There’s money to be made renovating cheap, foreclosed homes in Milwaukee, but hard-to-get loans are keeping contractors out of the market.
“It’s a great idea to buy foreclosures, rehab them and hold onto them until the market goes up,” said Cindy Kuhs, co-owner and president of Kuhs Quality Homes Inc., Greenfield. “It’s a great idea, but we can’t get the money for it.”
The lack of private redevelopers in the Milwaukee market is only made worse by the dearth of nonprofit companies willing to buy and redevelop houses, said Leo Reis, executive director of the Milwaukee office of the Local Initiatives Support Corp.
Some people who buy and flip homes are snapping up properties for anywhere from $5,000 to $20,000 with plans to lease them out, but many of those new owners are inexperienced and do not know how to manage renovations, he said.
“Our housing stock in Milwaukee, it’s predominantly single-family and duplex rentals,” Reis said. “It’s very time-intensive and cost-intensive.”
Kuhs said more experienced builders are not getting into the market because they can’t get bank loans. Kuhs said she tried to buy two foreclosed homes in Milwaukee to renovate them, but had to abandon the projects.
Banks would not lend money unless buyers had cash in hand for the renovation work, Kuhs said. Companies either don’t have the money or don’t want to risk it when times are tough, she said.
“The city of Milwaukee needs to understand this, and they need to use their own money to do that,” Kuhs said. “They can’t rely on developers and contractors to put their own money up.”
Rehabilitating properties in the city is, in many ways, more difficult than building new, Reis said. Some housing is too far deteriorated to be worth renovating, he said, but for the redeemable homes, the city must find ways to pay for renovations.
“How do we really invest in our existing housing stock in a way that’s affordable,” Reis said, “in a way that’s efficient and in a way that’s responsible?”
It is hard to get federal grants for the renovations because there are so many limits on how the money can be spent, said Milwaukee Alderman Robert Bauman. The federal grants have limits on resale or rental prices, for example, or require complete asbestos and lead abatement whenever any renovation work is performed.
“Nobody knew what to do with these properties,” Bauman said. “The private market didn’t want to buy them because they would take too much work. We don’t want to tear them down.”
So Bauman is proposing the city dedicate tax money to a Housing Infrastructure Preservation Fund that would pay for renovations or to mothball houses until the market recovers. He said the city would have more flexibility when deciding how to spend its own money.
He said he wants at least $2 million, generated through taxes or loans, dedicated to the effort.
“We hope to stimulate (construction),” he said. “There’s nothing more wasteful to me than to see perfectly good 1890s housing stuck rotting away because we can’t decide which pot of money we should use to pay for it.