Richmond City Council on Tuesday voted to move forward with a plan to use social impact bonds to rehabilitate and sell about 1,000 dilapidated and abandoned properties that have contributed to neighborhood blight.
The strategy, pitched earlier this year by prominent attorney and Richmond resident John Knox, would come at no cost to the city.
The city would issue social impact bonds, targeting investors who want their investment to have a positive social impact, then loan the bond proceeds to the nonprofit Richmond Community Foundation, which would buy the vacant homes from lenders such as banks, and then rehab and sell the homes at affordable prices to lower-income homeowners.
Potential homeowners would be identified by SparkPoint, a nonprofit financial education center in Richmond that guides low-income clients to becoming financially stable.
Following the sale of a home, a significant portion of the proceeds will be used to acquire and rehabilitate more properties.
Knox said the goal is to have the first home under the program purchased and rehabbed by the second quarter of next year. Knox hopes to rehab and sell 10 properties per quarter, or about 40 per year.
There is even a possibility the program could allow for the purchase and construction of homes on unused lots in the city, Knox said.
There were concerns expressed by Mayor Gayle McLaughlin and council over what happens if lower-income residents are not found to buy the homes, and whether some will be able to afford the homes after moving in. McLaughlin questioned whether the homes would become unaffordable for low-income residents.
Knox said that if local, lower-income buyers are not found, other buyers will be sought. The sale would still have achieved the goal of improving the neighborhood, Knox said.
“It is an excellent opportunity to clean up this city and get many of those homes back on the market,” said Councilmember Nat Bates.
For more information about the program, visit this PowerPoint presentation.
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