In prepared remarks for a conference on distressed residential real estate, Elizabeth A. Duke, of the Federal Reserve Board of Governors, noted that housing market conditions are improving, and reiterated the FRB’s belief that solving the lingering problem of long-term vacancies will require “a full spectrum of policy actions.” The FRB has calculated that long-term vacant properties have a negative impact on housing prices and can push down values of adjacent homes, a pattern that perpetuates negative trends in the broader housing market. In her remarks, Ms. Duke advocated a multi-faceted approach, suggesting that the FRB will not push for a “one-size-fits-all” solution, but instead will advocate for localized solutions that address the multitude of causes and effects of long-term vacancies. For example, in former “housing boom” neighborhoods, where private investors have shown increased interest, the preferred solution might focus on ways of ensuring that a sufficient number of properties remain owned by local landlords. While in so-called “low demand” locations, any solution will necessarily involve a means of financing the demolition of no-value, uninhabitable homes that blight communities.
Alert October 16, 2012