Urban Homesteading:

A Good Program Needing Improvement

CED-80-3: Published: Nov 13, 1979. Publicly Released: Nov 13, 1979.

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Because of interest by Congress, local governments, the news media, and others, a review was made of the Department of Housing and Urban Development's homesteading program. The program transfers abandoned houses in deteriorating neighborhoods that it has acquired through foreclosure to the communities. The communities, in turn, give them to individuals who must repair them and live in them for 3 years to become owners. The program has helped reduce the inventory of vacant houses owned by HUD while providing communities with the opportunity to improve their neighborhoods. It has made homeowners out of some who might not have been able to afford to buy a house.

The review found that some communities used unique and effective approaches to homesteading. In nearly every homestead neighborhood, there were houses that stood out as newly repaired and well cared for. However, some problems were observed. The time it took to homestead varied, reflecting the condition of the houses, the extent of necessary repairs, and the availability of financing and contractors. Timely disposition of the houses by HUD has varied from program to program. Where cooperation between local officials and HUD was effective, the programs were more successful. Two communities reviewed departed from ideal homesteading: one contracted for repairs and then sold the houses at a subsidized price, and the other continued the program even after the housing market had improved. HUD was only beginning to operate an administrative reporting system and to establish a monitoring system. These systems could have disclosed the questionable practices.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Housing and Urban Development should require: departmental field offices to work with communities to identify houses transferred to communities and found difficult to homestead and decide what should be done with them; and departmental program managers to identify successful methods of homesteading and to encourage communities to use them. Successful methods include promptly selecting homesteaders, selecting alternate homesteaders, and encouraging self-help. The Secretary should require: effective monitoring of the homestead program to assess the need for continuing existing local programs, identify practices in need of correction, and help local governments and HUD field offices improve administration of homesteading programs; an expansion of the reporting system to include all communities in the program and use this information in monitoring the program; and a halt to giving away higher value, marketable houses in unblighted neighborhoods so that homesteading funds can be concentrated in deteriorated areas.

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