There are a lot of people and companies buying distressed properties in Sarasota County to rehab and rent them out. It’s the market at work, supply meeting demand.
Perhaps the biggest operator, however, might surprise most people. Even many investors don’t realize the anonymous person he is negotiating against for a short sale, or bidding against in a foreclosure. It’s the government.
A partnership between Sarasota County and the city of Sarasota is using federal stimulus money that is part of the federal Neighborhood Stabilization Program to buy foreclosed or vacant houses, rehab them and flip or rent them.
The city and county have received a combined $30 million so far — $7 million from the first round in 2009 and another $23 million in 2010 — with about $6 million more on its way, said Jane Hindall, the NSP program manager.
Of course, as federal stimulus money, it is not even taxpayer money yet. It’s really just debt — debt against our children’s future income. More money we don’t have. (See chart on this page.)
According to a Sarasota County agenda discussion item, the goal of the program is “to stabilize neighborhoods significantly affected by foreclosures by reducing the number of vacant and abandoned properties, bringing the properties into compliance with code and making homes available through sale or lease to low- and moderate-income families and individuals.”
The feds also attached green strings to the money, so that the houses must have energy-efficient upgrades from solar hot-water heaters to added insulation, increasing the cost of the investment to the city or county.
The program has bought 98 properties so far, but with the second round of funds, many of those properties are apartment complexes. So it is funding non-profits operating perhaps a few hundred rental units.
The NSP actually acts as a mortgager, buying the properties and then finding non-profit developers to rehab and sell or rent them. Some of those developers include Habitat for Humanity, the Community Housing Trust of Sarasota County, Catholic Charities Housing Sarasota, GoodHomes of Manasota Inc. (Goodwill Industries), Harvest Tabernacle and the Greater Newtown Community Redevelopment Corp.
The government program does not use any for-profit developers, although the non-profit groups use for-profit subcontractors when needed.
Another string attached to the money is that all of it must be spent on families at or below 120% of the median family income in the county, while 25% of it must go to people at or below 50% of the median income in the county. A portion of the money has been spent to build the third phase of Janie’s Garden housing project in Newtown. Oh, and the program also provides down-payment assistance for homebuyers — all of which is a pretty good formula for failure because people are getting into homes they probably cannot afford or do not know how to handle.
But that is not so relevant now. Rather than getting people into their own homes, three-quarters of the homes bought in the NSP program are for renting. Local government as landlord.
In Newtown, the program is planning to demolish older structures and build townhomes. “There’s an awful lot of rental need,” Hindall said.
Indeed. Which is why there are a lot of investors. Sarasota County School Board Chairman Frank Kovach is among them. He has been buying properties for the past year to rent. He only accidentally found out that a real-estate agent he kept running into while trying to buy distressed properties was the acquisition agent for the government.
He was surprised and frustrated with a government program competing directly with part of what he does for a living.
“Most small investors are not aware that they are competing with the county, and don’t realize that the county is trying to buy the same properties they are. Losing bidders are not aware of their competition,” he said.
This is exactly the kind of thing government should not be doing for every conceivable reason.
First, the market is already doing what needs to be done — or trying to do it, if the government will get out of the way. Instead, the government is competing with the private sector to provide a service already being provided.
Second, there is no money for this. The federal stimulus money is debt, and it is just morally wrong as our debt burden is looking increasingly impossible to pay off.
Third, it acts to bail out big banks by pushing more tax money into that system. NSP sometimes even gets to bid on properties several days before private investors know about them.
Fourth, there is a risk that with further market declines, the county and city could be stuck with houses that they cannot sell or rent without taking a loss.
Fifth, it is a government program, which means by definition it will be riddled with inefficiencies and red tape.
The city and county should take the high moral ground and get out of it now. Let the unnecessary expenditure of our children’s money be on someone else’s conscience.
+ Reasons for optimism
Last week’s Suncoast Workforce Career Expo was the latest in a string of signals pointing to a solidifying economic rebound in Sarasota.
Nearly 100 employers participated in the job fair at the Sarasota-Bradenton International Convention Center this year, compared to about 80 last year and fewer than a dozen three years ago, when the event was canceled.
Also, the unemployment rate is down a full percentage point from last year and actual employment is up. Statewide, nearly 33,000 jobs have been added since this time last year.
Commercial leases and sales rose in the past two months, vacancy rates are down, retail is up and homebuilder Neal Communities reported 107 homes sold in the first quarter, up 85% from last year.
+ Ed Smith goes silent
Now that the excitement of spring-training is over — that was quick — the lights are turned off for professional baseball at Ed Smith Stadium until a few weeks next spring. It turns out that the Baltimore Orioles do not have a farm team in the Florida State League like the Cincinnati Reds did.
The Orioles have all their farm teams in the Maryland area and never had any intention of operating one in Sarasota.
So while there will be events held at the stadium, the primary purpose for the newly re-developed $30 million stadium will be silent until March 2012.
Federal spending insanity
Billions, trillions … whatever comes next for the federal budget. It’s all quite beyond any of us to grasp the size of the wildly out-of-control spending train in Washington, D.C. Sometimes it seems like those folks don’t live in the same reality as the rest of us.
So we brought the numbers to the most local level — a family in Sarasota County — to show the insanity of what has been going on and continues to go on with our future.
We took the median family income for Sarasota County and showed what household spending would look like if it mirrored the federal government’s attitude toward spending. It tells a striking tale.
In the chart below, family “income” represents this year’s federal budget revenues; “spending” represents federal expenditures; “credit card” debt represents the federal debt; and “cuts” are the tiny reductions Republicans are desperately trying to get through in the current year’s spending. The “new spending” level is what the ever-so-slightly improved mess would look like if Republicans prevail.
The result? If a Sarasota family making $41,957 spent like the feds, it would spend $62,600 this year while carrying $251,742 in credit-card debt. Further, the more responsible spouse among the two — which is not saying much in our example — is trying to cut $1,058, so the family is only spending $61,542. But the other spouse is fighting that cut as unaffordable.
This is what is going on in Congress.
The Republicans are trying to cut $60 billion, which equates to that $1,058 for our family, and the Democrats and President Obama are fighting it at every step.
They are only up for a paltry $10 billion in cuts, which equates to $176 in our family budget. This is the context in which to listen to the Democrats calling proposed budget cuts “extreme.”
They can’t see even to slow the insanity, preferring to play re-election politics over the good of the nation.
The numbers make the case, and show why doing the right thing must get our support at the polls.
A FAMILY BUDGETS THE WAY THE FEDS SPEND MONEY
Income Spending Credit card Cuts New spending
$41,957 $62,600 $251,742 $1,058 $61,542
Sources: U.S. GAO, U.S. Census Bureau, Sarasota Observer