Impact Foreclosures Have on Municipalities

Resource Government
August 22, 2012 — 1,010 views  
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When houses go into foreclosure, as millions do around the United States each year, it's a largely unfounded myth that only property owners and renters are the real victims. In truth, foreclosures can have a dramatically adverse effect on local communities and municipalities. The negative externalities that arise from foreclosures often have wide-reaching impacts both immediate and long-term, as high-frequency neighborhoods tend to receive a stigma.

One of the most immediately-felt impacts that stem from high instances of foreclosures is the direct effect on the rise in crime in communities, according to Neighbor Works America. As foreclosed homes tend to be abandoned and largely empty, thieves often break in and strip the houses of their remaining valuables. This can include copper wires, air conditioning units, water heaters, refrigerators and even toilets. Making matters worse, as property theft and vandalism occurs, the houses lose even more value, becoming even more difficult to sell. Some of these homes end up costing more money to fix up than they would fetch on the open market.

Beyond its effect on properties, foreclosure can directly impact the wellbeing of community residents as well. First and foremost, families who are forced out of their homes need somewhere to live. According to the National Coalition for the Homeless, 61 percent of local and state homeless coalitions say they've seen a rise in homelessness since the foreclosure crisis began in 2007. Increasing rates of homelessness within a community not only put a black mark on the area, but end up leading to higher crime rates and lower property values as well.

Another population segment directly affected by foreclosures is the children and youth of a community. The Center for Responsible Lending suggests that more than 1.95 million youth have suffered as a direct result of foreclosure, which produces a negative environment for them to grow up in. The instability of their environment, coupled with the stress their parents are feeling, combine for a tough childhood.

Finally, local governments themselves are suffering tremendously in the face of rising foreclosure instances. According to House Logic, local governments that rely on property taxes and homebuying and homeselling fees will see their coffers dwindle. As budgets shrink, municipalities will find themselves making cutbacks on infrastructure repairs and community services such as street repair and trash collection. As governments and banks embark on foreclosures, the vicious cycle of the entire process will ultimately come back to haunt them.

Resource Government