“Zombie” and Vacant Properties Remediation and Prevention

by Helene Caloir, Director, NY State Housing Stabilization Fund, LISC

This paper provides a brief overview of the Initiative, including its history, challenges, and emerging best practices. The paper ends with suggested next steps in the continued effort to address zombie and empty residential properties in New York State.

In 2016, the convergence of new legal authority and funds from a significant bank settlement gave municipalities in New York State an unprecedented opportunity to take stock of and address zombie and vacant properties in their jurisdictions. With grant funds and technical expertise from the “Zombie” and Vacant Properties Remediation and Prevention Initiative, 76 cities, towns and villages across the state began grappling with properties that were stuck in the foreclosure process or otherwise vacant. This paper provides a brief overview of the Initiative, including its history, challenges, and emerging best practices.

The paper ends with suggested next steps in the continued effort to address zombie and empty residential properties in New York State.

Background

New York State’s Mortgage Foreclosure Crisis
At its peak in 2010, the housing crisis resulted in foreclosure filings against 2.87 million properties nationwide. In New York State, the foreclosure inventory reached a high of 101,000 in 2012. The pace of foreclosures has since eased, but large and small communities throughout the state are still feeling residual effects in the form of deteriorating residential properties tied to zombie mortgages.

What makes a property a “zombie”? A “vacant” is any one-to-four-family house that is not occupied for any reason, including the owner’s abandonment or death. A “zombie,” however, is a special type of vacant: a structure, typically a one-to-four-family house, with a mortgage lien that is stuck in the foreclosure process. This state of being neither lien-free nor fully foreclosed-upon is referred to as a “zombie foreclosure.”

In many such cases, the resident owner vacates the house at the first notice of foreclosure proceedings, believing a bank has already assumed control of the property and saving it is a lost cause. In truth, the foreclosure process, even when actively pursued, can take several years; some foreclosures languish even longer. When owners vacate these properties, they become subject to damage from weather, scavenging, squatters and criminal activity. The resulting deterioration can render them nuisances or worse, negatively affecting neighboring property values and physical conditions. But zombie foreclosures can also cloud properties' titles and make it more difficult for a municipality to enforce needed maintenance.