CookSouthwest CookSouthwest CookSouthwest Cook

South CookSouth CookSouth CookSouth CookSouth CookSouth CookSouth CookSouth CookSouth Cook

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Foreclosure Rental Housing May2008 Smith[1]

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