COMMENTARY. Legal Aid of Western Missouri s Economic Development Project: Bringing Self-Empowered Revitalization to Distressed Neighborhoods

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1 COMMENTARY Legal Aid of Western Missouri s Economic Development Project: Bringing Self-Empowered Revitalization to Distressed Neighborhoods Peter Hoffman I. Introduction II. Vacancy in Kansas City III. Legal Tools Case Study: Luv Does Matter IV. Programming A. Urban Homesteading B. Adopt a Neighborhood V. Conclusion I. Introduction For more than thirty years, Legal Aid of Western Missouri s Economic Development Unit (EDU) has represented grassroots community groups in Kansas City s urban core. In that time, the team has worked with long-time residents and stakeholders to rehabilitate hundreds of vacant and abandoned properties as safe and affordable housing. EDU s clientele is unusual for legal services providers, who focus on nonprofit group representation and typically work with neighborhood associations and community development organizations to create or rehabilitate aging low-income housing, secure municipal services, or assist tenant organizations and neighborhood associations in improving neighborhood quality of life in Kansas City. EDU s work, which results in the repair of between sixty to eighty blighted or vacant homes a year, includes land acquisition, financing, Peter Hoffman (phoffman@lawmo.org) is a staff attorney in the Economic Development Unit of Legal Aid of Western Missouri in Kansas City, Missouri. 403

2 404 Journal of Affordable Housing Volume 24, Number real estate closings, tax abatement, zoning, contracting with service providers, and litigation in support of blight removal. The unit is staffed by five attorneys, two paralegals, and a handful of volunteer lawyers and law school interns. Primary funding for the project comes from an annual municipal contract with added support from the Legal Services Corporation, local foundations, and Interest on Lawyers Trust Accounts (IOLTA). II. Vacancy in Kansas City Like many aging cities in the Midwest, Kansas City has suffered significant disinvestment over the last fifty years. The government policies that led to suburbanization, sprawl, and the concentration of poverty in the last half of the twentieth century have been compounded in the last decade by the wave of foreclosures and abandonment caused by subprime lending. According to Kansas City Planning and Zoning Department, approximately 18,000 parcels have been identified as vacant within the city proper. An estimated half of those parcels contain structures and only 5,000 are publicly owned. This disinvestment has led to increased public costs for city services and a decrease in the quality of life for urban residents. In the last five years, the city has paid $6,875,924 to contractors to mow and maintain vacant properties. Between 2009 and 2013, annual expenses to address problem properties more than doubled. Property values have declined and private investment in some neighborhoods has been absent for decades. The city increasingly has to do more with less: increased spending to remedy the public health and safety concerns presented by vacant properties and decreased property tax revenue. Pat Clarke, president of the Oak Park Neighborhood Association, one of the most distressed neighborhoods in Kansas City, with some of the highest vacancy rates in the region, was asked how he felt about the number of vacant and abandoned houses in his neighborhood. His response: It doesn t inspire a lot of hope. EDU s mission is to empower neighborhood residents and leaders to address issues of blight and vacancy on their own terms. Staff attorneys work with community leaders to pull together community stakeholders to turn vacant houses, traditionally seen as a drawback, into a community asset. EDU s cases typically involve building partnerships among neighborhood organizations, residents, local businesses, and contractors to rebuild distressed neighborhoods from the ground up. III. Legal Tools Initially, EDU attorneys relied on common law nuisance and receivership actions on behalf of individuals residing next to troubled properties, but the process of obtaining default judgments for damages and foreclosing on those judgments became overly burdensome and time consuming. At the request of state legislators, the EDU was asked to help write new

3 Legal Aid of Western Missouri s Economic Development Project 405 legislation that could help expand the options for dealing with problem properties. In 1993, the EDU assisted a legislator in drafting the Abandoned Housing Act (AHA) (MO. REV. STAT ), which provides a private right of action to nonprofit organizations to petition the circuit court to declare interests in real estate abandoned when certain statutory conditions are met. In the late 1990s, state nuisance and receivership statutes were codified to give nonprofit neighborhood associations standing to bring claims on behalf of their residents. This limited the exposure of individuals and provided communities with an opportunity to more proactively pursue cases against owners of problem properties. The AHA has proved to be the most effective tool in transforming abandoned houses into occupied homes. The cause of action is available to Missouri nonprofit corporations whose purposes include the provision or enhancement of housing and applies to properties when three conditions are met: (1) the house has been vacant for at least six months; (2) property taxes are delinquent; and (3) the house is a nuisance. Under the AHA, the nonprofit petitions the court for temporary possession of an abandoned house. In order to protect any potential rights to the abandoned property, the statute requires service of process on all parties with a legal interest in the property. After service, the court holds a hearing on the nonprofit organization s petition for temporary possession; any party defendant may contest the organization s case. The organization must establish to the satisfaction of the court that the house meets the three conditions to be declared abandoned. Additionally, the organization must demonstrate that it has the ability and resources to rehabilitate the property. If the court finds that the property meets the statutory requirements, it will declare the house abandoned. If the petitioning organization has the ability and resources to rehabilitate the abandoned house, the court will transfer possession of the property to the nonprofit organization. Rehabilitation capacity can be furnished either by a partnering forprofit local rehabber or by a nonprofit, publicly supported community development corporation. The EDU assists petitioning organizations in procuring those services and drafts all contracts and agreements under which the development is to unfold through the partnership. Upon transfer of possession of the property, the nonprofit organization rehabilitates the property according to the rehabilitation plan approved by the court. Once rehabilitation of the property has been completed, if no party with a legal interest in the property reimburses the nonprofit organization for its rehabilitation costs and expenses, the organization returns to the court where it will receive a court administrator s deed, which acts to extinguish abandoned ownership interests and vests title of the property to the nonprofit plaintiff. The EDU then assists the plaintiff in selling or leasing the property to a tenant or homeowner and provides transactional assistance with the real estate closing.

