When a home becomes rundown and vacant, it can drag down the entire neighborhood, with demolition sometimes the only solution. But Charles Scaravelli, owner of Loft Home Builders, has other ideas. He developed a way to rehabilitate the blight and put his idea to the test on Cleveland’s Near East Side, an area homeowners have shunned.

For only $10,000 to $15,000 — comparable to the cost of demolition — Scaravelli guts the interiors of rundown houses to create open and modern floor plans. In April, he partnered with two nonprofits —Cleveland-based Cuyahoga Land Bank and the St. Clair Superior Development Corp. — to rehab four homes. At press time, two homes had been completed and rented out.

“The Loft Homes we are working on already have a waiting list,” says SCSDC Executive Director Michael Fleming. “This contradicts the belief that there’s no demand for housing in the neighborhoods of Cleveland’s Near East Side — we just need to offer the right product.”

The Loft Homes project is one of hundreds of projects undertaken by nonprofit organizations across the country to help rebuild neighborhoods in the wake of the foreclosure crisis.

Nonprofits — the Cuyahoga Land Bank, NeighborWorks America, Rebuilding Together, the National Association of Hispanic Real Estate Professionals, PCV|VRM Seeds of Hope and many more local organizations — are investing significant resources to improve America’s most vulnerable housing markets.

The efforts by these organizations are resulting in the conservation of much-needed affordable housing opportunities in addition to the stabilization and revitalization of these decimated neighborhoods. The idea is that, over time, they will become active contributors in the community once again.

A large source of funding for nonprofits is the U.S. Department of Housing and Urban Development. One of HUD’s longest-running programs, the Community Development Block Grant program, funds a vast array of local community development.

According to a March study by the Joint Center for Housing Studies at Harvard University, more than $500 million in CDBG funds were used to rehabilitate single-family housing, while nearly $30 million was utilized for the repair of foreclosed properties in fiscal year 2011. Between 2005 and 2008, CDBG grantees assisted an average of 115,000 households each year.

Another HUD program, called HOME Investment Partnerships Program, was designed exclusively to increase the affordable housing supply for low-income households. Each year, the program allocates approximately $2 billion, according to the Harvard study. Over the last two decades, HOME funds went toward the rehabilitation of more than 20,000 owner-occupied homes.

But much work remains to be done.

Take Ohio’s Cuyahoga County. The foreclosure crisis left it with numerous vacant and distressed properties. At its peak in 2009, Cuyahoga County had 14,799 foreclosure filings, according to sources compiled by the Federal Reserve Bank of Cleveland. But that was only a small piece of a much larger puzzle. After six painful years of the crisis sweeping over the nation, remnants continue to affect neighborhoods throughout the United States.

FIRST RESPONDERS

Chuck Wehrwein, NeighborWorks America’s chief operating officer, described his organization as “the economic first-responders” after the foreclosure crisis left many neighborhoods decimated.

According to Wehrwein, the nonprofit came at the crisis with a sort of multipronged approach in order to stop the “bleeding” as quickly as possible.

It first focused on community stabilization. “So how do we try to stop what’s happening or basically make sure that all of the good work that had been done by so many of our network organizations over the last 30 years or so wasn’t completely undone?”

As the crisis barreled through communities, NeighborWorks put 190 of the groups it works with in some form of homeownership promotion, education, counseling or development. “We already basically had the troops on the ground as it were, and they were telling us exactly what was going on in the moment, what they were seeing and what they needed to respond to it,” says Wehrwein.

Second came the National Foreclosure Mitigation Counseling program. Original legislation required that NeighborWorks award at least $50 million of funds within 60 days of enactment, a deadline it met “blindingly quick.”

To date, NeighborWorks has received around $800 million from the government to support its work. The housing network has counseled more than 1.5 million homeowners who are in distress, helping many “either stay in their home, work through the complicated web of processes and options or, if things were too far gone and they were in a loan that was too problematic or too much over their head, help them find a path toward affordable, decent housing.”

Third, they focused on rentals. Wehrwein says he asked himself if they could respond to the number of people effectively coming out of homeownership needing a place to live?

