A new plan to rehabilitate foreclosed homes that create blight in Richmond neighborhoods is gaining traction.
On Tuesday, Richmond resident John Knox, an attorney and son of former state Assemblyman John T. Knox, pitched City Council on an idea to rehab and resell hundreds of vacant and distressed properties in the city by seeking investments through social impact bonds.
A social impact bond is a relatively new financing strategy that partners government, nonprofits and private investors on projects that tackle longstanding social problems in a community. Typically such investments, if successful, reduce costs to government. Only when a social policy goal is achieved does the government pay back investors with a small profit.
The strategy has been used to address recidivism at Riker’s Island Correctional Facility in New York, and in an asthma-reduction program in Fresno that reduces emergency room visits.
Knox believes a social impact bond could address between 500 and 1,000 of Richmond’s blighted properties.
“The idea is to take advantage of the fact that there are investors who want to achieve a social impact with their investment,” Knox told council.
Details of the strategy have not yet been worked out, but Knox said Orrick, Herrington & Sutcliffe LLP, the San Francisco firm where he is a partner, will work pro bono in order to make the program viable. The nonprofit, Richmond Community Foundation, has been tapped to join the effort.
City Council on Tuesday agreed to allow Knox’s firm to flesh out the plan. However, Mayor Gayle McLaughlin said she fears renovated properties won’t be set aside for low-income residents, thus inviting gentrification.
Knox said his plan would address those concerns.
“We are talking about rehabbing existing homes, not remodeling them, not expanding them, not turning them into something they weren’t, but simply turning them back into usable housing again,” he told council.
City Manager Bill Lindsay called Knox’s proposal a “good program” involving a reputable nonprofit organization. Councilmembers agreed the strategy is worth exploring.
The investment strategy would not necessarily interfere with the controversial Richmond CARES program. Under that program, which is being pushed by the mayor, the city would acquire more than 600 underwater mortgages at fair market value, possibly using eminent domain powers if creditors refuse to sell. Financial institutions have vowed to battle the plan, saying mortgage lending could be halted in any city that tried to use eminent domain for underwater properties.
Knox’s plan, on the other hand, would require government and financial institutions to work collaboratively to rid Richmond of blighted properties.