Mayor McLaughlin garnered national headlines last year when she championed a controversial plan to seize private mortgages of underwater homes. Despite her best efforts, the plan never gained super majority support.
The plan entailed significant risks and a possibility it wouldn’t even work critics claimed. Richmond has now decided to move forward in a safer direction to help troubled homeowners.
John Knox, a bond attorney and son of former East Bay Assemblyman John T. Knox, put forward a plan that would actually rehabilitate blighted neighborhoods, without the risks of the eminent domain proposal. The City Council recently voted to support the Knox plan. People say its creative and it doesn't pit people against each other while the old plan garnered fierce opposition from the local realtor association and some members of the community. Moreover, financial risk would be borne by the investors, not the city under the new plan.
Knox proposes Richmond issue tax-free bonds. While the city would be involved, it would not be guarantor of repayment. The proceeds would be used by a housing non-profit to buy up distressed homes, often those banks have taken through foreclosure, repair them so they are inhabitable and then sell them to individuals at affordable prices.
There are many variables, but the plan will likely provide help faster and more effectively than the old proposal. Because this plan presents substantial risk to bond-buyers and lacks opportunity for large returns, social investors, like foundations or wealthy individuals looking to help the community will be sought out. The Orrick firm, for which Knox works, will provide free legal services for the project.
Banks that currently hold the distressed homes and have been unable to market them may be willing to cooperate by selling them at deeply discounted prices, a prospect they refused when eminent domain was being considered. Construction crews will be employed to rehabilitate the properties creating some good temporary jobs in the process.
While the Mayor and supporters of eminent domain felt the new plan doesn’t go far enough, that did not keep the community from coming together around this new method. Finally the council, Mayor included, unanimously voted to move forward with the new option. If all goes according to plan, a new program to help Richmond homeowners should be up and running in the near future.