4 406 Journal of Affordable Housing Volume 24, Number Case Study: Luv Does Matter In early 2013, EDU and the Blue Hills Neighborhood Association 1 determined that roughly half of the single-family homes located on 55th Street were vacant or abandoned. Two of these vacant properties were next door to Luv Does Matter, a daycare owned by Linda Brown, a lifelong neighborhood resident. EDU represented Blue Hills Neighborhood Association in an AHA lawsuit and was able to gain legal control of the properties nearest the daycare to rehabilitate the dangerous buildings closest to where the children played. EDU drafted the development agreements on behalf of the neighborhood association, making the daycare owner the developer of the project. A local builders cooperative was brought on as the general contractor. The cooperative tackled all of the rehabilitation work but on the day before the final property inspection, an arsonist set fire to a neighboring property, setting the project back months and causing tens of thousands of dollars of damage. The community rallied again, deciding that this project was too important to abandon. The neighborhood secured crowdsourced funds for the properties and scheduled community workdays. Within a few short months, the houses were again fully renovated, and the EDU returned to the court, which granted title in favor of Blue Hills. The properties were then conveyed to the developer in exchange for her investment and today are homes for the families of children who attend the neighboring daycare. This case is just one of hundreds of examples of holistic, communitybased case work that has made the EDU s approach to neighborhood revitalization so effective. IV. Programming Legal Aid of Western Missouri s EDU has been able to utilize the available legal tools to develop a number of programs encouraging grassroots nonprofits to independently acquire and redevelop vacant properties. Two of those programs outlined below have been particularly successful. A. Urban Homesteading In 2013, EDU began to pilot an Urban Homesteading Program where Kansas City s Indian Mound Neighborhood Association 2 partners with 1. Ten thousand people reside in the Blue Hills neighborhood s 3,600 residential properties. The average household income is $34,000 per year and, as of 2015, the average home value was $70,000. About 55 percent of the neighborhood consists of homeowners. 2. The Indian Mound neighborhood is characterized by a highly diverse population (ethnically and economically); the neighborhood serves as the entry point for many immigrants and migrants arriving in Kansas City. Today, 52 percent of Indian Mound residents identify themselves as Hispanic and about 30 percent of

5 Legal Aid of Western Missouri s Economic Development Project 407 individuals or families who are interested in rehabilitating vacant properties in the neighborhood as their homestead. Through this program, individuals are vetted to ensure they have the proper construction skills and human capital (time, resources, and interest) to fully and adequately rehabilitate an abandoned property. A contract is entered into with the neighborhood association, which works to provide support and help the individual prospective homeowner meet deadlines and report improvements to the court in accordance with the AHA. In exchange, the neighborhood association asks that the homesteader commit to residing in the property for at least two years. The AHA greatly reduces the cost of acquiring a property, meaning an individual can put the bulk of his or her investment into making improvements directly to the home. The result is clean and insurable title on a property that an individual can rehabilitate to her or his specifications. This helps avoid predatory contracts for deed arrangements and allows access to homeownership for people who otherwise may be deemed unbankable. Since its launch, more than a dozen properties have been acquired and rehabilitated under the program. B. Adopt a Neighborhood In 2015, Legal Aid of Western Missouri was awarded a Legal Services Corporation (LSC) Innovation Grant to expand upon its highly successful Adopt a Neighborhood project. This project originated in the Marlborough Neighborhoods in Kansas City in 2009, bringing in experienced and reputable attorneys from the corporate law firm of Stinson Leonard Street LLP to provide targeted group representation to the Marlborough Community Coalition. 3 Representation by that firm utilized the tools perfected by the EDU to attain significant outcomes including the rehabilitation of dozens of blighted properties, the repurposing of the long-empty King Louis East Bowling Alley, bringing a grocery store to the neighborhood, helping to encourage municipal officials to greatly improve the storm water drainage system for the neighborhood, and successfully fighting off a federal government plan to put a national mercury storage site just outside neighborhood boundaries. As a direct result of those successes, the EDU was presented with the LSC grant to expand its work. Since October 2015, four additional private law firms have stepped up to adopt four other low-income neighborhood associations. With these added resources, the project expanded to include enhanced legal services to individual residents of the neighborhood while also continuing to provide group representation. residents are Caucasian. Poverty is a serious issue with over one-third of its residents living below the poverty level with a median household income of $31, The Marlborough Community Coalition is an umbrella organization of five low-income south Kansas City neighborhoods: Battleflood Heights, Walnut Grove, Marlborough Renaissance, Marlborough Pride, and Marlborough East.

6 408 Journal of Affordable Housing Volume 24, Number V. Conclusion Since the housing crash, municipalities have begun to implement their own tools to address vacant properties, including heightened code enforcement, receivership actions, and land banking, all with varying degrees of success. These municipal responses to vacant properties are higher cost solutions and can lack the community engagement and empowerment that occurs when neighborhood organizations and longterm community members themselves drive redevelopment. Legal Aid of Western Missouri s success comes as a result of its direct representation of grassroots communities to help them recognize their vision for dealing with this complex problem.

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