BiggerPockets

Surfeit of Foreclosed Houses is Spelling Pain for the Administration

Wednesday, June 16

Thousands and thousands of houses have been either foreclosed or repossessed by the banks. Some are vacant while others have been boarded and sealed. Squatters abound, crime flourishes and yards have become jungles. Entire localities are cursed by the blight of bank foreclosures. This has spelt pain for the government and administration with resulting loss of revenue. On this revenue depends grants forward to cities, and schools of California.

Without any other alternative the local governments have issued retrenchment notices numbering some hundred as they are being compelled to cut down on expenditure. The foreclosed houses do not generate revenue until the banks manage to sell these. So the revenue collection continues to fall leading to a long term decline in the tax base.

The banks own about 10,000 houses in the Bay Area and of these a mere fraction has been put up for sale. Another lot of about 20,000 are in the middle of foreclosure inching towards bank repossessions according to the findings of RealtyTrac.

In Contra Costa County out of 20 houses one is distress. Gus Kramer the assessor of Contra Costa County said that undoubtedly government’s services of all categories would suffer from this.

Kramer said that the banks are not going to push all the units into the market at one go. They are going to do so in phases and that will just linger the pain without resolving anything.

The pain can be seen. Concord City has already laid off a quarter of its employees. Antioch’s budget is a quarter less from what it was previously. Hayward has had to pass a tax so as to avoid laying off workers. These cities have been worst hit by the decline in revenue from property. The concentration of foreclosures is most in the eastern section of Contra Costa County. Closely following on the heels is Concord as well as Martinez.

To some degree the majority of the cities would be impacted – even the upscale ones. Ron Thomsen the assessor of Alameda County said, “The loss is really going to be spread throughout. Public education is going to get hit very hard because they get the majority of the property tax dollar.

California State apprehends taxes on properties would continue to fall. From 2009 to 2010 it fell by 4.1% and the drop will be 3.1% from 2010 to 2011.

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