In a buyer's market, who buys?
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City officials and neighborhood activists worry about another influx of predatory investors. So they're trying to beat them to the punch by attracting owner-occupants -- including large immigrant families who see this as an opportunity to buy into the American dream.
There are several Minneapolis neighborhoods that have been significantly changed by the presence of African, Asian and Latino immigrants, including on the West Bank of the University of Minnesota campus.
Arafat El-Bakri sits inside Mapps coffee shop near the intersection of Cedar and Riverside avenues.
As the espresso machines hiss inside, outside the window looms the large towers of the Cedar Square apartments.
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The buildings house hundreds of Somali immigrants. El-Bakri says the apartments are too cramped, especially for those with extended families.
"I think it will be very wise to make some offers, or give some incentive to these people to move them to their own homes," El-Bakri said. "That would help both areas -- north Minneapolis which is suffering great deal from lack of homeownership."
El-Bakri knows a number of immigrants, mostly Muslims, who are interested in buying homes in north Minneapolis. He says where there are several empty properties on a block, extended families could buy homes near each other.
El-Bakri came here from Egypt more than 20 years ago, and he owns several rental properties throughout the city. He'd like to help newcomers find the necessary financial and educational resources they need.
"It requires some education, and it requires also some education for the city of what kind of people we're dealing with," El-Bakri said. "But it's a great fit. People are very ambitious to have their own homes, and bigger place for their children to grow without the pressure of being in a building."
El-Bakri says if he can get just 20 immigrants into homes, a wave of others will follow.
"I think there's a real opportunity for immigrant communities here," agreed Carolyn Olson, executive director of the Greater Metropolitan Housing Corp.
The nonprofit corporation has been rehabbing and building new homes in north Minneapolis for more than 30 years. Now it's stepping up efforts to buy foreclosed homes and get them back on the market.
So far this year, the corporation has looked at more than 200 properties and closed on 50 of them. Olson says the average purchase price has been around $46,000.
"Some of these homes we're rehabbing are going to be $120,000," said Olson. "So when you tie in the affordability loans that will come with this, they can really get an affordable home."
Affordable home prices are not new to the north side. But some city and neighborhood officials worry current low property values will bring the investors back.
The majority of foreclosed homes in north Minneapolis were investment properties. So, the city of Minneapolis and some neighborhood groups are offering affordability loans that will encourage owner occupancy.
"These neighborhoods will not survive another round of predatory investment."
The new Minneapolis Advantage loan program offers $10,000 from the city that can be used as a down payment. The loan is forgiven after the owner has lived in the home for five years.
Some neighborhood groups offer additional incentives, such as grants for converting rental property to a single-family residence.
According to Roberta Englund, executive director of the Webber-Camden Neighborhood Association, enticing buyers who intend to live in their homes will be important to repopulating the area.
"These neighborhoods will not survive another round of predatory investment, which has left in its wake such horrible dwellings -- such really used up, throwaway houses," Englund said. Those throwaway properties came from illegal real estate transactions.
Between 2003 and 2006, an investment group called T.J. Waconia bought about 140 homes in the Webber-Camden and Folwell neighborhoods.
The investors inflated the property values, and immediately resold the homes. But most of those homes were foreclosed.
Neighborhood organizations, the city and the Greater Metropolitan Housing Corp. sued the investors and the homes have been placed in receivership. The housing corporation now manages the properties, and they want to buy and resell the homes.
Roberta Englund says neighborhood residents, many of whom have several vacant homes on their block, don't want to see the cycle repeat.
"There is a concern among residents in these neighborhoods who own and live in their own homes here, that each of those new acquisitions, each of those new owners should also be owner-occupied," Englund said.
But Englund says that's not a realistic goal. She says they can't keep people from buying and renting properties. And Englund says rental properties aren't inherently bad -- there are plenty of responsible landlords.
The city of Minneapolis can't prevent a return of investors to the north side, but city housing director Tom Streitz says the foreclosure crisis has led the city to become more vigilant.
"If we observe patterns of investment in certain neighborhoods, people coming and buying a large number of homes like T.J. Waconia did and they're investment firms, we're going to know who they are," said Streitz. "We'll say, 'We observe you purchased six properties over the last three months in x-neighborhood. Welcome to the neighborhood, we look forward to meeting with you, talking about your goals.' And there will be a set of principles or expectations that will be part of that greeting."
Streitz is still in the process of drafting this set of ideals. The list includes an effort to determine the proper rental-vs.-homeownership ratio in the city.
But some aren't worried that the drop of housing prices on the north side will lead to another wave of investors looking for rental property.
"We had $50,000 and $60,000 houses on the north side for a long time," says University of Minnesota professor Prentiss Cox.
Cox, who monitors home prices statewide, says the crisis began when imprudence among lenders and greed among investors conspired to over-inflate home values.
Cox says a combination of new state laws against predatory lending and the collapse of the subprime industry will prevent a return of flippers and equity strippers.
Arafat El-Bakri pauses for a sip of his coffee inside Mapps coffee shop, and continues to share his vision of how immigrant homebuyers can change Minneapolis' north side.
He sees a future where immigrant homeowners and business owners play a large role in the revitalization of north side neighborhoods and its most prominent business corridor, West Broadway Ave.
El-Bakri says it could resemble Nicollet Ave. just south of downtown, which is now lined with ethnic restaurants.
"I would like to see -- even better than what's happening on Nicollet, 'Eat Street,'" said El-Bakri. "I would think we can have an area where people and families can go out to have food, to have fun, to enjoy themselves and to see the true face of the city."
El-Bakri's vision for the future is actually a reflection of the north Minneapolis of days long gone, and it's shared by city residents who remember north Minneapolis as a place for affordable homes with diverse neighborhoods.
Some say now -- with a little help from the city and groups of eager newcomers -- is the best time to re-establish that history.