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at a glance
Neighborhood Stabilization Program
•Program boundaries include most of the city’s southeast side and parts of southwest extending into Southwood Park. The boundary on the northeast is Curdes Avenue, and on the northwest, Goshen Avenue.
•To participate in the program, buyers must have an income of no more than 120 percent of the metropolitan area’s median, which for a family of four is about $75,000 a year. They must be pre-qualified for a mortgage at the full value of the rehabbed house.
Photos by Cathie Rowand | The Journal Gazette
The city used federal grant money to fix up a southeast-side home in foreclosure before Dustin Archer and Cassie Caudill moved in.

Rescuing rundown homes

City arranges repairs with grant money

Archer and Caudill cook for friends and family at their new home, which was “basically trashed” when they first saw it, Archer says. The Neighborhood Stabilization Program repairs vacant homes that require prohibitively expensive work.

When Cassie Caudill and Dustin Archer took their first walk-through of the house they bought last year, it was hardly love at first sight.

The two-story colonial in the Victoria Park neighborhood on the city’s far southeast side was, well, a wreck.

Someone had ripped out all the downstairs carpeting. The master bath’s vanity and toilet were gone, and holes dotted walls and ceilings where copper pipe had been ripped out.

“It was basically trashed,” says Archer, a 28-year-old security guard at St. Joseph Hospital in Fort Wayne, of the approximately 40-year-old home. But this isn’t a story about how the young couple, with stars in their eyes, bought the foreclosed-on property anyway and spent years – and thousands of dollars – lovingly fixing it up.

Oh, the pair did buy the house. But they let city-approved contractors fix up the place for them with federal money so they could move into a spotless, completely updated home.

The house turned out to be a perfect candidate for Fort Wayne’s Neighborhood Stabilization Program – a 2-year-old effort that targets foreclosed or long-vacant single-family houses in certain Fort Wayne neighborhoods and rehabs them for resale.

The program aims to keep neighborhoods with distressed homes from getting caught in a downward spiral of neglect that lowers property values, erodes the tax base and can cause potential homebuyers and current residents to flee.

Since 2009, the city has spent more than $4 million in federal Housing and Urban Development money on neighborhood stabilization projects involving custom rehabs, says Heather Presley-Cowen, deputy director of the city’s department of Housing & Neighborhood Services, which oversees the program.

Twenty-two homes have been finished and sold to homeowners as of the beginning of February, she says, with one about to be sold and another under construction. Work on at least three is about to start.

Ellen Fox, a board member of the Northside Neighborhood Association, says the rehabs have had an effect.

Her neighborhood just north of downtown has had a half-dozen homes fixed up.

“We’ve kept track of them, and they’re lovely. They impact everything,” she says. “Any time you take care of a (problem) property, it makes the value of your property go up because it’s making the neighborhood more appealing.”

Ric Zehr, a longtime residential subdivision developer in Fort Wayne and Allen County, says the program is aimed at houses that wouldn’t prove feasible for investors – or most potential buyers – to rehab on their own.

Zehr formed a new company, Belay Corp., just to work on neighborhood stabilization projects and has finished 15 of the 22 homes completed.

Houses that fit the program’s criteria, he explains, typically have been in foreclosure and taken back by their lenders. The properties also typically have problems requiring substantial additional investment, so they don’t sell even at lower prices, Zehr says.

Their average renovation cost was about 1.3 times the acquisition price – much more than would be obtainable through typical financing such as a home-equity loan, Zehr says. The average acquisition price for the homes was about $55,700.

“No one could have bought them and fixed them up and made money in any sense,” he says. Besides repairs, Zehr says that the program funds energy-efficiency updates and remodeling that improves salability, such as adding a bathroom or increasing curb appeal.

Renovations have a budget of 125 percent or 150 percent of what the home will be worth when completed, depending on whether extensive work, such as lead-paint removal, is needed.

Builders and developers get about 10 percent of acquisition and rehab costs out of the deal, and the buyer’s Realtor gets a commission of 6 percent of the sales price or $6,000, whichever is greater.

In the most recent version of the program, the buyers also get up to $3,500 in closing costs in return for promising to use the home as their primary residence for five years.

With neighborhoods getting a house that isn’t an eyesore and will likely be resold at market rates, and local governments getting a house back on the tax rolls at a value about 60 percent more than it sold for, the outcome is “a win-win-win-win-win,” Presley-Cowen says.

But the program, Zehr says, is not self-sustaining without infusions of federal grant money – even though a portion of each sale goes back into the city’s development pot.

“We’re at the point of diminishing returns,” Zehr says.

The program is continuing this year as the city spends money now on hand and generated by future sales, Presley-Cowen says. But it’s unlikely additional federal money for customized rehabs will be forthcoming, she says.

Still, Presley-Cowen thinks the program has been a success.

“We’ve seen this program raise comps, so it’s a force, a legitimate force, in the real estate market, and that’s where we create the long-term impact,” she says.

The long-term impact for Archer and Caudill, 25, a hospital patient advocate, is that they got a house they can love as much as they love each other. Archer says he proposed to Caudill at the closing and she accepted.

“If we had bought this house on the market, we would have had to put a lot into it,” he says.The remodel made a master suite from a fourth bedroom and installed new mechanicals.

“We basically got to pretty much pick every detail that went into it – well, within the budget,” he adds. “It was almost like building a new house – except the structure was already here.”