After an initial period of concern, the rental market took off, he says. The number of rental units operated by NeighborWorks went from 68,000 in 2008 to 102,000 units today — a 50% jump. “That’s a very important component in the economic recovery.”

Coming out of the recession and financial crisis, NeighborWorks has renewed its focus on homeownership. “We’ve done what we’ve always done well: to focus on quality consumer education and counseling,” says Wehrwein. The nonprofit is bidding to ensure its clients have the right information to make smart decisions about whether or not they should be buying a home.

In a recent study conducted by Neil Mayer & Associates and Experian, NeighborWorks revealed that homebuyers who receive the network’s pre-purchase housing counseling and education are nearly one-third less likely to fall behind 90 days or more on their mortgage within two years of origination.

“Our groups really do know what they’re doing and we, as a national program, really had a great handle on how to help consumers have a successful homeownership experience and a sustainable homeownership experience. And so we wanted to bring those tools back to the markets as they were beginning to recover,” explained Wehrwein.

MAKING HOMES SAFE

But getting the homes occupied has not been the only challenge the past few years. Low-income, elderly or disabled homeowners often lack the resources to make their homes safe, energy efficient and accessible. National nonprofit Rebuilding Together rehabilitates homes for this demographic, using donated materials and services along with private/corporate partnerships.

In 2011, the most recent annual report available at press time, Rebuilding Together had reinvested $173 million in homes and communities, rebuilding infrastructure and revitalizing communities. According to the organization’s annual report, it assists 10,000 low-income homeowners and families every year.

“We work almost exclusively with low-income homeowners, so whether they’re in foreclosure or not, it’s just people who’ve had to do things like deferred maintenance, and so their houses are already in bad shape,” Rebuilding Together Marketing and Communications Director Tim Parsons tells HousingWire.

Parsons notes that most of the low-income homeowners the nonprofit works with have faced a choice between food and medicine or fixing up their homes. The result? For the past 20 years, home maintenance has taken a backseat. “So then the roof starts to fall apart and the basement starts to go and the heating system starts to go, but they always need food and medicine a little bit more immediately,” says Parsons.

Another scenario, Rebuilding Together has found, emerges when a homeowner’s house starts to become old and unsafe, and it’s time for the nonprofit to step in.

Because the foreclosure crisis was part of a larger economic crisis, Parsons adds, the number of people classified as low-income homeowners increased dramatically. In 2010, there were 46.2 million people —roughly 15.3% of the population — in poverty, according to data from the U.S. Census Bureau.

“It wasn’t just the foreclosure part of it, it was just the fact that anyone who owned a home had less income to maintain their home, so more people were eligible for our services and more people were in need of our services because everybody had less money to spend on keeping the roof up and keeping the energy bills paid and keeping the furnace fixed,” he says. “It increased the need overall, not just specifically related to foreclosures.”

For other organizations, such as the National Association of Hispanic Real Estate Professionals, efforts were focused on preparing professionals to enter the field able to help those affected directly by the housing crisis.

Gary Acosta, co-founder of NAHREP, tells HousingWire that his organization, as a professional real estate trade association, takes a slightly different approach than a typical community nonprofit. “Our goal is to try to prepare our members to be better service providers in the marketplace,” he says.

“And with the default market being so significant, especially in markets where there are a lot of Hispanic homeowners — California, Arizona, Nevada, Florida — it’s really essential that we have professionals that are prepared to deal with those issues who can speak the language.”

When a Hispanic family loses a home, Acosta explains, it’s very likely the process could confuse them. They may be first-time homebuyers or may not have family members who can help them navigate their choices, so the real estate professional involved becomes the trusted adviser.

It’s important that real estate agents understand what the options are for homeowners, says Acosta, whether it’s a short sale, foreclosure or relocation. “And they really need to have the language skill sets and cultural skill sets to be able to create better outcomes.

“If you have a real estate agent or broker, who is from the neighborhood, who can speak the language and who understands the process very well, not only will you have a better transition out for a family that is in a distressed situation, but more likely, you can resell that property to an owner-occupant who will then move in, become invested in that neighborhood and become a participant in the community.”