Nonprofit Strategies for 1- to 4-Unit REO Properties: An Analytical Framework

Real estate owned (REO) housing resulting from the recent foreclosure crisis threatens to destabilize lowand moderate-income neighborhoods across the country. Nonprofit organizations seeking to redevelop these properties into affordable housing face weak market conditions and operate with limited resources and capacity. This study presents a framework through which nonprofits can analyze REO redevelopment opportunities for 1to 4-unit properties within their communities. The paper specifies the conditions necessary for REO redevelopment and discusses how local market conditions, the geographic distribution and the physical characteristics of REOs, their ownership and legal status, internal organizational capacity, and public policies each affect nonprofit efforts to acquire, rehabilitate, sell and rent REO properties. Finally, this paper considers the unique difficulties of the current situation relative to past vacant-housing scenarios and concludes that many nonprofits may wish to pursue alternative, non-redevelopment strategies.